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Danielle Pletka

Welcome back the real Barack Obama

By Danielle Pletka

March 6, 2012, 2:49 pm

In a major effort to win back pro-Israel voters, Barack Obama went before AIPAC’s 2012 policy conference and reassured the audience that he “has Israel’s back.” He got a big round of applause, and more than a few in the audience breathed a sigh of relief that the president was once again in Israel’s camp, especially on the dangerous question of Iran. But at the presser he gave at noon on Tuesday, it became clear that that was then, this is now. Apparently, having Israel’s back “isn’t a military doctrine.” It isn’t… anything. Talks with Iran are the way forward. Sanctions are biting. Talk of war is dangerous. There are costs.

Let’s face facts: Barack Obama doesn’t have Israel’s back. He’s down with his own rockin’ foreign policy. He’s not interested enough in Israel to visit once as president. He’s not worried enough about U.S. interests to resource the forces needed in the region. He’s pretty sure that talks will lead somewhere. Oh, and by the way, he’s also pretty uninterested in that whole fight for democracy thing in Syria or Iran. That’s the kind of “unilateralism” he can’t support. Or something.

And another thing: Barack Obama thinks everyone who listens to him is a fool. How otherwise can he give one speech on Sunday and another on Tuesday? How can he suggest that “got your back” means “we have historically cooperated with Israel”… “just like with a host of other countries” when he clearly intended his AIPAC audience to believe something else?

Lessons learned: 1) Hope Obama doesn’t have your back. 2) Listen to the press conferences, not the speeches. Only the former show us the real man behind the words.

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Categories:  Foreign and Defense, Middle East, U.S. Politics   |   Tags: ,

Danielle Pletka

Romney slams Obama’s ‘six exaggerations’ at AIPAC

By Danielle Pletka

March 6, 2012, 11:52 am

Generally, campaign press releases are unrelenting twaddle. But Romney put out a decent one today… better, frankly, than his not-too-dramatic op-ed in today’s WaPo. (Really, Mitt, shipbuilding will be job one in taking on Iran?)

But back to the release. Romney slams President Obama for “six exaggerations” in his AIPAC speech. They’re spot on, and I’m recasting below.

1.) Obama takes credit for leading on Iranian central bank sanctions and oil exports. But he opposed that sanctions amendment and still hasn’t imposed the full sanctions available under law against the Central Bank.

2.) Obama committed to joint missile defense programs, like “Iron Dome,” that protect Israel. Well, OK, if you call systematically cutting funding for Iron Dome and claiming credit for increases that Congress imposed.

3.) Obama “rallied” a “divided” international community to impose sanctions on Iran by “exposing” its intransigence. If you call sucking up to Iran, failed “engagement,” and lagging so far behind that it is now Europe that sets the gold standard on Iran sanctions.

4.) Bush let centrifuges proliferate in Iran, and Obama slowed them down with sanctions. Er, what? The number of centrifuges operating has grown 124 percent on Obama’s watch, and its nuclear enrichment rate last year was higher than 2010 and is now at the highest rate ever.

5.) The “loose talk of war” trope. It has all come from Obama’s team.

6.) Obama stood up for Israel at the United Nations. For real? By focusing on settlements? Asking for funding for UNESCO after it admitted “Palestine”?

PS. For those of you who are going to accuse me of shilling for Romney, get lives. Obama gets credit when he does something right.

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Categories:  Foreign and Defense, Middle East   |   Tags: , , ,

Marc Thiessen

10 disasters America will face if Obama gets a second term

By Marc Thiessen

March 5, 2012, 3:02 pm

In today’s Washington Post, I argue that while electing a transformational conservative president may not be in the cards this November, stopping a transformational liberal president still is. The damage of a second Obama term could be potentially irrevocable. I asked a number of conservative thinkers what they feared most from a second term, and compiled this list of the top ten disasters that would befall America if Obama were re-elected this fall:

1.    Obamacare will not be repealed.

2.    The unprecedented levels of spending in Obama’s first four years will become the new floor, as America sets new records for fiscal profligacy and debt.

3.    Job creators will face massive tax increases, and more Americans will come off the tax rolls—resulting in fewer citizens with a stake in keeping taxes low and more with a stake in protecting benefits.

4.    Government dependency, already at record levels, will continue to grow.

5.    Four lost years in dealing with the entitlement crisis will become eight—digging us into a hole from which we may not be able to emerge.

6.    Obama, unworried about the impact of gas and electricity prices on his reelection, will finally wage the regulatory war on fossil fuels the Left demands.

7.    He will unleash the Environmental Protection Agency to impose crushing new burdens on U.S. business.

8.    His administration’s assault on religious freedom will go on and expand to new areas.

9.    The Defense Department will be gutted, with cuts so deep that America will no longer be a superpower.

10.    Obama could have the opportunity to appoint more liberal Supreme Court justices, ending the Roberts court in all but name for a generation.

This is, of course, not a complete list—not by a long shot. I’d be interested what readers and my fellow AEI scholars think: What’s missing from this litany of impending disasters?

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Categories:  Politics and Public Opinion, Society and Culture, U.S. Politics   |   Tags: ,

What you may have missed in the polls … about Obama’s foreign policy

By Karlyn Bowman and Andrew Rugg

March 2, 2012, 9:28 am

This week, Republicans Karl Rove and Ed Gillespie and Democrats Stan Greenberg and Jeremy Rosner wrote dueling articles on ForeignPolicy.com about Obama’s national security record, with the Republican team suggesting that the president is vulnerable and the Democratic team suggesting that foreign policy will be a plus for the president in November.

Our take is that it all depends on how the issue is framed and what’s going on in the world. Polls show that President Obama gets better marks on handling foreign policy than on domestic policy. But still, his ratings aren’t that strong. In the latest poll, for example, 46 percent approve and 46 percent disapprove (Quinnipiac).

In the February AP/GfK Roper poll, 48 percent trusted Republicans to do a better job on protecting the country while 40 percent trusted the Democrats. In the December 2011 NBC News/Wall Street Journal poll, Republicans had a 3-point advantage on handling Afghanistan (26 to 23 percent) and a 13-point advantage on handling terrorism.

President Obama receives high marks for his planned troop withdrawal from Afghanistan. In a February Pew poll, a majority (53 percent) thought that Obama was handling removing troops from Afghanistan “about right.” Twenty-two percent thought he wasn’t withdrawing troops quickly enough. While Iraq receives scant news coverage, Obama receives positive marks for handling the situation there in all recent major polls.

At the same time, many of Obama’s foreign policy actions remain unpopular. A plurality of 49 percent told CBS News pollsters in November 2011 that the United States did not do the right thing by taking part in Libya. Thirty-seven percent thought the United States did the right thing. Only 33 percent approve of the way Obama is handling the possibility of Iran obtaining nuclear weapons, in a January ABC/Washington Post poll.

Obama must also confront the growing concern over American decline. Sixty-four percent told Gallup in February that they are dissatisfied with America’s position in the world. A majority believe China is the world’s leading economic power. Only 10 percent felt that way about China in 2000.

Americans still see Republicans as stronger on foreign affairs than Democrats, but absent new events, President Obama may have addressed a familiar weakness of Democratic presidential candidates. At this very early stage of the campaign, polls suggest Obama has at least diffused a potential weakness. But it is still very early in the election cycle, and in today’s volatile geopolitical environment any number of potential events could make Americans reconsider their current thinking about the president.

