Debt is Destroying the Dollar
By George WillWASHINGTON -- One of the many television commercials exhorting viewers to buy gold says solemnly that it is an asset whose value "has never dropped to zero," a boast that surely sets a record for minimalism. Still, the world's appetite for gold as an investment option is intensifying. Last month, India purchased 200 tons of gold at $1,045 an ounce, before the price topped $1,108 on Monday. China, too, may increasingly diversify from paper -- i.e., bonds -- into gold, the price of which, some experienced investors believe, could soar to $2,500 an ounce in three to five years. One reason for all this is U.S. behavior.
India's 2008 GDP was $1.2 trillion, so its $6.7 billion purchase was small beer. It may, however, be a large portent: Gold increasingly looks to investors to be a more reliable store of value than governments' bonds are, especially U.S. bonds as the U.S. government threatens to pile a mammoth health care entitlement onto the nation's Ponzi welfare state, increasing the nation's debt and borrowing.
The fiscal year 2009 budget deficit, triple that of 2008, was 10 percent of GDP and, Lawrence Lindsey says, probable policies will produce deficits of 7 percent of GDP for a decade. Ronald Reagan's worst deficit was 6 percent of GDP, and for only one year.
Lindsey -- former member of the Federal Reserve board of governors and director of George W. Bush's National Economic Council (2001-02) -- says Americans' net worth has dropped at least $13 trillion since the recession began in December 2007. What is to be done?
Americans could suddenly begin saving substantially more, but this would deepen and prolong the recession. Alternatively, America could reflate the value of its assets by printing money. Lindsey says it is already doing that -- printing bonds promiscuously and lending money to banks at negligible rates, money banks can use to buy the bonds. This sharply increases the money supply, which sets the stage either for inflation -- too much money chasing too few goods. Or for recovery-snuffing higher interest rates to try to prevent inflation. Or for something like Japan's lost decade -- banks pouring money into government bonds rather than the real economy.
America, says Lindsey, will not become Weimar Germany, where hyperinflation caused people to rush to stores with satchels of rapidly depreciating currency. But, he adds, no country has successfully behaved the way the United States is behaving.
Suppose, he says, you owned some U.S. Treasury bonds or other dollar-denominated assets, and you were sitting in front of two buttons, one marked Buy More, the other marked Sell. Which button would you push? Obviously, Sell.
Fortunately, Lindsey says, there is so much U.S. paper circulating, every owner cannot hit Sell at the same time. But if enough people, institutions or nations sell, others will not buy unless U.S. interest rates rise substantially, which can ignite a vicious cycle -- killing economic growth, thereby depressing revenues and increasing the deficit and borrowing.
Irwin Stelzer of the Hudson Institute notes that China, America's largest creditor, has increased its dollar holdings 20 percent this year, so China has increased its interest in not having the dollar devalued by mass selling. But, Stelzer adds, China thinks geopolitically as well as economically, and might have noneconomic reasons for encouraging a controlled flight from the dollar.
A cataclysmic event -- say, an interruption of the flow of Middle Eastern oil -- could, Stelzer says, cause the world to flee to the safety of even a depreciating dollar. But absent such an event, the world will be carefully watching a U.S. government that has a powerful incentive to try to use controlled inflation for the slow-motion repudiation of some of its mountain of new debt.
It is, however, hubris -- something abundant in Washington -- to think inflation can be precisely controlled, like an oven's temperature. It is hubris cubed to think inflation can be unleashed just short of provoking a flight from the dollar.
Perhaps Federal Reserve Chairman Ben Bernanke knows how to sop up the trillions of new dollars before inflation ignites. But will he? He knows about "the recession within the Depression" that occurred in 1937, perhaps as a result of premature confidence in a recovery.
Furthermore, he may feel duty-bound to try to use loose money to help reduce unemployment. But although the Fed has suddenly assumed stupendous powers, it still has one sovereign duty -- to preserve the currency as a store of value.
Fighting a Coercion Clause
Fighting a Coercion Clause
By George WillPHOENIX -- In 2006, long before there was an Obama administration determined to impose a command-and-control federal health care system, a young orthopedic surgeon walked into the Goldwater Institute here with an idea. The institute, America's most potent advocate of limited government, embraced Eric Novack's idea for protecting Arizonans from health care coercion. In 2008, Arizonans voted on Novack's proposed amendment to the state's Constitution:
"No law shall be passed that restricts a person's freedom of choice of private health care systems or private plans of any type. No law shall interfere with a person's or entity's right to pay directly for lawful medical services, nor shall any law impose a penalty or fine, of any type, for choosing to obtain or decline health care coverage or for participation in any particular health care system or plan."
Proponents were outspent 5-1 by opponents who argued, meretriciously, that it would destroy Arizona's Medicaid program, with which many insurance companies have lucrative contracts. Nevertheless, the proposition lost by only 8,687 votes out of 2.1 million cast, and Arizonans will vote on essentially the same language next November.
But does not federal law trump state laws? Not necessarily. Clint Bolick, a Goldwater Institute attorney, says, "It is a bedrock principle of constitutional law that the federal Constitution established a floor for the protection of individual liberties; state constitutions may provide additional protections."
In 1997, the U.S. Supreme Court held that under the Constitution's system of "dual sovereignty," states' "retained sovereignty" empowers them to "remain independent and autonomous within their proper sphere of authority." The court has been critical of the "federalism costs" of intrusive federal policies, and recently has twice vindicated state sovereignty in ways pertinent to Novack's plan.
In 2006, the court overturned an interpretation of federal law that would have nullified Oregon's "right to die" statute. The court said states have considerable latitude in regulating medical standards, which historically have been primarily state responsibilities.
In 2000, Arizona voters' endorsed an English immersion policy for students for whom English is a second language. Federal courts had issued an injunction against such policies because they conflicted with federal requirements of bilingual education. This year, however, the Supreme Court mandated reconsideration of the injunctions because they affect "areas of core state responsibility."
The court says the constitutional privacy right protects personal "autonomy" regarding "the most intimate and personal choices." The right was enunciated largely at the behest of liberals eager to establish abortion rights. Liberals may think, but the court has never held, that the privacy right protects only doctor-patient transactions pertaining to abortion. David Rivkin and Lee Casey, Justice Department officials under the Reagan and first Bush administrations, ask: If government cannot proscribe or even "unduly burden" -- the court's formulation -- access to abortion, how can government limit other important medical choices?
Democrats' health bills depend on forcing individuals to buy insurance or face severe fines or imprisonment. In 1994, the Congressional Budget Office said forcing individuals to buy insurance would be "an unprecedented form of federal action," adding: "The government has never required people to buy any good or service as a condition of lawful residence in the United States."
This year, the Congressional Research Service delicately said "it is a novel issue whether Congress may use the (Commerce) Clause to require an individual to purchase a good or service." Congress has the constitutional power to "regulate commerce ... among the several states." But a Federalist Society study by Peter Urbanowicz and Dennis Smith judges it perverse to exercise coercion under the Commerce Clause "on an individual who chooses not to undertake a commercial transaction." As Sen. Orrin Hatch, R-Utah, says, there is "a fundamental difference between regulating activities in which individuals choose to engage" -- e.g, drivers can be required to buy auto insurance -- "and requiring such activities" just because an individual exists.
House Majority Leader Steny Hoyer, D-Md., says Congress can tax -- i.e., punish -- people who do not buy insurance because the Constitution empowers Congress to tax for "the general welfare." So, could Congress tax persons who do not exercise or eat their spinach?
When asked whether any compulsory insurance purchases are constitutional, Speaker Nancy Pelosi was genuinely astonished: "Are you serious? Are you serious?" In 1803, in Marbury v. Madison, Chief Justice John Marshall wrote, "The powers of the legislature are defined and limited; and that those limits may not be mistaken, or forgotten, the Constitution is written." He was serious.
America's fiscal deficit
America's fiscal deficit
Stemming the tide
Unprecedented levels of government debt may require radical solutions
STUDENTS at National Defence University in Washington, DC, were recently given a model of the economy and told to fix the budget. To get the federal debt down, they jacked up taxes and slashed spending. The economy promptly tanked, sending the debt to higher levels than before. The lesson: “You’ll never get re-elected and you may do more harm than good,” concluded Eric Bee, an air-force colonel who took part in the exercise.
