March 2009


Secretary of State Clinton showed refreshing cander last week when she said that failure of the United States to address the demand side of the illegal drug equation was “fueling the drug trade” in Mexico.  I’m could not agree more.  We will not stop of the flow of drugs on the supply side with all of the money in the world unless we also devote significant resources to the demand side of the equation.  For more information on Clinton’s visit last week to Mexico and her statements about illicit drugs see the New York Times story entitled Clinton Says Demand for Illegal Drugs in the U.S. ‘Fuels the Drug Trade’ in Mexico.

America is focused on the simple solution and our efforts to “solve” the problem of illegal drugs is a case in point.  Although the country’s problem with illicit drugs is highly complex, our simple solution is to address the supply side alone.  The fact is that as long as there is a market (demand), supply will find that market.  Let’s hope Clinton’s voice on the international stage can help build momentum toward a more rational drug policy in the United States, one that better addresses the demand side of the illicit drug equation as well.

A few weeks ago in a posting I speculated that a battle royal was brewing in the House and Senate over the so-called “card check” bill, otherwise knows as the Employee Free Choice Act (HR 1409 and S 560).  With the defection of Senator Arlen Spector and a number of conservative Democrats rethinking the issue, the momentum on this bill has slowed considerably.  This is a good thing from my perspective.  This legislation is a very bad idea.

That is not to say that some compromise can’t be found that reforms the present law but avoids the excesses of the card check bill.  A story in today’s Washington Post entitled Union Bill’s Declining Chances Give Rise to Alternatives explains both the card check bill’s growing lack of political support as well as moves to draft a more widely acceptable compromise.  For those interested in the issue, it is worth reading.

The nay-sayers on climate change came out in a big way today with a full page advertisement in the Washington Post and New York Times under the sponsorship of the Cato Institute.   I suspect they are wrong but in the interest of laying it all out there, I think it is important to consider the advertisement and the argument that’s being made.  Perhaps they are right and the rest of us are wrong.  The consequences of them being wrong, however, will likely be catastrophic.

I must also question their involvement with the nay-sayers on this issue.  Who can argue with the Cato Institute’s motto of “free markets, liberty and peace”.  In my view, however, Cato has become much more than its motto.  It has become the home of the rigidly ideological libertarian.  While I can understand that libertarians, who possess a general aversion to government, might chafe at any solution to a problem that necessarily involves a large role for government, I am deeply suspicious in this case that it is Cato’s ideological rigidity more than any science that’s at play here.  It would appear that what’s happening is that Cato and its ideological brethren would rather deny the problem (and science) than accept the inevitable government involvement that would be required should the problem and the science be accepted.       

I suggest that instead of denying climate change that a much better and productive focus for Cato would be on how government can best address the phenomena.  I am firmly in the camp that believes that “cap and trade” as a solution to climate change is folly and that the only viable solution, and the only one that truly relies on market forces, is the carbon tax.  For a variety of reasons beyond climate change a carbon tax, is an idea that needs to be given the most serious consideration.  

It is my view that the American public will neither understand nor ultimately accept the massive government bureaucracy that will be required to administer a cap and trade system.  We would be better off doing it right in the first place with a carbon tax.  For decades we have been subsidizing the internal combustion engine by refusing to attach to the price of gasoline, through a tax, the cost to our government of keeping gasoline inexpensive.  This subsidization has notably included the billions of dollars in defense expenditure required each year to keep the middle east “secure”.  Their have been other notable consequences of this subsidization.  The low cost of gasoline has wreaked havoc on our countryside and our road systems with the burgeoning of suburbia, what I call “McMansions in the burbs”.  This lifestyle is and always has been unsustainable, made possible only by government subsidization of oil imports.  A carbon tax, implemented by government but relying on the market appears to me to be the soundest solution, and a solution that Cato with its ‘less government’ philosophy could help to promote if it weren’t already aligned with the nay-sayers on climate change.  Cato may come to regret this alignment as the train toward climate change legislation moves forward.  I’d argue they could play a much more important role in shaping that solution than they are playing in denying its necessity.

Cato and other libertarians need to quit denying the underlying reality and direct their anti-government instincts toward solutions to climate change that minimize the role of government and emphasize the role of the market.    