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Categories:  Politics and Public Opinion   |   Tags: , , ,

Danielle Pletka

Hey North Korea! We won’t attack you, but it’s okay if you attack us. Love, Barack Obama

By Danielle Pletka

February 29, 2012, 5:23 pm

Earlier today, I passed along the exciting news that senior State Department official Wendy Sherman had once again helped deliver the North Koreans to the negotiating table, a reprise of her Nork work of the Clinton years. And indeed, the new deal looks a lot like the deal Mrs. Sherman did back then, except…. Apparently one of the things the North Koreans really wanted back in 2000 after the fateful U.S.-North Korea negotiation that achieved… well, nothing, but that’s not our story here. Let me start again. Apparently, one of the things the North Koreans really wanted back in 2000 was a promise from the United States that it harbored “no hostile intent” toward the loathsome Pyongyang dictatorship. And in return for that commitment, duly offered, they promised that they too, despite their nuclear weapons, their missiles pointed at our troops in South Korea, their proliferation of missiles and nuclear technology to America’s enemies, also had no “hostile intent” toward the United States.

So, when the Bush administration sought to reprise the Clinton years and do a deal with Pyongyang, NK again looked for the “no hostile intent” promise. And Colin Powell delivered those three little words every dictator loves to hear. But George W. Bush just wouldn’t say it, and so no grand bargain was reached. Mrs. Sherman slapped Bush for that omission in a 2005 interview with the Washington Post, explaining that the North Koreans couldn’t trust us without such a promise because: “Ultimately, it is about regime survival.”

So, let’s get this straight: Bill Clinton and his negotiator promised North Korea “regime survival” in 2000. George W. Bush didn’t really, which is why, according to Mrs. Sherman, he failed.

And now, what are we promising? Yes, North Korea, there is a Santa! In the trumpeted North Korea agreement released today, the United States pledged once again that we harbor “no hostile intent” toward the Pyongyang regime. But unlike the 2000 agreement, apparently the North Koreans do not reciprocate, and make no such commitment.

So let’s review the bidding one last time. President Obama has “no hostile intent” toward North Korea, but seeks no such assurance from North Korea that the American people will be safe from Pyongyang’s predations. Another diplomatic triumph!

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Categories:  Asia Pacific, Foreign and Defense   |   Tags: ,

Edward Pinto

The FHA and USDA divisions of Government Mortgage flunk the marshmallow test

By Edward Pinto

February 27, 2012, 3:04 pm

In a recent op-ed in the Wall Street Journal, Arthur Brooks observed out that President Obama’s budget fails the “Marshmallow Test.” In the test, children were offered one marshmallow now or a reward of a second one if they could wait 15 minutes before eating the first one. About two-thirds of the kids failed the experiment. Years later, the test subjects were evaluated and it was discovered that the children who could defer gratification tended to turn out well compared to those who couldn’t.

Arthur went on to observe that expanding government programs exist, “in no small part, to shove marshmallows into our collective mouth.” This has particular relevance for the government agencies that constitute Government Mortgage (Fannie, Freddie, the FHA, the USDA, Ginnie Mae, and the VA). Fannie and Freddie (prior to their bailouts) and the FHA and USDA today flunk the marshmallow test. They promote lending that eliminates the need to show the discipline to defer instant gratification for a long term goal. In 2010, the FHA, the VA, and the USDA accounted for 55 percent of all owner-occupied home purchase loans, with the preponderance of their loans having either no down payment or a minimal one. Today, the FHA and the USDA each have a delinquency rate that approaches one in five guaranteed loans.

When it comes to shoving marshmallows into borrowers’ mouths, the USDA’s single-family guarantee program is hard to beat. A borrower with a FICO score of 580 (a score in the bottom top ten per cent of all scores) is able to get a zero down loan guaranteed by the USDA (or similar loan insured by the FHA). The all-in cost of the USDA loan is at least $12,000 below what Freddie Mac would require for the same loan of $150,000. Except that the USDA loan is too risky for Freddie because about one in three would be expected to fail. Thanks to the government substituting marshmallows for discipline, this same borrower would pay an all-in cost that is a mere $1,500 more than a prime borrower with a 740 FICO (a score in the top forty-three percent of all  FICO scores) and a 25 percent down payment. Government Mortgage must be reined in before it is too late.

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Categories:  Economic Policy   |   Tags: , ,

Kenneth P. Green

Life imitates Hogan’s Heroes

By Kenneth P. Green

February 23, 2012, 9:34 am

According to White House Spokesperson Jay Carney, President Obama did not cancel the Keystone pipeline, and he has nothing, absolutely nothing, to do with high gas prices. According to the White House, it’s not EPA regulations that fragment the gasoline market and drive up refining costs; it’s not his foreign policy or its impacts on world oil production; it’s not his (fabulously denied) crusade to slow fossil fuel production on federal lands; it’s not his economic policy effects on the value of the dollar; it’s just a fact of life and signs of an economic recovery!

And there is nothing—nothing!—that he can do about it other than raise taxes to punish oil companies, and exhort people to live smaller lives with less energy.

One can’t help but be reminded of Sargent Schultz, from “Hogan’s Heroes”: “I see nothing! I was not here! I did not even get up this morning!”

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Categories:  Energy and Environment, U.S. Politics   |   Tags: ,

Why Obama’s corporate tax plan is a total bust

By James Pethokoukis

February 22, 2012, 8:33 am

The current U.S. economic recovery is arguably the worst in modern American history. Incomes are flat, housing is moribund, and the past three years have seen the longest stretch of high unemployment in this country since the Great Depression. Yet President Barack Obama—with the backing of Treasury Secretary Timothy Geithner—has the temerity to propose a corporate tax reform plan that would actually raise the tax burden on American business by $250 billion over a decade (and de facto on workers, too) without lowering rates to an internationally competitive level. This is a terrible, terrible plan:

1. The Obama-Geithner plan would lower the statutory corporate tax rate to 28 percent from 35 percent, currently the second-highest among advanced economies. But that would still leave the combined U.S. corporate tax rate—state and federal—at 32.2 percent, far above the OECD combined average of 25 percent. The U.S. combined rate would be a bit below slow-growing Japan and France but above the U.K. and Germany. That’s not nearly good enough. Canada just lowered its corporate tax rate, for instance, to 15 percent. So instead of having the second highest corporate tax rate in the world, the United States would probably be fourth behind Japan, France, and Belgium.

2. The Obama-Geithner plan would establish, according to the New York Times, a minimum tax on multinational corporations’ foreign earnings to discourage “accounting games to shift profits abroad” or actual relocation of production overseas.

So instead of a carrot, Corporate America gets the stick. Instead of lowering the U.S. rate to a competitive level, Obama would raise the penalty on keeping profits overseas. Indeed, the United States is a huge outlier in that it taxes the foreign profits of multinational companies. Here is Obama’s own Jobs Council:

While most other developed nations have adopted territorial systems that exempt most or all foreign income from taxes when they are repatriated, the U.S. subjects all worldwide earnings to the corporate income tax when they are brought home to the U.S. This approach actually encourages U.S. companies to keep their earnings abroad rather than investing them here at home. Adopting a territorial tax system would bring us in line with our trading partners and would eliminate the so-called “lock-out” effect in the current worldwide system of taxation that discourages repatriation and investment of the foreign earnings of American companies in the U.S.

Obama’s debt commission made a similar recommendation.

3. To pay for the lower tax rate, Obama would eliminate ”dozens of tax loopholes and subsidies,” according to Politico. But some of the money would be used to “lower the effective rate on manufacturing to no more than 25 percent, while encouraging greater research and development and the production of clean energy,” according to the Times.