This is the ugly arithmetic of America’s public finances. Recession and aggressive fiscal stimulus have hugely swollen the federal deficit. Stimulus was essential to cushion a collapse in private demand. In spite of that, the economy has barely emerged from recession and unemployment is still rising, feeding speculation that more stimulus is needed. Yet at the same time voters are growing alarmed at the tide of red ink, and it may be only a matter of time before markets do, too.
On current policies the federal deficit, which hit a post-war high of 10% of GDP in the fiscal year that has just ended, will fall to 4.2% by 2014 and will then head steadily higher. Aides to Barack Obama know this is unacceptable. With a new budget due in February, government departments are said to be preparing to tighten their belts. Meanwhile an advisory committee, chaired by Paul Volcker, who used to head the Federal Reserve, will report to the president in early December on options for tweaking the tax system, though not how to raise much more revenue from it.
But the administration has resisted being pinned down on concrete deficit reduction. The post-crisis experience of other countries suggests that America’s recovery will be muted and fragile. As the students found, premature tightening of fiscal policy could strangle the recovery in its cradle and worsen future deficits. “Doing the prudent thing about deficits now would be an extremely foolish thing,” observes Paul Krugman, a Nobel-winning economist.
However, persistent deficits could eventually drive up interest rates, and uncertainty over when or how taxes will rise could dampen business confidence. Higher interest charges will take money from other public services, and limit the flexibility to respond to future economic shocks. “While it is premature to begin exiting from fiscal support, governments should not hesitate to announce a credible exit strategy now,” said the International Monetary Fund (IMF) on November 3rd.
Such an announcement, even without immediate spending cuts or tax increases, could help steady nerves. And actual deficit reduction, if done right, could enhance economic growth. For example, fixing entitlement programmes for the elderly could extend Americans’ working lives and expand the labour force; shifting the burden of taxes to consumption could boost saving and investment. But it will not be easy.
Early last year the Congressional Budget Office (CBO) thought federal debt held by the public, then about 40% of GDP, would fall to 28% in a decade’s time. It now sees it reaching 82%. As William Gale and Alan Auerbach, two prominent fiscal experts, put it: “The future is now.”
Using the CBO’s economic-growth and interest-rate assumptions, and assuming that Mr Obama’s last budget is implemented (for example, that his payroll-tax credit is made permanent and that George Bush’s tax cuts remain except for the wealthiest), a deficit of 3% of GDP in 2014 (instead of 4.2%) would stabilise debt at about 70% of GDP. That would require trimming more than 200 billion from the 2014 deficit and more than 500 billion from the 2019 shortfall. This amounts to a cumulative 1.2% fiscal contraction over three years, and about double that over seven. The specific timeline is not important; stretching it over more years means a higher debt. Either way there are risks: it may hobble a still-weak economy. And it may not be enough.
The spending bonanza
Further efforts after 2019 would be needed because of growing pressure on the debt from entitlement spending. This will go on relentlessly rising as the baby-boomers continue to reach retirement age, and then become infirm.
Most of the growth in the deficit comes from spending, which averaged 21% of GDP from 1980 to 2007 but will approach 25% by 2019, according to the CBO (see chart 1). Some of that comes from interest charges on the debt, expected to more than triple from their current 5% of total spending. But entitlements are the elephant in the budget. On current policies, pensions and health care for the retired (Social Security and Medicare, respectively) and health care for the poor (Medicaid) will grow from 10% of GDP in 2011 to 18% by 2050.
Mr Obama had long planned that his health reform would not just cover the uninsured but also stop the long-term growth in health costs. In the bills currently in Congress, that second goal may be out of reach. Although Mr Obama insists that the reform will not raise the deficit, it will still absorb some of the revenue that could have been used to reduce it.
Social Security is more straightforward. First, because Americans live longer and healthier lives than a generation ago, the age of eligibility, which will rise to 67 in 2027, could be raised to 70 and be linked to life expectancy thereafter. Medicare’s eligible age, now 65, could also be raised. Second, starting benefits could be based on how much prices, rather than wages, have risen during a beneficiary’s working life, except for the lowest-paid workers. Third, benefits could be linked to an inflation index with less upward bias than the one now used. Fourth, while married retirees are both alive, the spousal benefit could be reduced. Overall, a worker’s benefits would be lower than currently projected, but not in real terms. Lower-income workers and anyone now nearing retirement would be spared.
Currently the federal government pays 50-83% of Medicaid; states pay the rest. This encourages states to expand coverage and benefits because they pay only a portion of the extra cost. Switching Medicaid to a block grant, indexed to inflation and population, and requiring wealthy states to pay most of their share, would encourage states to control costs. The model would be the 1996 welfare reform, which shifted funding to block grants; in exchange, states gained flexibility in designing their programmes.
States and their congressional delegations will complain that this simply shifts costs from federal to state budgets. Still, states that really want more generous programmes could raise their own taxes to fund them. Because most are required to run balanced budgets and have less-than-AAA credit ratings, they would be less likely than the federal government to fund cost overruns by borrowing.
Because entitlement changes have to be phased in slowly, they offer only limited savings in the short term. Other programmes such as highway funding and farm assistance could be trimmed, and perhaps handed over to the states. Defence and discretionary items represent just a third of spending, and Mr Obama has already planned to shrink both in nominal dollars by 2014, as the wars in Iraq and Afghanistan (with luck) wind down and the stimulus expires. Thereafter, they would grow only slightly faster than inflation. Freezing both at 2014 levels would shrink them in real terms. Still, it would save only $160 billion a year by 2019. Even elimination of the notorious “earmarks”, favoured projects slid into the federal budget by individual congressmen, would save little; they add up to less than $20 billion a year, and in any case they only rearrange, rather than expand, the budget.
Taxation’s maze
The measures outlined above could generate perhaps half the savings needed to get the deficit down to 3% of GDP (see table). Without more drastic cuts, achieving the other half requires higher tax revenue. George Bush’s tax cuts expire at the end of next year. This could provide a catalyst for more fundamental tax reform.
America depends inordinately on payroll and income taxes, on both people and corporations (see chart 2 and article). This penalises work and investment, and encourages borrowing and spending. Exemptions, credits and loopholes worth $1 trillion a year riddle the system and distort behaviour. The deduction for employer-provided health insurance encourages richer plans and more spending. The mortgage-interest deduction fosters borrowing and leverage. The largest loopholes also favour the rich, making the tax system less progressive, and encourage rampant tax avoidance. The tax code is now several million words long and changes, on average, more than once a day. Compliance costs Americans the equivalent of $200 billion annually. That complexity is magnified by the “alternative minimum tax” (AMT), a parallel income tax aimed at the wealthy that must be fixed each year to avoid ensnaring more of the middle class.
Economists generally see two goals for tax reform: less complexity and more bias towards taxing consumption. There are two broad ways to achieve that. The first would broaden the income-tax base by eliminating loopholes while lowering rates, as occurred with the last big reform in 1986. Some exemptions, such as the one for retirement saving, would be kept. Abolishing deductions for employer-provided health care, mortgage interest, capital gains on homes and state and local taxes would raise over $500 billion in 2014. Some of that could be used to reduce the deficit, and the rest to shrink or scrap the AMT.
Junking these deductions entirely may be politically impossible. But much the same result could be achieved by capping the exclusion for employer-provided health care (exempting most lower-cost plans) and replacing the mortgage-interest deduction with a tax credit. Some conservatives go further, advocating a single “flat” tax bracket above a basic personal exemption. But that would make the system much less progressive.
The second type of tax reform would replace or supplement the income tax with a broad tax on consumption. There are many ways to do this. One would allow an unlimited exemption for saving, in effect turning the current income tax into a consumption tax. Another would be a national sales tax, similar to state sales taxes but charged federally. An alternative is a value-added tax, which all other OECD countries have (see article). VAT is levied at each stage of production. For example, a baker might pay five cents VAT on flour and collect 25 cents VAT on the bread he sells, remitting 20 cents to the government.
An analysis for The Economist by the Tax Policy Centre estimates that a 5% VAT that exempted education, housing, and religious and charitable services would raise a net $324 billion in 2014 and $411 billion in 2019. Some of that could be used to reduce the impact on the poor, for example by expanding Mr Obama’s payroll-tax credit. The rest could be used to lower corporate and personal rates and reduce the deficit.