Count me among those who’ve concluded that climate change is fact, not fiction.  I have been convinced that consensus has largely been reached within the scientific community.  While there are scientists who deny that climate change is the result of human activity, they are clearly in a tiny minority.  Yet, especially among Republicans on Capitol Hill, I am continually running into people who are firmly convinced that it just ain’t so.

Given this strong belief that climate change is fantasy, I think it would be valuable to print two recent opinion pieces that give the opposing arguments.  The case against climate change being a consequence of the activities of mankind is made by George Will in a March 15 piece in the Washington Post entitled Dark Green Doomsayers.  The case for is made by Chris Mooney in piece directly addressing the Will claims entitled Climate Change Myths and Facts, which appeared in the March 21 Washington Post.

I personally find it very difficult to find Will credible on this.  I’d be interested in reader comments.

 

There is an excellent Op-ed in today’s Washington Post entitled Weakening A Market Watchdog: An Accounting Rule Change’s Real Costs.  The author laments the interference of Congress in the independent and sound regulation of our banks.  Specifically, he discusses the political pressure that has been applied to an independent entity to change “mark to market” rules.  He suggests that this pressure, if heeded, is dangerous precedent.  Levitt makes a powerful case that both the present instance and the likelihood that other regulatory bodies will be forced to capitulate to political pressure bode poorly for the future.  It’s not good news for the American investor that independent bodies and regulatory agencies can be coerced by politicians.  I am persuaded and recommend the piece highly to readers.  

As readers will know, I believe that the biggest threat to a successful Obama presidency lies in Nancy Pelosi and her House of Representatives.  Their full-left tilt, if left unchecked, will mean measures more extreme than are both wise for the country and sound politics for Democrats and especially Obama.  Politically, too far left means the Democrats give Republicans the amunition to potentially scuttle Obama initiatives and perhaps even alter the composition of the House and Senate over 4 years.  The good news is that there are mechanisms to neutralize Ms. Pelosi and her band of liberal brothers.  One of these is called the United States Senate.  For the good of the country, the Senate is almost always the more deliberative and cautious body.  Even better is when you have moderates of either party in the Senate working for reasonable compromise.  We saw it in the last administration when a number of Republicans joined with Democrats to defuse “the nuclear option” threatened by harder core Republicans in response to Democratic foot dragging on the confirmation of federal court nominations.  We are also fortunately seeing it in this administration and this piece in yesterday’s Washington Post by Senators Evan Bayh, Tom Carper and Blanche Lincoln called Building Bridges on the Hill informs us as to why they believe that moderates working together is a good thing.  Here’s an excerpt:  

As moderate leaders, it is not our intent to water down the president’s agenda. We intend to strengthen and sustain it. Moderation is not a mathematical process of finding the center for its own sake. Practical solutions are practical because they offer our best chance to make a difference in people’s lives today without forcing our children to pick up the tab tomorrow.

As a centrist, or “moderate”, I could not agree with the words above more.  Moderation is absolutely not a mathematical process of finding the center for its own sake.  What it is about is finding rational solutions that work irrespective of party and party politics.  That is the core message of this blog–its raison d’etre.  Thank you Senators for attempting to give it life in the United States Senate.

You must read this letter.  It is the resignation letter of Jake DeSantis, courtesy of the New York Times Op-ed page today.  Mr. DeSantis is an executive vice president of AIG’s financial products unit.  It is powerful.  It shows the dangers of mob rule.

And mob rule was what happened last week in Washington.  The masses went wild and the politicians reacted, as did, apparently AIG’s chief executive officer.  As I’ve expressed before on this blog, while I understand the public’s anger over the AIG bonuses, I expect politicians to react more intelligently and in more measured fashion than the public.  I would also expect AIG’s CEO to have acted with some backbone.  Backbone is hard to come by these days, and while the politicians are stepping back a bit from their self righteous anger, much damage has been done and may yet be done.  We will have accomplished nothing positive and potentially a lot negative.

This is but another manifestation of our broken political system.  Our system as it has evolved makes it harder to elect statesmen–wise men–to public office.  They’ve been replaced in large measure by cowardly followers, not leaders.  And, with the election of so many cowardly followers, we should expect half-baked outcomes such as the one described in the above letter.  We are getting no more than we deserve.  