First, the effective manufacturing tax rate would be higher than 25 percent once you add back state taxes. Second, the White House is sticking to its clean energy agenda even as other advanced economies like Germany and Spain are abandoning such wasteful subsidies. Again, this is ideology trumping economic reality.

4. Obama and Geithner apparently still don’t understand how harmful corporate taxes are. Here’s the OECD: “Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.”

5. Obama and Geithner apparently still don’t understand who bears the burden of corporate taxes. It’s workers. AEI economists Kevin Hassett and Aparna Mathur have found that “corporate tax rates affect wage levels across countries. Higher corporate taxes lead to lower wages. A 1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.”

6. Obama and Geithner apparently don’t understand that “corporate income taxes have a highly significant and negative effect on long-term growth,” according to the Tax Foundation:

7. Obama and Geithner apparently don’t understand that U.S. corporate tax rates are so off the map that the best way to maximize revenue would be to flat out cut the top corporate rate 8.6 percentage points to 26.4 percent. You could then eliminate corporate welfare and take the rate even lower.

8. Obama and Geithner would take the top individual tax rate to 40 percent, leaving a 12 percentage-point gap with the corporate tax rate. This creates a huge incentive for tax sheltering.

Bottom line: Real pro-growth corporate tax policy would eliminate tax breaks, dramatically lower tax rates, and only tax profits earned at home. The Obama plan would actually make the corporate tax code and the U.S. economy less competitive and less productive. But the proposal does neatly fit into the president’s Occupy-inspired campaign theme that wealthy Americans and greedy corporations are to blame for the Great Recession and rising income inequality. Besides, how can Democrats ever raise taxes on the middle-class to pay for all their spending ideas without first socking it to the 1 percent and to business?

Obama had no experience in the private sector before becoming president. The free market is a sort of theoretical construct he learned about in college. But Geithner should know better. He’s had lots of contact with all sorts of executives, both at Treasury and when he ran the New York Federal Reserve Bank. If he has any doubts about this plan, he should resign. And if he doesn’t, he never should have gotten the job in the first place.

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Categories:  Economic Policy, Fiscal Policy and Taxes, U.S. Economy   |   Tags: , , ,

Marc Thiessen

A devastating take-down of Obama’s budget

By Marc Thiessen

February 14, 2012, 1:40 pm

All the more so because it comes not from conservative critics of the president, but from Andrew Taylor of the Associated Press:

Taking a pass on reining in government growth, President Obama unveiled a record $3.8 trillion election-year budget plan Monday, calling for stimulus-style spending on roads and schools and tax hikes on the wealthy to help pay the costs. The ideas landed with a thud on Capitol Hill.

Though the Pentagon and a number of Cabinet agencies would get squeezed, Obama would leave the spiraling growth of health care programs for the elderly and the poor largely unchecked. The plan claims $4 trillion in deficit savings over the coming decade, but most of it would be through tax increases Republicans oppose, lower war costs already in motion and budget cuts enacted last year in a debt pact with GOP lawmakers….

Obama’s budget blueprint reprises a long roster of prior proposals: raising taxes on couples making more than $250,000 a year; eliminating numerous tax breaks for oil and gas companies and approving a series of smaller tax and fee proposals. Similar proposals failed even when the Democrats controlled Congress….

But there are spending increases, too: The Obama plan seeks $476 billion for transportation projects including roads, bridges and a much-criticized high-speed rail initiative. Grants for better performing schools would get a big increase under Obama’s “Race to the Top” initiative, and there would be an $8 billion fund to train community college students for high-growth industries….

The projections in Obama’s budget show that he is doing little to restrain the surge in [entitlement] programs that is expected with the retirement of baby boomers. Obama’s budget projects that Medicare spending will double over the coming decade from $478 billion this year to almost $1 trillion in 2022. Medicaid, the government health care program for the poor and disabled, would more than double from $255 billion this year to $589 billion by 2022.

Congressman Paul Ryan has posted the full story on his website. You can read it here. Save it as a handy reference guide for everything that is wrong with the president’s budget proposal.

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Categories:  Economic Policy, Fiscal Policy and Taxes   |   Tags: ,

Marc Thiessen

While Obama slashes defense, China doubles its military budget

By Marc Thiessen

February 14, 2012, 1:12 pm

Mackenzie has a great post explaining how the Obama administration is slashing defense spending to fund domestic spending—including a 50 percent increase in the transportation budget. As she correctly notes, “President Obama’s latest defense budget proposal does not adequately resource the military’s new defense strategy, making the military’s intended emphasis on the Asia-Pacific a ‘paper pivot.’”

To underscore the point, while the president guts the Pentagon, China’s defense budget is headed in the opposite direction. This morning, the Wall Street Journal’s China Real Time Report has the wonderful news that Beijing is doubling its defense spending over the next three years:

China’s defense budget will double by 2015, making it more than the rest of the Asia Pacific region’s combined, according to a report from IHS Jane’s, a global think tank specializing in security issues.

Beijing’s military spending will reach $238.2 billion in 2015, compared with $232.5 billion for rest of the region, according to the report. That would also be almost four times the expected defense budget of Japan, the next biggest in the region, in 2015, the report said….

China says its defense budget for 2011 increased by 12.7 percent to about $91.5 billion, but many defense experts believe its real military spending is much higher.

IHS Jane’s put the figure for 2011 at $119.8 billion, and predicted it would increase by an average of 18.75 percent annually until 2015.

“China’s investment will race ahead at an eye watering 18.75 percent, leaving Japan and India far behind,” said Paul Burton, senior principal analyst of IHS Jane’s Defence Budgets….

Responding to the report, the Global Times, a nationalist tabloid published by the Communist Party mouthpiece People’s Daily, did not dispute IHS Jane’s projections but warned against Western powers “with an axe to grind” using China’s military budget to promote the idea of a China threat.

As China’s military grows—particularly the size and reach of its surface fleet—it is becoming more assertive of its territorial claims in the East and South China seas. Beijing is also becoming more aggressive in challenging U.S. reconnaissance flights along its coast—increasing the likelihood of another EP-3 incident like the one that greeted President Bush shortly after he took office in 2001. And China will become even more aggressive as its confidence and capabilities grow with these new military spending increases. If the Obama administration is really serious about its pivot to Asia, it needs to resource our Pacific forces accordingly. In his speech in Canberra last fall, President Obama said the United States is “all in” in the Asia Pacific. Gutting the defense budget is no way to show it.

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Categories:  Asia Pacific, Foreign and Defense   |   Tags: , ,

Alan Viard

Obama changes course on dividend taxes

By Alan Viard

February 13, 2012, 12:34 pm

President Obama’s fiscal 2013 budget plan, released this morning, is similar in many ways to his previous annual budget proposals. One feature that wasn’t in his fiscal 2012 plan is the proposed Buffett tax, which would impose a 30 percent minimum tax on the income, including dividends and long-term capital gains, of millionaires. But there’s one other important change, which would also increase the tax burden on saving and investment, from last year’s plan.

The president now proposes that the 2003 dividend tax cut be allowed to fully expire at the end of this year for taxpayers with incomes greater than $200,000 ($250,000 for married couples), making dividends taxable at ordinary income rates for those taxpayers. As a result, the top dividend tax rate will rise from 15 percent this year to 39.6 percent next year. In his fiscal 2012 and earlier budget plans and in his 2008 campaign proposals, the president had called for most of the dividend tax cut to be preserved for these households, with the top dividend tax rate rising only to 20 percent.