An alternative or complement to either of those reforms would be a tax on carbon emissions. This would raise revenue, penalise consumption and encourage energy efficiency. The most economically efficient method would be a carbon tax. Mr Obama and Congress are instead pursuing a cap-and-trade system; that could do the same thing, provided permits to emit carbon dioxide are sold rather than given away. Raising the current federal fuel tax would have similar benefits with fewer complications: a 50-cent boost, to 68 cents a gallon, would raise some $60 billion a year.
Whether America adopts a broader-based income tax with lower rates, or a VAT, or any serious tax reform, depends more on politics than economics. Each of the tax code’s loopholes has fierce defenders. Yet it might be even harder to persuade almost everyone to pay a new federal tax where none has existed.
Join hands and jump
Historically, politicians are most likely to tackle deficits when prodded by markets. Denmark in 1982, Ireland in 1987 and Canada in 1995 all embarked on ambitious programmes after spiralling debts had driven up interest rates. In the same way, American deficit-reduction deals in 1985, 1990 and 1993 were nudged along by nervous markets. Such concerns are notably absent now. “Until the bond-market vigilantes form a posse again, it’s just too easy to ignore this issue,” says Alan Blinder, a Princeton University professor and former adviser to Bill Clinton.
One way to moderate the political resistance to cutting entitlements and raising taxes is to bypass regular legislative procedures. Kent Conrad and Judd Gregg, the Democratic chairman and top Republican respectively on the Senate Budget Committee, have proposed a bipartisan commission, probably composed of legislators and administration officials. They would produce a single proposal which Congress must approve or reject, but cannot amend. “The only way you do this is if everyone joins hands and jumps off the cliff together,” says Mr Gregg. It is “institutional insurrection”, admits Evan Bayh, an Indiana senator. He means that in a good way.
At least three other, similar proposals are before Congress now. A dozen senators have said they will support a higher national debt limit—scheduled for a vote in the next couple of months—only if it is tied to the creation of such a commission. Mr Obama has previously expressed interest in the idea. But many congressmen think it would usurp their responsibilities. Nancy Pelosi, the speaker of the House of Representatives, is adamantly opposed.
A similar commission was set up to restore solvency to Social Security in 1982-83. It succeeded because the problem was imminent, the consequences of failure were unacceptable to both parties, and its members were trusted and pragmatic dealmakers, according to a joint analysis by the Brookings Institution and the Heritage Foundation. Entitlements and tax reform today are a far larger, more amorphous problem, the threat of catastrophe is absent so far, and politics is more polarised. But “the alternative—political paralysis—is far worse,” the analysis concluded.
Of course, if the commission failed, it “would be a very damaging moment in the eyes of our international creditors,” says Douglas Holtz-Eakin, a former CBO director. “To raise the political stakes so high in this environment has some real risks.” Yet that could also put pressure on the commission to succeed, and on Congress to approve its recommendations.
Back at National Defence University, Mr Bee, the student, did eventually find a way to reduce the deficit without sending the economy into a tailspin. Unfortunately, it required America to keep borrowing from abroad. Mr Bee asked the students representing China in a similar exercise if they would advance the money. “They said, ‘We’ll think about it’.”
How to feed the world
Food and agriculture
How to feed the world
Business as usual will not do it
IN 1974 Henry Kissinger, then America’s secretary of state, told the first world food conference in Rome that no child would go to bed hungry within ten years. Just over 35 years later, in the week of another United Nations food summit in Rome, 1 billion people will go to bed hungry.
This failure, already dreadful, may soon get worse. None of the underlying agricultural problems which produced a spike in food prices in 2007-08 and increased the number of hungry people has gone away. Between now and 2050 the world’s population will rise by a third, but demand for agricultural goods will rise by 70% and demand for meat will double. These increases are in a sense good news in that they are a result of rising wealth in poor and middle-income countries. But they will have to happen without farmers clearing large amounts of new land (there is some scope for expansion, but not much) or using up lots more water (in parts of the world, water supplies are stretched to their limit or beyond). Moreover, they will take place while farmers also wrestle with the consequences of climate change, which, on balance, will do more harm than good to farmland round the world.
It may be too late to avoid another bout of price rises. Despite a global recession and the largest grain harvest on record in 2008, food prices are heading up again. Still, countries have a brief window of opportunity in which to set long-term policy goals without being distracted by panic measures. They need to do two things: invest in the productive capacity of agriculture and improve the operation of food markets.
Governments have done one but not the other. Over the past year investment has risen faster than anyone expected. But distrust of markets and a reaction against farm trade are growing. Unless governments restrain those impulses, they will undermine the gains from rising investment.
The quarter-century slumber
For most of the past 25 years, investment in agriculture has declined relentlessly. In 2005 most developing countries were investing only around 5% of public revenues in farming. The share of Western aid going to agriculture fell by around three-quarters between 1980 and 2006. This disinvestment laid waste to productivity. During the Green Revolution of the 1960s, staple-crop yields were rising by 3-6% a year. Now they are rising by only 1-2% a year; in poor countries, yields are flat.
Fortunately, the food-price spike of 2007-08 shocked governments out of their quarter-century of neglect. The World Bank and many rich countries have doubled the money they put into poor countries’ farming. In the poor countries themselves, agriculture has gone from being a sideshow for the government—something the minister of agriculture does—into its main event, which everyone needs to worry about. This is as it should be: farming is far and away the single most important economic activity in most poor places.
Some of the new splurge of public money is going on safety-net programmes for poor farmers, which are justified on anti-poverty grounds: three-quarters of the world’s poorest live in rural areas. But the money will pay dividends in the long run only if it improves farmers’ access to market. Lack of reliable markets is the biggest barrier to rural development, since without them farmers have little incentive to grow more. So the increase in rural road-building is welcome, as are measures to improve the operations of local markets by (for instance) spreading price information and building grain stores. There is also a case for temporarily subsidising better seeds and fertilisers in places where local markets are failing to provide them: this is an example of correcting market failure.
Boosting world food production without gobbling up land and water will also require technology to play a larger role in the next 40 years than it has in the past 40, when people have been more or less living off the gains of the Green Revolution. Technology means a lot of things: drip irrigation, no-till farming, more efficient ways to use fertilisers and kill pests. But one way of raising yields stands out: developing genetically modified (GM) crops that, for example, use less water. Here, too, public bodies can overcome resistance. GM crops may be more acceptable if they come from government institutes than big companies or if the seeds are given away, rather than sold (which may be why Monsanto is doing that; see article).
I’m not all right, Jack
There is, however, a danger inherent in all this government activity: the temptation of self-reliance. The food-price rise of 2007-08 made all countries worry about “food security”—quite rightly. But over the past year “food security” (ensuring everyone has enough to eat) has shaded into “food self-sufficiency” (growing it all yourself). Self-sufficiency has become a common policy goal in many countries (see article).
In itself, self-sufficiency is not bad. If poor countries have a comparative advantage in producing their own food, they should do so (and that will often be the case). The problem is that the new rhetoric of self-sufficiency coincides with a growing distrust of markets and trade. Grain importers no longer trust world markets to supply their needs. “Land grabbers” are snapping up land abroad to use for food production. Everywhere, governments are more involved in farming through input subsidies. In these conditions self-sufficiency could easily sprout protective walls.
That would be in nobody’s interest. As Europeans have demonstrated over decades, pursuing self-sufficiency above all else is extremely wasteful. Self-sufficiency would also lock in patterns of agricultural production just when climate change is affecting different parts of the world differently, making trade between them all the more important.
The food-price trauma of 2007-08 is persuading some countries to say that they need to divert part of their wealth to subsidise food so they can be self-sufficient and avoid future crises. But the demands of feeding 9 billion people in 2050 tell a different story: farming needs to be as efficient as possible. That requires markets and trade. Investing in agriculture is a boon; rejecting agricultural markets would be a disaster.