There was a great piece on Russia by Anne Applebaum in yesterday morning’s Washington Post.  She explains that the issues with Russia are far more complex than can be solved by the U.S. and Russia “pressing the reset button.”   Unless Russia climbs down off of its high horse (my words here, not hers), no amount of resetting the tone is going to change the Russian government’s fundamental arrogance and desire to play bully on the world stage.  The danger here is that the Obama adminstration play too nice with the bully.  Her conclusion is that the administration’s first Russia move has been a bad one and that it’s time to live in the real world, not a virtual one.  The piece is entitled For Russia, More Than A ‘Reset’.   Apologies for not getting this posted yesterday as promised.     

There are two columns in today’s Washington Post that continue the debate about the wisdom of Congress’s plan to retroactively tax bonuses paid to companies receiving financial assistance from the U.S. government under its Troubled Assets Relief Program (TARP).  Anyone who’s been reading my postings of the last several days will know my views on the subject.  The two Post columns go further than the AIG bonus debate, however, and lodge more broadly substantial criticism of Congress and the Administration.  The perspectives come from the right, George F. Will, and the center-left, Richard Cohen.  There is much truth in both columns, which is to say, again, that I am in substantial agreement with both.  While one expects a strong critique from Will, one does not expect it from Cohen, making it all the more salient.  He is critical, although subtly, of Nancy Pelosi, acknowledging clear strengths but pointing out clear dangers to the President of abdicating too much control to her. 

I continue to believe that unless reined in, Nancy Pelosi and her left-leaning cohorts have the potential to sink Mr. Obama.  Cohen, citing Charlie Cook, concludes that Obama is beginning to slip in the polls, with a notable loss of independents.  The loss of political independents is a bad sign.  (The Cook column, Are Independents Hedging Their Bet?, from which Cohen apparently got his information is a most valuable-read.)  It is a sign of a backlash against liberals.  It is a sign of the country beginning to see merit in divided government.  For Obama, it signals that he needs to control the Pelosi House of Representatives in order to stave off a Republican resurgence in the next election.  That’s what many of us thought that was one of the reasons that Obama selected Rahm Emanuel as his chief of staff — to keep Pelosi and the House under control.  Well, he clearly hasn’t been doing it.

The George Will column is entitled The Toxic Assets We Elected and the Richard Cohen piece, With Friends Like Pelosi…     

There is a wealth of good commentary (commentary that I generally agree with) in the Washington Post this morning.  I’ll write about it in three posts today, divided by subject matter.  The first subject I’ll address is the newly announced plan by the Obama administration to stabilize banks and relieve them of their “toxic” assets. 

Before I begin with the two “good” pieces, lets get the bad out of the way.  Yesterday in the New York Times, Dr. No, otherwise known as Paul Krugman, despaired that the rescue plan to be announced later in the day was disappointing, filling him with a “sense of despair.”   Poor boy.  He was also on the Lehrer Newshour last night as the posterboy for the nay sayers.  I don’t think Krugman is right here.  Let us all hope he isn’t.  His column yesterday is entitled Financial Policy Despair.

Let me make clear that like the Treasury plan.  I do not want to see the country’s biggest banks “liquidated” and thereby nationalized, something that Paul Krugman seems to crave.  If we can avoid it, the country will be healthier for it, assuming we put into place new regulatory mechanisms that protect against future extreme folly.  It is no wonder, therefore, that I liked the Washington Post editorial today (Mr. Geithner’s Plan ) and especially Steven Pearlstein’s Washington Post Business section column (Optimism Over Despair).  In his piece, Pearlstein directly addresses the Krugman critique.     

I’m not an expert here.  I am trusting in our leadership.  But, what they are proposing seems prudent and smart and balanced.  It appears to me that the plan can work in a positive way with its fundamental reliance on the market.  More market and less bureacrats is always a good thing in my book.  As long as you have regulators who can temper market excess and force consideration of externalities as needed, it will remain the best allocator of resources that humankind has discovered.  It simply can’t be replaced by federal bureaucrats.   Mr. Krugman may have more faith in bureaucrats than markets, but I don’t.  This plan is deserving of our support and it has mine.  Let’s hope it works.

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