The president’s earlier proposals had recognized that the 2003 dividend tax cut offers (imperfect) relief for the burden that the corporate income tax imposes on corporate equity-financed investments, an insight not reflected in his current proposal. In a prominent 2008 Wall Street Journal article, the Obama campaign’s top economists emphasized that he would increase the top dividend tax rate only to 20 percent, boasting that “this rate would be 39 percent lower than the rate President Bush proposed in his 2001 tax cut and would be lower than all but five of the last 92 years we have been taxing dividends.” Unfortunately, the president’s current proposal sharply diverges from that path.

President Obama is hardly the first president to change his tax proposals after taking office. But, it is regrettable that he has changed course in a way that will place heavier tax burdens on saving and investment.

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Categories:  Economic Policy, Fiscal Policy and Taxes   |   Tags: , ,

The key assumption of Obama’s budget

By Daniel Hanson

February 9, 2012, 10:40 am

In preparation for the president’s budget proposal next week, it’s important to discuss one of the assumptions on which all figures will be based.

Over the past few years, interest rates on federal debt have fallen to historically low levels thanks to manipulation by the Fed and risk aversion by markets. An unintended consequence of these low interest rates is that the federal debt has been financed very cheaply. Still, interest payments on federal debt have rising sharply since the end of the Clinton era.

The average maturity of the national debt is just over 62 months. This means that once every five years, almost all of our national debt is refinanced into new contracts. The CBO does its budget projections with this in mind, and guesses at what the interest rates will be. For their most recent projections, they assume interest rates will stay low until they begin to slowly rise until 2014.

This is a big assumption. Any number of things could cause interest rates to rise, from a market shock to another debt ceiling debacle to a debt downgrade and so on. Assuming interest rates don’t stay low, the cost of financing the public debt could rise extremely quickly. The chart below shows the national debt picture 62 months from now under different interest rates.

If interest rates rise to where they were at the end of the Clinton presidency, when the economy was rosy, the federal debt will be $4 trillion higher in five years. It’s amazing what a difference a little assumption can make.

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Categories:  Economic Policy, Fiscal Policy and Taxes, Monetary Policy, U.S. Economy   |   Tags: ,

Marc Thiessen

Dependency index up 23 percent under Obama

By Marc Thiessen

February 8, 2012, 11:13 am

In this week’s Washington Post, I criticized Mitt Romney for his comments that he would help the very poor by “strengthening” the social safety net as president. The liberal project is to strengthen the social safety net and grow the nanny state, I argued. The conservative project is to help people escape it.

Today, more evidence that the nanny state is growing by leaps and bounds. Investor’s Business Daily reports:

The American public’s dependence on the federal government shot up 23% in just two years under President Obama, with 67 million now relying on some federal program, according to a newly released study by the Heritage Foundation….

The increase under Obama is the biggest two-year jump since Jimmy Carter was president, the data show. The rise was driven mainly by increases in housing subsidies, an expansion in Medicaid and changes to the welfare system, along with a sharp rise in food stamps, the study found.

Among other findings cited by the IBD:

1.       The number of people dependent on the federal government shot up 7.5 percent over the past two years.

2.       In 2010, for the first time ever, average spending on dependence programs per recipient exceeded the country’s per-capita disposable income.

3.       The dependency index has dipped only seven times in the past 49 years, three of which were under President Reagan and two under President Clinton.

4.       Some observers say the rise in dependence under Obama is merely a reflection of the deep and long recession.

5.       But William Beach [author of the study] says his team’s research shows that economic effects account for only one-fifth of the change in the index.

You can see the stunning rise in dependency since 1962 here:

All this underscores the fact that the last thing the country needs is a Republican president who wants to expand the safety net and grow the welfare state. Whoever the GOP nominee is, he should make clear that conservatives are not okay with having more and more of our citizens trapped in dependency on the federal government. He must lay out a vision for an America where every one of our citizens—no matter what their station in life—has an opportunity to escape the safety net and seek a better future.

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Categories:  Economic Policy, U.S. Economy, U.S. Politics   |   Tags: , ,

Danielle Pletka

5 questions on Syria for the Obama administration

By Danielle Pletka

February 6, 2012, 9:56 am

Syria is going to hell in a handbasket, and the world is watching. This morning, the State Department announced that the U.S. ambassador to Syria and his few remaining staff were gone, the embassy shuttered. That step and this weekend’s Russian and Chinese veto of an almost toothless U.N. Security Council resolution will dominate the news this morning, but the real question is: What next?

Here are five questions for the Obama administration, which professed itself “disgusted” by the Russian and Chinese veto:

1.    Will the United States support the arming of the Free Syrian Army?

2.    Will the United States join a “coalition of the willing” with the Arab League and others to support the Syrian opposition?

3.    Will the United States convene or join in the convening of a conference of the Syrian opposition to build unity and plan for the post-Assad transition?

4.    Will the United States release and urge others to release information about the foreign bank accounts of top Syrian officials, rather than waiting as everyone did post-Qadhafi?

5.    If it’s not doing the above, what exactly is the Obama administration doing for the people of Syria, except talking?

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Categories:  Foreign and Defense   |   Tags: ,

Islamabad needs to acknowledge the existence of drone program

By Ahmad Majidyar

February 3, 2012, 3:54 pm

Earlier this week, President Obama laid out a strong defense of using drone aircraft to target al Qaeda and Taliban militants inside Pakistan, and thus for the first time officially acknowledged the CIA’s “worst-kept secret” program that has increased significantly under his watch. The president’s remarks will put new pressure on his administration to further explain and justify the legality, utility, and morality of the program to Congress and rights groups, and, as my colleague Marc Thiessen points out, it also exposes the program to a “greater risk of successful legal challenges.”

On the positive side, however, the president’s public acknowledgment will now give more leeway to the administration to counter damaging misinformation vis-à-vis the program in Pakistan. The drone strikes have provoked outrage across Pakistan not because the attacks kill terrorists, but because both politicians and militants constantly remind the people that the attacks violate their country’s sovereignty and mostly kill civilians. In reality, both these claims are inaccurate.

First, most of the drone strikes have been conducted with the permission of, and sometimes in coordination with, the Pakistani government. In a U.S. diplomatic cable released by Wikileaks, Army Chief Ashfaq Parvez Kayani in 2008 asked Washington for “continuous Predator coverage” in South and North Waziristan, and in another leaked cable, Prime Minister Yousaf Raza Gilani is quoted as saying: “I don’t care if they do it as long as they get the right people. We’ll protest in the National Assembly and then ignore it.” Publicly, however, the Pakistani leaders condemn the strikes.

Second, reports about civilian casualties are mostly unsubstantiated as they rely on information provided by the Taliban. After each attack, the militants cordon off and bar everyone from visiting the attack site, and then announce that all or most of the casualties were civilians. The sensationalist Pakistani media not only publishes the Taliban’s accounts, but also multiplies misperceptions that largely go unchallenged by Islamabad and Washington. As a result, the opposition and religious parties have exploited the issue to weaken President Zardari’s government and force Islamabad to distance itself from Washington. On January 27, more than 100,000 people massed in Karachi to protest the strikes.

The reality is that the drone strikes, as my colleague Sadanand Dhume argues, have proven to be the least indiscriminate option available for the U.S. military to target terrorists in Pakistan’s tribal areas. The attacks have disrupted the activities of terrorist groups and killed over 2,000 militants over the past years, including high value targets, such as Baitullah Mehsud, former leader of the Pakistani Taliban, and Shaikh Sa’id Masri, al Qaeda’s No. 3 leading the group’s operations in Afghanistan.