Taming the mafia state
Afghanistan’s anti-corruption drive
Taming the mafia state
Anti-graft pressure mounts in Afghanistan, as Hamid Karzai is again sworn in as president
IT WAS no secret what the world wanted to hear from Hamid Karzai when Afghanistan’s president was sworn in for a second term on Thursday November 19th: a commitment to get tough on corruption. Visiting Kabul for the inauguration, Hillary Clinton, America’s secretary of state, said Mr Karzai had a “window of opportunity” to show tangible results. American officials say he has just six months to tackle what one calls “Afghanistan’s mafia state”.
In his inauguration speech, he said ministers in his administration must be “competent and just”. But heeding Western concerns about their behaviour does not come naturally to Mr Karzai. He has been in a combative mood since the West’s much-resented demand that he accept that his re-election was marred by massive vote-rigging. In a recent American television interview he batted back questions about corruption in his government with his oft-repeated line that foreign donors must clean their own act up and stop development funds from being wasted. Such wastage, however, is at least lawful, unlike the Afghan government’s practice of selling jobs to officials who then repay themselves through extortion. Nor is it akin to the impunity the well-connected enjoy.
So entrenched is corruption in Afghanistan that some argue it can be fought only by appointing international prosecutors. But Mr Karzai’s government rebuffs such proposals with a prickly defence of Afghan sovereignty. So the idea now is to create elite Afghan law-enforcement agencies, under the guidance of the FBI and Britain’s Serious Organised Crime Agency (SOCA). The hope is that locking up some big drug dealers and corrupt officials will show that not everyone is immune.
A special counter-narcotics agency, with mentors from SOCA, that arrests, detains and tries drug-traffickers, has been operating for some time. It was responsible for the conviction of a well-connected drug-dealer later pardoned by Mr Karzai. The agency had its first big success this year when an important drug dealer was brought down by a sting operation and the novel use of wiretap evidence.
NATO is also getting involved. An anti-corruption task force will gather evidence on suspects and pass it to a body called the Serious Crimes Task Force, referred to as “the Afghan FBI”. This will be structured along similar lines to the counter-narcotics outfit, with heavily guarded judges who it is hoped will be immune to intimidation.
The attorney-general’s office, too, has received help. Diplomats hope it will soon announce some senior scalps, probably including ministers (though provincial governors seem immune). Despite all the efforts to protect judges, a recent drug case was mysteriously dismissed, only for the suspect to be found guilty in a hasty retrial.
For some Americans, the crucial test of Mr Karzai’s seriousness in tackling corruption is his willingness to sack Ahmed Wali Karzai, his half-brother, who lords it over the south as head of Kandahar’s provincial council. Both he and his brother deny longstanding allegations that Ahmed Wali is involved in the drug trade. And parts of the foreign effort in Afghanistan also rely on Ahmed Wali, including allegedly the CIA (though he denies reports he is on the agency’s payroll). As one NATO official in Kabul put it, Ahmed Wali’s “ruthless use of patronage” has annoyed many people and possibly increased support for the insurgents. But it has also kept many other people on side. “Ahmed Wali is the only thing holding Kandahar together right now,” says the official, speaking of a city second only to Kabul in importance, and suggesting that in tackling this important symbol of perceived corruption it is not just Mr Karzai who has a conflict of interest.
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The War Comes Home
The War Comes Home
A transcript of the weekend's program on FOX News Channel.
Paul Gigot: This week on "The Journal Editorial Report," the war on terror comes home again. Lessons from the Fort Hood massacre, and the Obama administration says the mastermind of 9/11 to stand trial in, believe it or not, a New York criminal court. And health-care reform and the abortion uproar. Is the Stupak amendment really a pro-life victory, and how big a role will the issue play in the Senate debate to come? Plus, bailouts for newspapers? Why your favorite daily may soon be getting a helping hand from the government.
***
Gigot: Welcome to "The Journal Editorial Report." I'm Paul Gigot.
Military prosecutors announced late this week that they will charge Fort Hood shooting suspect Maj. Nidal Malik Hasan with 13 counts of premeditated murder. The charges come as investigators try to piece together the circumstances surrounding massacre at the Texas military base and whether key warning signs were ignored, including email exchanges between Hasan and a radical cleric in Yemen who knew three of the Sept. 11 hijackers, and who has advocated jihad against the United States.
And in a stunning change in the legal war on terror, the Obama administration announced that we'll try the mastermind of 9/11, Khalid Shaikh Mohammed, and four other enemy combatants at Guantanamo in a criminal court in New York City. What's behind this decision, and is it possible that they could be acquitted?
Joining the panel this week, Wall Street Journal columnist and deputy editor Dan Henninger, editorial board member Dorothy Rabinowitz and columnist Bill McGurn.
So, Dorothy, was Hasan a terrorist, really a terrorist hiding in plain sight, and why didn't people see that?
Rabinowitz: Well, the last question first. Yes, he was apparently. Everything in his life pointed to this. He said outrageous things at long lectures and the response was, We have to let him do his thing.
Gigot: This was at a presentation at Walter Reed Medical Center.
Rabinowitz: Yes, at Walter Reed. And then people sent him to, of all things, school. They thought if they sent him to a university lecture place, he would be responsive to all of this. He carried a card that said, "Soldier of Islam," we now discover. He seethed with hatred at the war.
Gigot: OK, so people are seeing all of this. Why didn't anybody blow the whistle?
Rabinowitz: Look, what's really happened is, Americans are not going to forget that it happened. Cowardice prevented anyone from interfering. That is the only word to use. We have to drop political correctness, and--
Gigot: Cowardice on whose part? Inside the military?
Rabinowitz: On the part of the military as well as all his superiors. You could not say--there's a woman in charge there, who wouldn't give her name to a reporter, said, "You know, we cannot simply allow people who are different to be picked on." Now, that difference showed up--
Gigot: That is political correctness, in that sense. It's diversity ideology, I guess.
Rabinowitz: Yes, it's political--those are the words, but the real animating feeling is cowardice.
Gigot: Cowardice, why, because they fear for their jobs, for their careers?
Rabinowitz: Cowardice because, A, yes, you could be written up for insensitivity. The general of the Army, who could sit there and say--
Gigot: Gen. Casey.
Rabinowitz: Casey. It is cowardice. This is something--this is Army policy. And it's one of the things that has happened, very unlike Sept. 11's aftermath, where you didn't really know. Everyone was paralyzed. What you really had here is the sharp laser focus on cowardice and the omission of the necessary steps.
Henninger:: Well, Paul--
Gigot: Quite an indictment.
Henninger: Yeah. Let me try to, shall we say, extend Dorothy's remarks beyond cowardice. I would say it is more confusion. You know, if we're going to talk about KSM here in a minute, and clearly the country is about to embark on a huge fight over whether it's appropriate to try him in New York or not. Look, the people--we have had the same fight over the war on terror since the day it started and we passed the Patriot Act seven years ago. You recall that, for instance, electronic surveillance, the Foreign Intelligence Surveillance Act, it was fought in the courts over what the scope of it should be. If you are an Army or CIA or FBI analyst and your job is to monitor Hasan's call to an imam in Yemen, at what point do you make the judgment that he's over the line if you're watching a political class that can't make up its own mind about these things?
Gigot: Do you buy that, Bill, that people would have jeopardized their careers had they spoken up and said, "This guy really scares me, he's a threat"?
McGurn: I think so. I mean, I blame Jack Bauer for a lot of this stuff, because I think people have this view of law-enforcement officials and FBI--
Gigot: He's a fictional character.
McGurn: Yes, but that's what people--people think our guys are going to go around, do whatever it takes, and they forget that they're government workers and they respond to incentives. And one thing about an army, it's a big bureaucracy, and a lot of people behave as people working in a big bureaucracy. They know the incentives for getting ahead. And in the absence--now we all connect the dots and so forth that say you should do it. In the absence of that, you bring it up, it's going to be "he's picked on" and so forth, and people are afraid. We have the same thing all the time. We say, "Who connected the dots?" and then we make it difficult for people to connect the dots.
Gigot: And Dorothy, I want to move on to KSM here.
Bill, Khalid Shaikh Mohamed coming to a New York criminal court--stunning news. What's behind this? What do you think the administration is thinking?
McGurn: Well, they've sort of said this all along. I think, look, how many years have you been writing editorials on this? And people are--people don't pay attention.
Gigot: Don't remind me, Bill.
McGurn: But you know what? Now they see President Obama's speeches, hope and change and living up to our ideals, and they see what it means in reality. And that's why it's stunning news. It's not surprising news.
Gigot: No, it's not surprising. I agree.
McGurn: We knew it was coming, but it's stunning because people say, "Gee, this really has consequences. When you take a law enforcement approach, this is what you're going to get." And I think they're going to pay a high price for it.
Gigot: Yeah, former attorney general Mike Mukasey wrote on our page that this is a mistake. I think he probably knew that this was coming. And one of the reasons is, it's very hard to apply the rules of evidence of a criminal trial to what you can gather in the battlefield. I mean, we don't have Kandahar CSI dusting off for fingerprints in the battlefield.
Rabinowitz: Absolutely, and you have the rules of evidence. And then you have the way again of all of the civil rights complainants about torture and the release of the torture documents that are going to vitiate everything. However, this is the unspoken thing. This event, which, believe me, no one should underestimate, is, as Dan said in his column--it is a huge event that we've just lived through. The pain of this loss--
Gigot: The Hasan, the Fort Hood.
Rabinowitz: Hasan--is in everyone's heart, and it is going to fill in all of the spaces. I think we're in for a bit of a surprise at the pushback of any effort to in any way exculpate KSM in any way.
Gigot: Well, could he--Dorothy makes a good point about evidence, Dan. I mean--
Henninger: Well, of course.
Gigot: They're going to--his attorneys are going to say--
Henninger: Of course.
Gigot: --the evidence against him cannot be admitted because it was the product of torture. Could he possibly be acquitted?
Henninger: I think he could--which the president of the United States has described as torture.
Rabinowitz: That's right.
Henninger: What stronger witness could one ask for than that? And you know, KSM, everybody goes, "the mastermind of 9/11," yes, he was not in the United States when he masterminded this plot. It was a conspiracy. Conspiracies are very difficult to prove. I think we're in for a nightmare of bringing this guy into the criminal system here.
Rabinowitz: And do you remember what happened when, in the summer, they released, against all the wishes of the Army and everyone else concerned, all of that testimony about torture that they got? And the president went marching into the CIA to reassure them. All of this is coming together in a great big witch's brew, which I think the administration will pay for.
Gigot: All right, Dorothy, last word.
When we come back, Nancy Pelosi gets her health-care bill with the help of some abortion foes in Congress. But will the Stupak amendment prove to be a lasting victory for the pro-life movement?
***
Gigot: A last-minute compromise to strip federal funds from insurance plans that cover abortions may well have saved Nancy Pelosi's health-care reform bill, which passed the House in a late-night vote last Saturday. The deal negotiated by Michigan Democrat Bart Stupak and supported by the National Right to Life Committee, gave some 40 Democrats cover to support the larger bill. But will it prove to be a lasting victory for the pro-life movement? The antiabortion amendment faces its first test next week in the Senate, where Majority Leader Harry Reid plans to unveil his chamber's version of the health-care bill.
So, Bill, you wrote this week that you thought this was a victory--excuse me, a defeat for Nancy Pelosi and the abortion-rights movement. Why?
McGurn: Well, one, Nancy Pelosi clearly didn't want this amendment. She gave it up only at the end when she needed the votes. I think the criticism of it only makes sense if you believe that the Republicans could have stopped the final vote. And I believe if the Republicans voted "present" as some people said, and defeated the amendment, apart from the issues of cynicism about the Republican Party, that would have freed up all the Stupak members to go south and push the bill through.
Gigot: But just at that political procedural level, don't you think this made her job easier, because it gave some of those Democrats the cover to say--go back to their constituents and say, "See, I got this, I got this"?
McGurn: It might have. But why did she not give it until the 11th hour?
Gigot: Well, she didn't want to. I agree with that.
McGurn: She didn't want to.
Gigot: If she didn't have to.
McGurn: And now she has a civil war. If you look at Politico, the Hill, all the papers in Washington, it's all about abortion causing turmoil for Harry Reid now. I don't think we know whether it'll stay in. But I'd rather have them having a civil war on the issue than our side having a civil war on the issue.
Gigot: All right.
Henninger: Well, you know, but there's another aspect to this. It was brokered by the Conference of Catholic Bishops. Stupak had them in his office. He said to Speaker Pelosi, I've got these people; you've got to talk to them. People think that the bishops are a single-issue group, abortion. They're not. They have been for--
Gigot: Not normally at least, but in this case they did seem to be something like that.
Henninger: No, no, no, they have explicitly been in favor of universal health care for years. They have--they are--they support what Pelosi is trying to achieve on that broader health-care bill. And this was frosting on the cake for them. They literally explicitly enabled her to get it.
Gigot: But when you talk to the right-to-life issue, obviously Bill's concerned about prenatal life, OK? But what about the end of life? Because if this bill leads to, as I suspect, it will--well, I don't suspect, I believe it will--rationing by the government--
McGurn: It will. It will.
Gigot: --of health care at the end of the life. And particularly, that means the aged, and it means people who are grievously sick, terminal cancer patients. Will they be able to get the new experimental drug, for example, that's terribly expensive? The government doesn't want to finance it, and by the way, it's only going to extend your life nine months or a year, so, sorry, ma'am, you don't get it. That's also a right-to-life issue.
McGurn: I agree with that. I don't have a problem with that. Some of the other people on the Democratic side don't agree with that. I think what's happened is, you have a block now that's been very difficult to Pelosi. And if you read, Rahm Emanuel had a meeting yesterday with Planned Parenthood. These people are screaming at him. I, again, would rather have them screaming at each other. I think this amendment has made it more difficult to get a final solution--not on its own, but on other things.
And as far as Dan's points, the bishops--the bishops' view, I think, is this is what makes the bill minimally acceptable. They're very split on--I think, more of them are for comprehensive coverage and coverage for illegals and so forth, but this was the minimum they were holding out.
Gigot: I'll tell you, Dorothy, I think that there is no way in the world that the left, the pro-abortion-rights left, is going to let this issue interfere in a way that kills the health-care bill. So I think in the end they'll cave, notwithstanding all the toing and froing now, which will help their fund raising.
McGurn: But if they cave, then the amendment stays in, right?
Gigot: I'm sorry?
McGurn: If the pro-abortion left caves, then the amendment stays in.
Gigot: Then the amendment will stay in, but the larger bill passes, which creates much bigger problems, in my view, for the right-to-life movement.
Rabinowitz: And creates huge cynicism on the passage of that particular exchange. Certainly presents to the larger country a feeling that something underhanded has gone on here, something that may be betrayed. And it feeds into the resistance to the entire bill with the sense of overall government manipulation. Something is rotten here in every case, including in this exchange.
Gigot: And I would argue that Rahm Emanuel at the White House is probably smiling at this debate, because if everybody's screaming out about abortion, they're not focusing on the other real problems of this bill, which is that it's going to break the federal budget and it's going to lead to that rationing of medical care.
McGurn: Yeah, you don't get the sense from the stories that they're smiling. Nancy Pelosi didn't give this until the very end, because she didn't want to, and she realizes it caused a problem there. I think they've got a lot of complications on their hands. I also think that people can disagree with the National Right to Life, but they have a right to pursue their issues. This was an amendment that Stupak had pursued for a long time, that Republicans asked for a vote on back in September. I mean, almost all of them. It's just very hard for them to oppose it.
Gigot: OK, Bill, last word.
Still ahead, we've bailed out car companies, banks, pretty much all of Wall Street. So are newspapers next? When we come back, a closer look at the call for the government to give our beleaguered industry a helping hand.
***
Gigot: The government has given them to car companies, banks, pretty much all of Wall Street, so why not a bailout for newspapers? With so many on the brink of bankruptcy, that move may be closer than you think. Just last week, the state of New Hampshire agreed to back a loan to one of its dailies. And several bills have already been introduced in Congress, including a measure sponsored by Maryland Democrat Ben Cardin that would allow newspaper companies to restructure as nonprofits with a variety of tax breaks. Back in September, President Obama said he would, quote, "be happy to look at that bill and others."
For more, we're joined by senior editorial page writer Collin Levy.
So, Collin, is this really an idea that is being taken seriously in political circles?