Now that Washington has acknowledged the controversial program, it is time for Islamabad to follow suit. It will help counter the terrorists’ propaganda about civilian casualties and mitigate rising anti-American sentiment that is damaging ties between Pakistan and the United States.

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Obama’s confusion over American excellence

By Daniel Hanson

February 3, 2012, 3:45 pm

President Obama’s trade policy is a mess. It seems he doesn’t know precisely what he wants. On the one hand, we see very positive signs, like this, from the State of the Union:

Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing finance or new markets like Russia. Our workers are the most productive on Earth, and if the playing field is level, I promise you – America will always win.

He apparently realizes both that the United States is a giant in global trade, and that when unfettered by bad policy, U.S. companies will succeed. He even hints at one of those bad policies and says that it should be repealed. I agree. As I wrote:

…the U.S. will continue to trade with Russia under its current terms because U.S. policymakers have failed to resolve the real sticking point in Russian trade: the Jackson-Vanik Amendment. Despite brokering broad-scale bilateral agreements on market access and garnering small-scale compromises on auto parts, meat exports, and intellectual property, U.S. policymakers are rejecting Russia’s moves to open markets to U.S. producers, placing the U.S. at a competitive disadvantage … U.S. exporters will have substantially more items taxed at substantially higher rates than the rest of the world when Russia becomes part of the WTO … If we wish Russia to become more free market, we must offer them the opportunity to compete in free markets. Barring market access through trade barriers, particularly when the rest of the world embraces Russian trade, is counterproductive and denies the benefits of trade both to U.S. citizens and to Russians vying for more freedom.

But more often, his trade policy is confused and protectionist. Obama has proposed plans to engage in industrial targeting as a means of bolstering U.S. exports and creating jobs. But as Solyndra should remind us, and as AEI’s Matt Jensen notes today:

Globalized supply chains make the hard task of picking industries to support near impossible. Industrial clusters are becoming less prominent and less valuable. As business coordination costs fall due to improved communication technologies, the sub industries, like the manufacture of parts and components, are separating geographically from the headquarters, R&D, and distribution. A hollowed-out industry is not worth as large of a subsidy, and the proper industries to target will be harder to identify.

What’s more, as industries break down into their sub-industries, it is more likely that a new firm will play a larger role in a sub-industry. Specialized workers and inputs will cluster around that firm, and knowledge spillovers will begin to occur across departments. While no bank is big enough to move an entire industry to a more efficient location, it might be able to move a sub-industry. Where capital markets work, governments should not meddle.

No one can predict the future. The next communication or transportation revolutions will likely change the world as much as the internet revolution has, and policy-makers should not waste money predicting which industries will be valuable, and which will still cluster.

Americans don’t need help succeeding; they need the freedom to compete. If Obama wants to create jobs and boost exports, he should put his money where his mouth is: level the playing field and rely on American productivity and ingenuity to win.

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Categories:  Economic Policy, Trade, U.S. Economy   |   Tags: ,

Marc Thiessen

Obama ‘disclosure’ of CIA drone program opens door to legal attack

By Marc Thiessen

February 2, 2012, 11:06 am

Earlier this week, President Obama did something unprecedented when he acknowledged the existence of the CIA’s drone campaign—the first time an American president has publicly declared that the United States is using unmanned drones to kill al Qaeda terrorists.

It is unclear whether the disclosure was inadvertent, or the result of a conscious decision by the administration to be more forthcoming about the drone program. But one of the consequences of the president’s remarks is that it exposes the program to greater risk of successful legal challenges by groups opposed to the drone campaign.

Before the president spoke, the government could argue in court that the very fact that the United States is conducting drone strikes in a given area and context was classified and thus within the scope of a “state secret” assertion. Indeed, the administration has successfully argued in previous legal cases that national security prohibits the discussion of the covert program.

Now, if a civil plaintiff were to claim harm from a drone strike in the general area and context implicitly acknowledged by Obama, the plaintiff might be allowed to proceed—even if the government could still assert state secrets privilege over specific details of an operation or the workings or techniques of the drone program. The president’s public acknowledgment of these operations has thus narrowed the ground for a “state secrets” assertion and made it at least marginally more difficult to get cases dismissed on national security grounds.

Indeed, the Washington Post reports this morning that the ACLU has already seized on Obama’s comments:

The American Civil Liberties Union asked a federal court Wednesday to force the Obama administration to release legal and intelligence records related to the killing of three U.S. citizens in drone attacks in Yemen last year.

The lawsuit, filed in the U.S. District Court for the Southern District of New York, charged the Justice and Defense departments and the CIA with illegally failing to respond to requests made in October under the Freedom of Information Act (FOIA). It cited public comments made by President Obama, Defense Secretary Leon E. Panetta and other officials in arguing that the government cannot credibly claim a secrecy defense…. Most recently, Obama made extensive comments Monday about the overall drone program — which has included hundreds of strikes against non-U.S. citizens in Pakistan, Yemen and Somalia — in an online town hall meeting. Panetta discussed it in a Sunday interview on CBS’s “60 Minutes”….

Last year, the ACLU lost a case demanding drone information from the CIA when the same court said administration comments on the drone program were not specific enough to constitute public disclosure. Wednesday’s case argues that more recent comments by Obama, Panetta and others make a mockery of that defense.

You can read the full story here.

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Marc Thiessen

Obama ‘exposes’ a covert action program

By Marc Thiessen

January 31, 2012, 11:00 am

During an online question and answer session on Monday, President Obama “exposed” a covert action program when, for the first time, he acknowledged the existence of the CIA’s drone campaign against al Qaeda. The drone program is, of course, an “open secret” in Washington. U.S. officials routinely discuss it on deep background, and Obama has referred to it obliquely in the past. But this was the first time an American president had openly acknowledged that the United States was using unmanned drones to kill al Qaeda terrorists.

The president made his remarks in the context of defending the program against charges from critics on the left that it has led to the deaths of a large number of civilians. “Drones have not caused a huge number of civilian casualties,” the president declared. “There’s a perception that we’re just sending a whole bunch of strikes willy-nilly. This is a targeted, focused effort at people who are on a list of active terrorists who are trying to go in and harm Americans … It is important for everybody to understand that this thing is kept on a tight leash.”

He added that, far from a source of tension with countries where strikes occur (he judiciously avoided mentioning Pakistan by name), relations would be further frayed if drones were not available to go after al Qaeda and the United States had to use manned missions to kill the terrorists instead. “We have to be judicious in how we use drones,” the president said, “but we have to understand that probably our ability … to limit our incursions into somebody else’s territory is enhanced by the fact that we are able to pinpoint-strike an al Qaeda operative in a place where the capacity of that military in that country may not be able to get them.”