Levy: Well, I think it is being taken sort of seriously. And you have to remember, Paul, this is an incredibly Faustian bargain for newspapers. There was a recent report done by former Washington Post executive editor Leonard Downie and Columbia Journalism professor Michael Schudson that basically talks about all sorts of ideas for how the government can help the press. And what you're talking about here and what they are suggesting is that the only way for the press to maintain its independence is for it to basically surrender that independence in the form of government subsidy.
Gigot: So, what are the specific ideas they're talking about? I gather one of them is to have these subsidies--seed money, if you will--for local news reporting councils around the country. Because one of the concerns here is that local newspapers are having their business models blown up, and you're losing that local coverage. So we'd sprinkle government money to local cities. Congress would love that.
Levy: Yeah, Congress sure would. And this is a disastrous idea, because what you'd basically be doing is creating a national network of state-funded reporters, and that wouldn't be good for local reporting. It would also, you know, probably not be good for the circulation of local papers, because local readers would start to find that sort of coverage dubious.
Gigot: But here's the idea, Collin. I mean, people say it would be nothing more than the National Endowment for the Arts, say--you know, we'd subsidize a certain art, and that isn't politicized at all. So what's the problem with reporters?
Levy: Right. Right. Well, I mean, there's two things on that. Obviously, I wouldn't say the National Endowment for the Arts is a particularly shining example here. But the other issue is, you know, more seriously, the National Endowment for the Arts isn't directly tasked with being a watchdog for government, and that's simply a very different sort of relationship that newspapers have.
Gigot: All right, Dan, defend subsidies for the press, please.
Henninger: Absolutely not.
Look, here's the problem. The Columbia Review study is talking about taking newspapers to nonprofit status. In fact, for at least the past 40 years, most journalists on these papers think they have been engaged in some sort of nonprofit enterprise. They see newspapers as a public trust, as a public good, and that the money that supported them sort of came from the tooth fairy up there: I really can't think about that stuff because I'm doing all these good things.
Gigot: Not even profits.
Henninger: From 1789 onward, the newspaper business was a business. In New York City, you used to have seven or eight daily papers competing and fighting it out, both for news and for profits. This would simply take newspapers into an area that would make them less competitive, less interesting--all the reasons why people have been fleeing them for financial reasons the past 15 years.
Gigot: I want to read a different point of view from the Columbia Journalism Review editorial, all right: "Government has always subsidized the press in this country," Dan, "starting with legislation in 1792 that established below-cost mail rates for newspapers. Over the years, some subsidies have worked well, others less so. But the idea that a purely commercial media alone could continue to deliver the journalism we need is becoming difficult to swallow. If we don't get beyond the rational but outdated fear of government help for accountability journalism, if we just let the market sort it out, this vital public good will continue to decline."
Dorothy?
Rabinowitz: Well, if you knew the number of times the word "accountability" was used in that particular argument. What does accountability mean? It means the very important social issues and encouragement of ethos and the rest of it. The interesting thing is that this point of view divides the great populace of the United States, which is interested in reading about recipes, apparently, according to the Journalism Review, and interested in crossword puzzles. Without responding--
Gigot: Nothing wrong with either of those, Dorothy.
Rabinowitz: No. Without this kind of funding, we wouldn't have people reading those wonderful editorials and reports. I mean, this kind of snobbery behind this, that the government should tell us.
Gigot: Collin, what about this idea that the press has always been subsidized in some way, say mail routes or somehow, by the government?
Levy: Well, the subsidies come in very different forms, and I think you have to look at what's happening now. You're actually seeing--this week, we saw for the first time the state of New Hampshire guaranteed a loan worth about $200,000 to one of its local newspapers. So you're now seeing a situation where you have a direct government handout to a newspaper. And I think that the kind of relationship that that creates between editors and reporters and the local politicians they cover, you know, is a lot cozier than, you know, a mail subsidy.
Henninger: And I think you could argue that the tax code subsidizes every business in American one way or another. They're not wholly owned subsidiaries of the government, which is what we're talking about here.
Gigot: All right, Dan.
We have to take one more break. When we come back, our "Hits and Misses" of the week
***
Gigot: Time for our "Hits and Misses" of the week. Dan, first to you.
Henninger: Paul, this week a federal jury acquitted two Bear Stearns traders who'd been accused by prosecutors of using--of sending emails expressing concerns about trading practices. The prosecutor said this amounted to felony crimes because they didn't share it with their customers. A jury of normal people said, Whoa, wait a minute, whatever else was going on here, this didn't rise to the level of a crime. This is a very significant case. It pushes back at the prosecutors' impulse these days to find new ways criminalize normal business behavior. Very, very big deal.
Gigot: All right. Dorothy, you have a hit for some muggers who gave a pass to an Army reservist?
Rabinowitz: Yes. There was this young man, Kyle Windorski, in Milwaukee, who ran into a bunch of muggers, who, by the way, I should say, probably should go to prison. But when they discovered--when they had him on the ground, enraged that he had no money--they went through and they found his military card, and that was the end of it all: "Hey, we can't touch this guy." And this was wonderful. They shook his hand, they thanked him for service, and it all reminds one of the times that we have always embraced this idea that your country is more important than anything, and the Mafia--
Gigot: Thank you, Dorothy. Collin?
Levy: Paul, I'm giving a miss to Harvard University, which this week invited disgraced former New York governor Eliot Spitzer to give a lecture at the ethics department. And this was such an egregious invitation that it actually prompted a letter from the former madam, who used to procure escorts, saying she'd love to attend, but she couldn't break the terms of her probation. So this was a pretty horrible thing. And obviously, he should not be held up as anyone's moral exemplar.
Gigot: Harvard strikes again. All right.
And remember, if you have your own "Hit or Miss," please send them to us at jer@foxnews.com. That's it for this week's edition of "The Journal Editorial Report." Thanks to my panel and to all of you for watching. I'm Paul Gigot. We hope to see you right here next week.
Americans Deserve a Transparent Fed
Trillion-dollar interventions in the economy merit scrutiny by taxpayers and their representatives.
RON PAUL JIM DEMINT
For nearly a century the Federal Reserve has operated in the shadows, away from the prying eyes of Congress, journalists and the American people. Created in 1913, the Fed was given enormous responsibility to protect the value of our currency. Yet in the last 96 years the U.S. dollar has lost more than 95% of its purchasing power. The Fed's unprecedented actions over the past year in attempting to stabilize the financial system have now forced it into the spotlight, and caused millions of people around the country to question the opacity of the Fed's financial transactions.
While the Fed is more transparent now than it was 20 or 30 years ago, there is still a long way to go. If the Fed were fully transparent, organizations such as Bloomberg and Fox News wouldn't have to sue its board of governors to receive materials that should be available through Freedom of Information Act requests. These include information on which banks and companies received loans and for what amounts after the 2008 financial meltdown.
One puzzling assertion made by the Fed and its supporters is that the Federal Reserve has some sort of independence from the government and independence in undertaking monetary policy. Nothing could be further from the truth. The Federal Reserve is a government-created banking monopoly, and its top decision makers are appointed by the president and confirmed by the Senate. If they do not perform satisfactorily in the eyes of politicians, they will not be renominated.
The Fed has also, for the past three decades, been required to engage in monetary policy with the goal of maintaining stable prices and full employment. Since the natural trend over time is for prices to decrease, a mandate to maintain stable prices is a mandate to pursue an expansionary monetary policy and inflate the money supply to counteract the lower prices we would expect from increased productivity.
The Fed chairman is required to appear twice a year before Congress to explain the Fed's actions, and how the Fed is complying with its mandates of stable prices and full employment. However, the idea that this constitutes any sort of oversight is laughable.
Each congressman who questions the chairman receives only a few minutes in which to ask questions and receive answers. Having been on the receiving end of Alan Greenspan's notoriously obtuse "Greenspan-Speak" answers and Ben Bernanke's similarly convoluted statements, we can assure you that the process is completely ineffective at getting any real answers.
No matter how direct the questions are, Fed chairmen answer with a vagueness common to bureaucrats. The whole process is window dressing for public consumption, not any sort of attempt to exercise oversight or gain any real insight into the Fed's actions.
What is needed is a full audit of the Fed, something that has never happened. We need to know who the Fed is giving money to, what types of securities are being purchased and what backs those securities, how much money is being paid for those securities, etc.