At almost the same time the president spoke, eleven terrorists, including four local commanders, are reported to have been killed in a U.S. drone airstrike in a southern Yemeni province where al Qaeda’s affiliate controls significant ground. And earlier this month, the United States resumed drone strikes in Pakistan after a nearly two month pause following an American air strike in November that killed two dozen Pakistani troops. According to the Long War Journal, this was the longest pause in strikes since the program was ramped up in the summer of 2008 by President George W. Bush. Here is LWJ’s list of the pauses in drone attacks:

Number of days between Predator/Reaper strikes in Pakistan since August 2008, eight days or greater

2011:

•    33 days, Nov. 16 to Dec. 19

•    11 days, Nov. 3 to Nov. 15

•    11 days, Oct. 15 to Oct. 27

•    12 days, Sept. 30 to Oct. 13

•    11 days, Sept. 11 to Sept. 23

•    17 days, Aug. 22 to Sept. 11

•    9 days, May 23 to June 3

•    19 days, April 21 to May 6

•    25 days, March 17 to April 13

•    14 days, Feb. 21 to March 8

•    27 days, Jan. 23 to Feb. 20

2010:

•    9 days, Dec. 17 to Dec. 27

•    19 days, July 25 to Aug. 14

•    15 days, June 29 to July 15

•    12 days, May 28 to June 10

•    12 days, March 30 to April 12

•    10 days, Feb. 24 to March 8

•    11 days, Feb. 2 to Feb. 14

2009:

•    19 days, Nov. 18 to Dec. 8

•    13 days, Sept. 30 to Oct. 14

•    9 days, Sept. 14 to Sept. 24

•    10 days, Aug. 27 to Sept. 7

•    8 days, Aug. 11 to Aug. 20

•    9 days, June 23 to July 3

•    28 days, May 16 to June 14

•    9 days, April 19 to April 29

•    10 days, April 8 to April 19

•    9 days, March 15 to March 25

•    11 days, March 1 to March 12

•    12 days, Feb. 16 to March 1

•    21 days, Jan. 23 to Feb. 14

•    20 days, Jan. 2 to Jan. 23

2008:

•    11 days, Nov. 29 to Dec. 11

•    13 days, Sept. 17 to Oct. 1

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Categories:  Bin Laden, Foreign and Defense, South Asia   |   Tags: , ,

Andrew P. Kelly

Obama tells higher education institutions they’re ‘on notice’

By Andrew P. Kelly

January 27, 2012, 4:32 pm

President Obama gave everyone more detail on his latest higher education reform ideas this morning. The proposals are unlikely to make many friends among the higher education establishment.

The big pieces:

•    A proposal to tie a portion of federal financial aid dollars to whether institutions maintain low net prices and provide “long-term value” to their students.

•    A Race to the Top for College Affordability and Completion: A competitive grant program that incentivizes states to lower postsecondary costs, and a smaller program (“First in the World”) for individual institutions and non-profit organizations to experiment with lower-cost models.

•    An effort to create a College Scorecard for consumers that would (eventually) include measures of labor market success.

What to make of it all? Two quick reflections:

1.    A college scorecard with comparable information on costs and quality makes good sense. I’ve written (repeatedly) about the need for better consumer information, shown that information can affect the way parents evaluate colleges, and discussed the shortcomings of existing efforts to provide it.

In K-12, the NAEP exam is necessary because the states have no incentive to honestly “keep score” on their own. The federal government has also fulfilled this role in higher education via the National Center for Education Statistics. This latest iteration is an effort to streamline the data that are available, place any given institution’s cost and performance in context, and add some measures that have heretofore been unavailable (earnings and employment).

Two issues to keep in mind:

Measuring earnings and employment information for all colleges and universities seems sure to provoke a firestorm of debate. But the federal government is already collecting similar information for for-profits and vocational programs at community colleges.

Second, making the information available is not enough: policymakers must find ways to proactively put the scorecards in front of consumers. Seems like providing the scorecard for each school a student lists on the FAFSA is the right place to start.

2.    While it’s not entirely clear, it looks like the “First in the World” competitive grant program will be limited to colleges and nonprofit organizations, thereby precluding any for-profit service providers from applying.

This echoes the administration’s stubborn stance on the i3 program in K-12, and it means that some of the most innovative providers in higher education will be left out. Many for-profits (and I’m not just talking about colleges and universities here) are experimenting with promising models of instructional delivery, student services, and credentialing and assessment that are bending the cost curve and promoting student success. Barring these outfits would be a missed opportunity to harvest the best of what the for-profit sector has to offer: the fruits of their R and D. For-profit organizations should be included, at the very least as potential partners to public and non-profit institutions.

Whatever happens, if anyone is considering a career change, now would be the time to get hitched to a higher education lobbying firm. Judging by the initial response to Obama’s ideas, it’s going to be a “growth industry” over the next few months.

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Claude Barfield

Outsourcing/insourcing contradictions

By Claude Barfield

January 27, 2012, 2:29 pm

Even longwinded SOTU speeches can provide amusement if one plows through the text. So it is with President Obama’s treatment of the goal to “bring manufacturing back” to U.S. shores. Without getting into the weeds of international tax policy, President Obama proposes to tilt the playing field strongly against U.S. corporations that invest abroad in order to keep up with global competition: specifically, he would take tax dollars away from such firms and give them to firms that bring jobs back to the United States.

There’s a lot wrong with this jiggling, but here let’s point to an obvious contradiction: just a few moments later, Obama praised the German multinational Siemens for building a gas turbine factory in North Carolina and providing a job for the (inevitably) “single mom,” Jackie Bray. By the logic of the president’s thesis, however, German Chancellor Angela Merkel must surely respond by punishing Siemens. Similarly, by extension the Korean government should jerk the chain on Hyundai’s plants, as should the Japanese government for Toyota’s U.S. plants. Does the president really want to go down this job-destroying path? And where was the Council of Economic Advisers when this economic nonsense was written into this SOTU campaign speech?

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Edward Pinto

5 reasons President Obama’s mass refinance plan deserves to be a non-starter

By Edward Pinto

January 26, 2012, 10:15 am

President Obama in his State of the Union address proposed that legislation be passed authorizing FHA to provide all homeowners that are current on their mortgage the opportunity to refinance at today’s record low rates.

“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates,” Mr. Obama said Tuesday night in his State of the Union address.

Since “responsible homeowner” presumably means borrowers that are current on their mortgage, this would be a major program expansion. CoreLogic, a company that tracks 85 percent of all mortgages, estimates that 28 million homeowners could cut the interest rates on their loans by more than one percentage point if they could refinance.

Past attempts to launch mega-fixes have been viewed as failures.

Both the Obama and Bush administrations have struggled with various initiatives designed to help at-risk borrowers to refinance without putting new costs on taxpayers…. After rolling out a series of ambitious loan-modification programs in 2009 that fell short of their goals, the White House largely shied away from more housing policies over the past two years.

This proposal is fraught with problems. Here are five that come immediately to mind:

1.       First and foremost, as with so many of the earlier proposals, it does not address the twin problems preventing a housing recovery: jobs and deleverage.

For 3 ½ years we have been using mortgage refinances as a “cheap” stimulus. With apologies to Winston Churchill, for a nation to try to modify itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

The economic stimulus that results from modification is highly questionable. The refinance process is largely a zero sum game. Someone is currently receiving income on these mortgages or mortgage backed securities, which income is lost upon refinance. This greatly reduces the stimulus value of the program.

Instead, the focus must be on permanent private sector jobs. It is jobs that create demand for housing, not the other way around. Creating one million new jobs would add $100 billion to the GDP annually.¹ Modifying 10 million loans would reduce payments by $30 billion per year,² but most of this is income redistribution. Better to have a laser focus on creating 1 million new jobs.

A core problem facing the mortgage market is over leverage—exemplified by the large number of mortgages that are underwater by 20 percent or more. Little has been done in the last 4 ½ years to address this issue. I propose a solution below to accomplish targeted deleverage.

2.       Such a mass refinancing could once again roil the mortgage finance market, penalize savers, further delay the return of private capital, and create further uncertainty as to prepayment expectations. This could lead to reduced demand resulting in higher housing finance costs in the future.

3.       As I recently pointed out, a new bubble may be growing in 30-year fixed-rate mortgage-backed securities. Domestic governmental units at all levels and their agencies, along with banks and other financial institutions backed by the Federal Deposit Insurance Corporation, now hold 52 percent of outstanding agency securities. The vast majority are backed by 30-year fixed-rate mortgages.