While Rep. Mel Watt's (D., N.C.) efforts to audit the new lending facilities authorized to bail out private firms such as AIG is a step in the right direction, it is still just a first step. These facilities have the same effect on the money supply as securities purchased through open market operations. Why should securities placed on one line of the Fed's balance sheet be subject to audit while the exact same securities placed elsewhere on the balance sheet are not subject to audit? The loopholes need to be closed.
In coming weeks we plan to offer companion amendments to legislation already before the House and Senate that will open the Fed up to a complete audit. The amendments set a six-month time lag on the publication of previously unreleased audit data to address the Fed's concerns that actions undertaken in support of monetary policy would immediately be politicized. The transcripts and minutes of the Federal Open Market Committee meetings would continue to be made public at the Fed's discretion, with unpublicized details of meetings not subject to any additional scrutiny. Finally, the amendments make clear that the purpose of the audits is not to interfere with or dictate monetary policy.
As strong opponents of government intervention into the economy, we do not want to see Congress directly dictate monetary policy. But while the Fed is involved so heavily in monetary policy and its actions so heavily influence the future of our economy, it is necessary that it be fully transparent. Interventions into the economy on the order of trillions of dollars cannot continue to escape public scrutiny. American taxpayers deserve better.
Mr. Paul is a Republican congressman from Texas. Mr. DeMint is a Republican senator from South Carolina.
The KSM trial announcement was too important for a Friday news dump.
By KARL ROVE
Every modern White House has put out news on contentious issues late on Friday in the hope that doing so will bury it, or reduce the amount of critical scrutiny it would otherwise receive. What is unusual is the degree to which this White House has relied on this tactic.
On Friday, Jan. 30, President Obama revoked the ban on giving taxpayer dollars to international groups that promote or perform abortions abroad. The president released his executive orders on detainee interrogations, closure of the Guantanamo prison, and new ethics rules during the previous week, his first in office.
On Friday, Feb. 27, Mr. Obama announced he would end U.S. combat activities in Iraq in 18 months. This was a much longer combat presence than his antiwar base wanted.
On Friday, April 17, Mr. Obama lifted some limits on the use of federal funds for the creation and subsequent destruction of human embryos for stem-cell research. The move won applause from some research advocates but also disappointed many "scientists who had expected a more liberal policy," according to the New York Times.
On Friday, May 15, Mr. Obama announced he would keep George W. Bush's military tribunals to try terrorist detainees, angering civil libertarians and antiwar activists in the Democratic Party's left wing who thought the administration would dismantle the entire Bush antiterror structure.
On Friday, Sept. 15, Mr. Obama admitted that it was unlikely he'd meet his own deadline of closing the Guantanamo detention facility in his first year in office, again angering left-wing supporters and demonstrating that exuberant promises made on the campaign trail and during his first days in office were ill-considered and naïve.
On Friday, Oct. 30, Mr. Obama delivered a double dose of late-breaking news. To respond to increasing criticism of the stimulus's failure to curb rising unemployment, the White House announced it had "created or saved" at least one million jobs since February. It hoped for one weekend in which the "million jobs created or saved" mantra had a relatively free and uncontested run before economists chewed the number up and spit it out. A week later, the unemployment rate hit 10.2%.
About Karl Rove
Karl Rove served as Senior Advisor to President George W. Bush from 2000–2007 and Deputy Chief of Staff from 2004–2007. At the White House he oversaw the Offices of Strategic Initiatives, Political Affairs, Public Liaison, and Intergovernmental Affairs and was Deputy Chief of Staff for Policy, coordinating the White House policy making process.
Before Karl became known as "The Architect" of President Bush's 2000 and 2004 campaigns, he was president of Karl Rove + Company, an Austin-based public affairs firm that worked for Republican candidates, nonpartisan causes, and nonprofit groups. His clients included over 75 Republican U.S. Senate, Congressional and gubernatorial candidates in 24 states, as well as the Moderate Party of Sweden.
Karl writes a weekly op-ed for The Wall Street Journal, is a Newsweek columnist and is now writing a book to be published by Simon Schuster. Email the author at Karl@Rove.com or visit him on the web at Rove.com.
Or, you can send him a Tweet@karlrove.
Then there was this past Friday, when the White House delivered a double news dose with a foreign twist. Attorney General Eric Holder announced that Khalid Sheikh Mohammed and five other terrorists would be tried in a civilian court in New York City rather than before a military tribunal. Later that day, the administration announced that White House Counsel Greg Craig was leaving and would be replaced by Democratic National Committee lawyer Bob Bauer. Mr. Obama? He was safely in the air flying to Asia, having left the day before with most of his press corps in tow.
Do Friday news dumps work? Yes, but marginally. The White House press corps is generally exhausted at the end of a long week. Congressional critics are either in route back home to their districts or already there. Friday night network television news and Saturday newspapers and cable coverage are traditionally less seen or read. By Sunday morning, a Friday announcement is often considered old news. Monday is the first opportunity White House correspondents get to ask the president's press secretary on camera about whatever was released Friday. By then there is almost always other news occupying the headlines.
Such tactics, however, can look disingenuous if they undercut public debate on substantive policy changes—such as deciding to bring terrorists to New York for trial.
What we are seeing with the White House's timing in releasing its decision on KSM and other terrorists is a presidency clinging to campaign tactics that aim to dominate the 24-hour-news cycle. The problem is that ploys that work in a campaign don't work nearly as well when you're in charge of the executive branch. Once in office, you have to live with the consequences of a policy decision.
The debate now taking place over trying terrorists in civilian courts is showing this White House that it cannot escape the hard realities that come with making presidential decisions. Not even Friday afternoons can offer sanctuary from dangerous or ill-considered policy choices.
Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of the forthcoming book "Courage and Consequence" (Threshold Editions).
Chip Stocks Drag on Market
Chip Stocks Drag on Market
Stocks remained lower Thursday as declines in metals and crude-oil futures weighed on the materials and energy sectors, while chip companies were hurt by an analyst downgrade.
The market seemed to shrug off a bigger-than-expected rise in the Philadelphia Fed Business Index for November, while the Conference Board reported a slightly smaller-than-expected rise in its index of leading economic indicators for October.
The Dow Jones Industrial Average was recently down 131 points, or 1.3%, to 10295. Intel was its weakest component, down 5.3% after Bank of America Merrill Lynch downgraded eight microchip companies, including Intel.
Among other indexes, the tech-heavy Nasdaq Composite declined 1.9%, while the Standard & Poor's 500 dropped 1.6%. Materials was its worst performing sector, off 2.2%, with energy close behind, hurt by the slump in metals and crude oil futures. Meanwhile, the dollar moved higher against the euro.
For much of a two-week run in the major stock market indexes that pushed all three to new highs on the year, materials and energy companies have been at the forefront. Broadly, the gains stemmed from an upturn in global economic sentiment, as well as a slide in the dollar.
"The quality of the rally was blue-chip oriented with traders moving from lower tier to blue chip stocks," said Steven Goldman, market strategist with Weeden & Co. "So, when you get to marginal new highs, you get a bit vulnerable. It's about playing levels and at new highs it becomes harder to play those levels higher. The market probably needs to back away to find stability."
Goldman noted there was well-below-average volume in each of the market's gaining days in November, while days in the red recently have seen an uptick in volume. It's a fact he attributes to more managers playing short-term moves over any type of longer-term portfolio management.
On the economic front, a weekly jobless claims figure that came in nearly as expected failed to offset some of the increased pessimism surrounding the world economy that was weighing on markets.
In its weekly report, the Labor Department said the number of U.S. workers filing new claims for jobless benefits last week remained unchanged from the prior week, while total claims lasting more than one week declined.
Separately, the Philadelphia Fed Business Index for November came in at 16.7, compared with 11.5 in October and an expected level of 12.
The index of leading economic indicators rose for the seventh consecutive month in October, signaling the U.S. recovery is in place. The leading index edged up 0.3% last month after increasing an unrevised 1.0% in September, the Conference Board reported Thursday. Economists had expected a 0.4% increase.