Federal policy has, in effect, created a closed system whereby the government subsidizes the rate on 30-year mortgages, guarantees the credit risk, and then puts itself on the hook for most of the interest-rate risk. Although government protects holders from credit or default risk, these investors are exposed to potentially sizable losses due to changes in the price of the security if interest rates go up. This increases the chances for a bubble in mortgage backed securities largely backed by 30 year fixed rate mortgages.

By creating even more of these artificially low interest rate securities, the impact of any dramatic increase in interest rates in the future will be magnified.

4.       Using the financially and administratively challenged FHA as the insurer for such a program will both inundate the FHA and detract from the real and pressing reform FHA needs to undertake now to protect taxpayers, the families unknowingly getting risky FHA loans, and the neighborhoods impacted by FHA’s risky lending.

5.       The eligibility pool for this program swamps the HAMP and HARP initiatives. While billed as “[n]o more red tape,” none of the prior programs have met this test. This could bring the mortgage finance industry to a standstill—including new home purchase originations.

So what should be done, besides getting serious about undertaking policies promoting the creation of real jobs? Here are two ideas, one by Lew Ranieri and one of my own. Neither has big downside risks, requires massive bureaucracies, or presents moral hazard risks:

1.       As reported by Nick Timiraos in the Wall Street Journal earlier this week:

Local investors could play a greater role in spurring a recovery in their own communities. Some mom-and-pop investors have begun to buy up excess housing stock and rent it out.

These buyers are important to clear the large “shadow supply” of foreclosures. Banks owned around 440,000 homes at the end of October, but an additional 1.9 million loans were in some stage of foreclosure, according to Barclays Capital.

While there’s no shortage of investor demand in many markets, financing remains an obstacle. In 2008, Fannie Mae and Freddie Mac, the main funders of mortgages, faced soaring losses from speculators and reduced to four from 10 the number of loans they would guarantee to any one owner. Fannie now backs as many as 10 loans, but some banks have kept lower limits.

“If that number were raised…to 25, you would very quickly start whittling down this very big backlog,” said Lewis Ranieri, the mortgage-bond pioneer, in a speech last fall. He said loans should be made on conservative terms that include 30% or 35% down payments.

In my view, Lew’s proposal has the right balance of credit risk mitigation and reliance on mom-and-pop investors.

The need to focus on small investors rather than a Washington-centric big investor approach was reinforced by recent research by Tom Lawler:

Contrary to what some espousers of ‘bulk’ REO sales to large investors to rent our SF properties might suggest, the number and percent of single-family detached homes occupied by renters increased significantly during the latter half of last decade, with the largest gains coming in “bubbly” areas. The table below is based on data from the American Community Survey. The 2000 data are from Census 2000, while the 2006-07 and 2008-09 averages are derived from the 5-year, 3-year, and 1-year ACS results for the 2006-10, 2008-10, and 2010 periods released this year.

It is not clear why folks focusing on the rental market for SF housing have not actually looked at any data, much less analyzed or commented on the truly astounding increase in the rental share of the SF housing market in many parts of the country. The astounding increase in the number of foreclosed SF detached homes in Maricopa County occurred, of course, without any mandated program to have bulk sales of REO at discounts to “large” investors.

2.       Provide non-delinquent homeowners with severely underwater loans (greater than or equal to a 120 percent combined LTV today) that were guaranteed by Fannie or Freddie prior to their conservatorship a modification down to today’s rate (from an average of 6.1 percent to, say, 3.5 percent), but without any payment reduction (remember these borrowers have been paying for an average of 5 years). This would accomplish the goal of rapid deleverage as the loan would now pay off in 15-18 years. This presents little or no moral hazard and could be done rapidly on a mass basis with little or no borrower fees. It would reduce the losses sustained by Fannie and Freddie (i.e., the taxpayers). Fannie and Freddie would buy the to be modified loans out of the MBS pool at par. This is fair to the bond holders because these withdrawn loans are in MBS that benefited from the direct taxpayer bailout of Fannie and Freddie, a bailout that was not legally required.

Footnotes:

1. Assumes $100,000 in additional GDP per job.

2. 10 million times $3000 per modified loan figure used by President Obama.

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Clean energy: the race to waste

By Benjamin Zycher

January 25, 2012, 4:09 pm

Mr. Bryan Ritterby is proud. Proud “to be working in the industry of the future.” And President Barack Obama is proud. Proud to have given Ritterby the opportunity to be proud to be working in the industry of the future. Proud of the federal “investments” that have nearly doubled the use of “renewable energy.” And proud of the “thousands of Americans [who] have jobs because of it.”

On the other hand, Obama presumably is not proud of a few details left unmentioned in his State of the Union address. The Solyndra debacle, to pick one example among many, and the many billions of dollars of costs heaped upon the taxpayers. The more-general reality that “renewable” electricity accounts for less than 4 percent of U.S. power generation despite massive subsidies, oops, “investments” that dwarf those given other energy sources, and despite guaranteed market shares in 30 states. The fact that in 2010, subsidies per megawatt-hour were 63 cents for natural gas, 64 cents for coal, over $52 for wind power, and $968 for solar generation. That’s a level playing field that Obama really does believe in.

Obama presumably is proud of the definitional sleight of hand under which those “thousands” of jobs include bus drivers and other occupations that are “green” only in the minds of Beltway central planners. He is proud of the new mandate for the Defense Department to purchase renewable electricity, no matter the massive costs; thus will the cuts to the defense budget look smaller than the reality, with the reduced outlays buying less actual defense than advertised. And the president is proud to enter the race with China and Germany to see who can waste more resources on “clean energy,” programs that are not clean and that will yield little actual energy or employment. Obama will be proud to win that contest, as the Europeans and, indeed, the Chinese already have tired of the massive costs and poor economic outcomes yielded by clean energy subsidies, and so are pulling away from such endeavors even as Obama urges the United States to plunge ever deeper into the “renewables” swampland.

The 1978 National Energy Act. The 1980 Synthetic Fuels Corporation Act. The 1992 Energy Policy Act. The 2010 Job Creation Act. And many more: ad infinitum. All enacted in pursuit of independence, sustainability, environmental quality, employment, efficiency, and motherhood and apple pie. All the products of the smartest guys in the room. All failures. All expensive. All wasteful. All hopelessly at odds with market forces. And now we await the forthcoming proposals from the smartest guys in the Obama White House. And so let it be said: We Americans are not quitters. We should be proud.

Benjamin Zycher’s book examining “clean energy” myths, Renewable Electricity Generation, was released this month.

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Christopher J. Conover

America’s humongous healthcare problem: Healthcare fact of the week

By Christopher J. Conover

January 25, 2012, 10:02 am

Extraordinary. The president’s State of the Union address made no mention of what is purportedly his signature domestic policy achievement: the Affordable Care Act. In fact, the speech nearly ducked entirely the single largest problem most in need of the forward-looking bipartisan team effort repeatedly invoked by the president: America’s “humongous healthcare problem.” According to the Congressional Budget Office’s latest long-term spending projections, the federal government is slated to increase in size by more than 40 percent (relative to the economy) over the next 75 years. Fully 100 percent of that increase can be attributed to growth in federally-financed healthcare entitlements (figure 20.7c).

Of course, these estimates only represent CBO’s “extended baseline scenario.” Moreover, they exclude the 40 percent or so of Medicaid spending that is paid for by the states as well as non-mandatory health spending such as public health. Inclusion of these missing components would add several more percentage points of GDP to the totals shown.

More importantly, the CBO, like the Centers for Medicare and Medicaid Services and even the Medicare Trustees, recognizes that some of the vaunted “savings” promised in the Affordable Care Act are unlikely to come to fruition. For example, Congress for a decade now has repeatedly granted physicians a temporary reprieve from spending cuts mandated by the Balanced Budget Act of 1997. To comply with such statutory requirements now would require a nearly 30 percent reduction in physician fees paid by Medicare. In light of the devastating consequences to access that would result from imposition of such draconian reductions, no one seriously believes they will ever happen. Under a more realistic alternative fiscal scenario that assumes no physician fee reduction and other companion adjustments to how Medicare constraints really would play out as well as other assumptions, CBO projects that federal spending will have climbed to 75.9 percent of the economy by 2085!

One might suppose that a looming fiscal tsunami of that magnitude might be front and center in a president’s efforts to even-handedly describe the state of the union and what he planned to do about it. But, judging from the laundry list of new spending initiatives proposed by the president, he is not particularly alarmed by this massive increase in the size of government. There appeared to be not a single problem on his list of priorities for which additional federal spending was not his suggested solution. That attitude does not bode well for making any progress on health entitlements. To be fair, the president did say he would be willing to contemplate addressing the Medicare and Medicaid entitlements problem if and only if Congress were willing to raise taxes on the 1 percent of Americans who already pay (again, according to the CBO) 29.5 percent of all federal taxes. Perhaps I misunderstood, but the president appeared to be saying that if Congress were unwilling to play the game according to his rules, the president would be happy to pick up his marbles and go home. It is hard to picture President Lincoln telling Congress he would be willing to address the attack on Fort Sumter only if he first got from them a pet piece of legislation, or FDR insisting on approval of one more component of the New Deal before he would lift a finger to respond to the attack on Pearl Harbor. Admittedly, the impact is much further in the future, but having the federal government sop up so much of GDP within 75 years would have adverse consequences that arguably would rival the nation’s being split in two or facing a Nazi empire in Europe.

More stunning still is that a serious bipartisan proposal to address the Medicare problem just recently got put on the table by House Budget Committee Chairman Representative Paul Ryan and Senator Ron Wyden. Instead of hectoring Congress to learn a lesson from the U.S. military on teamwork, the president might have invoked the Wyden-Ryan proposal as a living, breathing example of the kind of teamwork that will be essential to resolve the entitlements tsunami. Readers can judge for themselves why the president failed to do so. What we can be certain of is that unless and until the country has a president willing to confront this problem squarely, our nation’s best days may no longer lie ahead.

Christopher J. Conover is a research scholar at Duke University’s Center for Health Policy and Inequalities Research, an adjunct scholar at AEI and affiliated senior scholar at the Mercatus Center at George Mason University. The charts shown are from his new book American Health Economy Illustrated, to be released in January 2012 by AEI Press. See PowerPoint version of Figure 20.7c. All figures were obtained from supporting tables from the CBO’s most recent Long Term Budget Outlook.

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Kenneth P. Green

The Keystone divide

By Kenneth P. Green

January 23, 2012, 12:09 pm

Over at Politico, Darren Goode covers the increasing schism that President Obama’s rejection of the Keystone XL pipeline is causing among his formerly unified union supporters:

Unions representing construction workers that would directly benefit from building the pipeline feel stabbed in the back by unions that joined environmental groups to congratulate Obama for killing the project. “People are pissed,” said one U.S. labor official who supports the proposed TransCanada pipeline. “The emotions are really, really raw right now. This is a big deal.” “It’s repulsive, it’s disgusting and we’re not going to stand idly by,” Laborers’ International Union of North America General President Terry O’Sullivan told POLITICO. “The rules have changed. So we’ll react accordingly.” O’Sullivan said the first move will be to pull his union out of the BlueGreen Alliance — a coalition of environmental groups and labor unions that represented nearly all of the groups that signed a joint statement backing Obama.

But what’s amazing about the article is how blatantly political the other unions are: their focus is clearly not on their workers, it’s on supporting Obama [emphasis added]:

But the unions who signed the joint statement said it was the right thing to do and was necessary to help Obama fend off Republican attacks over his jobs record.“We’ve worked with Sierra [Club] and the others for a long time and we raised the issues about the hypocrisy of the Republicans in our statement,” Communications Workers of America spokeswoman Candice Johnson said. “That’s what we believe and … we thought it was very important to lay out exactly what was happening.” “It was kind of not explicitly about the president’s decision [on the pipeline] but the main issue was to rally around the president when the issue of jobs was being taken over by the GOP,” said Sean Sweeney, director of the Global Labor Institute at Cornell University, who helped the effort.

Best quote from the story?

“It’s the equivalent of us stepping in when they were doing the bailout of General Motors and saying ‘this is bullsh—,’” a pro-pipeline labor official said. “Nobody wants to step up to help us. Or just stay silent and let us fight our battles.”

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Kenneth P. Green

Obama’s Orwellian overture

By Kenneth P. Green

January 19, 2012, 4:16 pm

Yesterday, after the president shoved a thumb in both the Canadian and American people’s eyes by gratuitously and politically rejecting the Keystone XL oil pipeline, I opined that it was possible the president thinks that people won’t care because he intends to simply lie about the whole thing:

On the other hand, this president has a history of doubling- and tripling-down on his more absurd energy policies, and isn’t afraid of over-the-top Orwellian speaking.

I’d like to thank the president for helping me make my point. On the same day as he rejected the Keystone XL pipeline, the Obama campaign has released a YouTube video that basically claims up is down, black is white, Solyndra was a major success, the green-energy jobs thing really is working, and that the Obama administration is as ethically pure as the driven snow. Watch it here.

This is truly an ingenious ad, partly because it is so blatantly misleading. Rather than rebut the Solyndra debacle, they quote a liberal newspaper which debunked a political ad by a rival regarding Solyndra. Choice stuff here.

My favorite lines?

“And America’s clean energy industry? 2.7 million jobs and expanding rapidly.”

For this, the ad cites a Brookings Institute study on the green economy, and misrepresents it utterly. First of all, the Brookings study looked at all jobs they could define as “green jobs,” which were overwhelmingly not jobs in the clean energy industry, and included about 350,000 bus drivers, and another 380,000 trash collectors.

As I observed when the Brookings report came out, the Brookings conclusions are not what the green-job boosters claim they are.

Brookings concludes that,

For one thing, the data counsel against excessive hopes for large-scale, near-term job-creation from the sector. After all, the U.S. clean economy remains small where it is fast growing, and relatively slow-growing on balance, as defined here.

To rephrase that, the parts of the “clean” economy that boosters point to as having rapid growth are the smallest sections of Brookings’s re-defined clean economy.

“For the first time in 13 years, our dependence on foreign oil is below 50 percent.”

The folks at the Oil Drum blog have already debunked this, in response to a Mortimer Zuckerman article in U.S. News:

Exhibit 1 shows the data behind oil and petroleum product imports, and it appears that he has done a bit of mixing-and-matching to arrive at the percentages that he cites. It is true that crude oil & petroleum products represented 60% of 2005 U.S. imports compared to consumption. The reduction in imports to 47% in 2010, however, is the percentage of crude oil alone compared to consumption for that year. When we examine comparable categories, it is clear that crude oil imports – relative to total consumption of crude oil and products – were only 2% lower in 2010 than in 2005, and that the big change that he alludes to was mostly in petroleum product imports.

Orwell starts with an O. So does Obama. Coincidence? Apparently not.

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