Showdown Set for Health Bill
Showdown Set for Health Bill
Senate Democrats' $848 Billion Plan Promises Deficit Cut, Medicare-Tax Hike for Rich
GREG HITT JANET ADAMY
WASHINGTON -- Senate Majority Leader Harry Reid set the stage for a climactic debate in the Senate over health care by unveiling a 10-year, $848 billion bill that would extend insurance to 31 million Americans without coverage.
Mr. Reid's proposed legislation, 2,074 pages, is the Senate's answer to a bill that narrowly passed the House Nov. 7. The two bills have differences on taxes, abortion coverage and a public-insurance plan and would require considerable work to reconcile if Congress hopes to pass some form of health care overhaul -- the centerpiece of President Barack Obama's domestic agenda.
News Hub: Details, Price Emerge on Health Bill
3:56The New Hub's Kelly Evans and health reporter Janey Adamy parse details of the 2,000 page, $849 billion health bill, which does aims to reduce the deficit over 10 years by adding new taxes, such as a 5% tax on plastic surgery.
Senate Majority Leader Sen. Harry Reid (D., Nev.) with Sens. Tom Harkin (D., Iowa), left, and Charles Schumer (D. N.Y.), on Capitol Hill Wednesday.
The Senate bill needs 60 votes to proceed to a floor debate, and Mr. Reid is expected to call a vote later this week, perhaps Saturday if not sooner. If the tally gets to 60 -- which was still uncertain Wednesday, though Senate Democrats showed increasing confidence -- that would open perhaps the most critical period of legislative action on American health care since Congress created Medicare in the 1960s. The debate would end with a vote on the bill by the full Senate. Nearly every Republican in Congress still opposes the overhaul effort, and there are still sharp disputes among Democrats about central provisions.
"This is yet another trillion-dollar experiment, but it is not what Americans bargained for," said Senate Minority Leader Mitch McConnell (R., Ky.)
One swing Democrat, Sen. Ben Nelson of Nebraska, said he still has a range of concerns but suggested he might at least be willing to begin debate. "If you don't like the bill, then why would you block your own opportunity to amend it?" he said. Two other Democrats on the fence, Sen. Mary Landrieu of Louisiana and Sen. Blanche Lincoln of Arkansas, remained noncommittal Wednesday evening.
The nonpartisan Congressional Budget Office estimated the bill would ensure that 94% of those living in the U.S., not counting illegal immigrants, have insurance coverage. CBO previously estimated about 83% of Americans now have insurance.
![[D]](http://s.wsj.net/public/resources/images/OB-EL995_Health_D_20090917143202.jpg)
In a boost for the bill's prospects, the CBO estimated the Senate measure would reduce the federal budget deficit by $130 billion over the next decade, and additional amounts over the second 10 years of the program. It achieves that in part through a new Medicare payroll tax and a tax on high-value insurance plans, which has aroused strong opposition.
The $848 billion cost is below the $1.05 trillion cost of the health overhaul passed by the House this month, and the prospect of additional deficit reduction may raise chances fiscally conservative Democrats will back the package. But the figures aren't likely to win over Republicans, who say the bill adds costly new benefits for some Americans as the federal debt reaches new heights.
If Mr. Reid is able to bring the bill to a floor debate, the first weeks of December are likely to be devoted to amendments. The majority leader would need another 60-vote majority to conclude the debate and bring the bill for a final vote. If successful, he would then have to reconcile it with the House bill before it could go to President Barack Obama's desk.
As with the House bill, the uninsured are likely to be the biggest winners from the Senate bill. It would offer subsidies to help people buy insurance and sharply expand Medicaid, the federal-state health-insurance program for the poor. Losers include the wealthy, who would have to pay higher Medicare payroll taxes, and people with especially generous health-insurance benefits, who would also pay a new tax.
The Senate legislation comes down mostly on the liberal side on the question of a new government-run health-insurance plan or "public option," a flashpoint in the debate so far. It would include a public option, but unlike the House version, states would have the option of not participating. As in the House, the Senate plan would have the public plan negotiate payment rates directly with health-care providers, rather than tying payments to Medicare's low rates. Those were concessions to centrists worried about government's footprint in the private sector.
![[Two Plans chart]](http://s.wsj.net/public/resources/images/NA-BC131_HEALTH_NS_20091118234021.gif)
Mr. Obama said the legislation would help fix the problems of rising insurance premiums, increasing medical costs and the instability felt by those who lack insurance. "We're closer than ever to enacting solutions to these problems," he said.
"Tonight represents the last leg of this journey we've been on for a while now," Mr. Reid said. He met Wednesday with Vice President Joe Biden, and many Democrats voiced hope the majority leader will be able to secure the votes needed to overcome Republican opposition and move to the debate.
"We're going to clear the hurdles," said Massachusetts Sen. John Kerry. But the outcome remains uncertain. "I'm not going to assume a single vote," said Illinois Sen. Richard Durbin, the Democratic whip.
Still to be fought out is the issue of abortion. The Senate bill provides wider insurance coverage for abortion than the House legislation. Among other things, the Senate's proposal would allow women who receive government subsidies to buy insurance to enroll in a plan that covers abortion, while the House bill would bar that. Sen. Orrin Hatch (R., Utah) said he wanted to force the Senate to vote on whether to adopt the House limits. "We'll have a major debate," he said.
Funding the bill is proving troublesome. Mr. Reid decided to pare back a proposed tax on high-value insurance plans, bowing to liberal and union complaints that the measure would hit middle-class families. Under his proposal, the tax would fall on plans valued at more than $23,000 for couples, up from $21,000 in legislation written by the Senate Finance Committee. The tax was estimated to raise $149 billion over ten years, far less than earlier envisioned.
To help make up for the lost revenue, Mr. Reid inserted a provision that would raise Medicare payroll taxes on couples with income of more than $250,000 a year. For those families, the levy would be raised to 1.95%, up from 1.45%. Overall, the proposal would bring in $54 billion over ten years. Mr. Reid is also proposing a new tax on elective cosmetic surgery, generating $5 billion.
Both the House and Senate bills make hundreds of billions of dollars in proposed cuts in spending on Medicare. But the two chambers differ on how to raise revenue. The House legislation relies largely on an income surtax on the wealthy. The Senate bill would raise money across a range of health care sources.
Nearly every American would be required to obtain insurance, either through work, the newly created exchange or some other program. Low and middle income individuals and families would in many cases qualify for government assistance, such as the new tax subsidies that would be created. But if they chose not to obtain insurance, they could face a penalty up to $750.
To help ease the financial burden on workers, Mr. Reid lowered the maximum amount the bill would require them to spend on premiums, capping premiums at 9.8% of income, down from 12%.
Under the Senate bill, the employer-provided health insurance system would still continue. But any company that decided not to cover its workers would have to pay a fine to help cover the government's cost of covering those individuals.
Wednesday, November 18, 2009
Cosby and Obama
By Paul ShlichtaThroughout this past dreary year, while doggedly fighting against POTUS Obama, I have fended off accusations of racism with my standard ten-word refutation: "I would be delighted if Bill Cosby had become president."
Dr. Cosby has a far more impressive record than Obama. He earned his doctorate, an Ed.D. from the University of Massachusetts, with legitimate research work and a dissertation. Unlike Obama, his résumé would never fit on the back of a postage stamp. He has won four Emmys and nine Grammys; published eleven books; and received eleven honorary degrees, a Presidential Medal of Freedom, and a Bob Hope Humanitarian Award. He successfully managed a complex multimedia career. He has outspokenly campaigned for reforms in family structure and educational responsibility within the black community while retaining the respect of black leaders such as Jesse Jackson. Thus, in terms of Parkinsonian criteria for a job, Cosby has demonstrated executive ability, focused and persistent energy, charisma, idealism, honesty, and bravery -- all much-needed qualifications for high public office.
Why the Left Fears Sarah
By Bob WeirHave you ever seen so much hatred for, and vitriolic criticism of, someone who had only a brief stint on the national political stage? More than a year after the presidential election in which Sarah Palin, as the GOP nominee for Vice-President, campaigned for about three months, she is still being pilloried by the left-wing loons as though she had been elected and were actively engaged in dismantling the liberal establishment. Not a day goes by in which we don't hear or read vicious attacks on a woman who represents the wholesome conservative values of Middle America -- values that have been insidiously and incrementally eroded during the last few decades.
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