Tuesday, March 27, 2007

"Cracks in the façade" (Economist.com link)

The Economist talks housing markets. Amid a relatively tranquil couple of weeks in economic news (with headlines dominated by defense issues and the Gonzalez/US Attorney controversy) the Fed holding interest rates and the housing market just stir the storm in the tea cup.

Sunday, March 18, 2007

"American Idealism and Realpolitik"

As foreign policy and detente are outside my area of expertise, I particularly enjoy reading those occasional short pieces with literary merit or thought-provoking questions. The great British historian Paul Johnson had a most intriguing article in Forbes last week.

America is the reluctant sheriff of a wild world that sometimes seems mired in wrongdoing. The UN has nothing to offer in the way of enforcing laws and dispensing justice, other than spouting pious oratory and initiating feeble missions that usually do more harm than good. NATO plays a limited role, as in Afghan-istan, but tends to reflect the timidity (and cowardice) of Continental Europe. Britain and a few other nations such as Australia are willing to follow America's lead but are too weak to act on their own.

That leaves the U.S. to shoulder the responsibility. Otherwise--what? Is brute force to replace the rule of law in the world because there's no one to enforce it? I wish some of those who constantly criticize America's efforts and the judgment of President Bush would ask themselves this simple question: Would you really like to live in a world where the U.S. sits idly by and lets things happen?

Life in such a world would be like the bestial existence described in Thomas Hobbes' great work, Leviathan. If people "live without a common power to keep them all in awe, they are in that condition which is called war, and such a war as is of every man against every man." In that lawless state there will be "continual fear and danger of violent death, and the life of man solitary, poor, nasty, brutish and short."

In the 350 years since Hobbes wrote his book nothing essential has changed. For proof, look at the poor people of Sudan, in whose struggle the U.S. has not been willing to intervene and whose lives are exactly as Hobbes described. The same is true in Somalia, where the U.S. has been indecisive and vacillating. And this was the case in the former Yugoslavia until the U.S., with great misgiving, finally responded to pressure and sent in its forces.

It's fortunate for the world that in areas in which international law doesn't operate and rogue states do as they please, America will sometimes agree to play Leviathan in order to establish law, at the risk of huge financial expense and its soldiers' lives. It does so because it is a country founded on idealism. A majority of Americans have always believed that a society, under God, must come to the rescue of the poor, weak and oppressed if it has the means to do so. The U.S. has applied this idealism systematically to the world as a whole and in many different ways, from the Marshall Plan, which helped raise Europe from ruin in 1948, to declaring war on international terrorism five years ago.

On the Horns of a Dilemma

America is fundamentally and instinctively idealistic. But following these ideals and acting as the world's policeman raises moral issues. We all agree that the sheriff must be righteous, brave and resolute. But should he also, if the situation demands, be cunning, devious and Machiavellian? In short, should America, along with its idealism, also practice realpolitik? And won't these two forces be in constant practical and moral conflict?

It's difficult to exercise authority in large parts of the world and, to use Hobbes' phrase, "keep them all in awe," without a touch of realpolitik. Britain discovered this in the 19th century, just as the Romans had two millennia before. Moreover, as British statesmen such as Benjamin Disraeli and Robert Cecil, Lord Salisbury, found, imperial realpolitik expressed itself principally in two cynical maxims: "Divide and rule" and "My enemy's enemy is my friend." These two maxims are rearing their heads again in the Middle East, and almost unwittingly--and certainly not from any set purpose--the U.S. finds itself following them.

U.S. intervention in Iraq has had the inevitable consequence of fueling the Sunni-Shia feud, which has raged in Islam for 1,000 years at varying degrees of intensity. It's now running hotter than ever, and likely to get worse, as more and more of the Middle East is drawn into it. Of course, with the Sunnis fighting the Shia, they have less time and energy to fight the West, and America finds it easier to rule. But this raises moral dilemmas that the U.S. has so far failed to resolve or publicly recognize.

Another situation where realpolitik could come into play is Iran's nuclear power quest. The moment Iran possesses and can deliver nuclear bombs it will use them against Israel, destroying the entire country and its inhabitants. If this danger becomes imminent, Israel has the means--if suitably assisted--to launch a preemptive strike. Should the U.S. provide such assistance and moral encouragement?

China's progress in advanced military technology, especially Star Wars-like rocket defenses, is also giving American strategists problems: How should the U.S. react? The realpolitik answer would be to assist India, China's natural rival and potential antagonist in east and central Asia, to achieve technological parity. But would it be right to do so?

These kinds of questions can arise almost anywhere but do so especially around ruthless totalitarian regimes that are attempting to acquire more military power than is safe to allow them. North Korea is a case in point. It's one thing for the U.S. to make clear that it will defend its allies, such as South Korea and Japan, from nuclear threats. That is straightforward and honorable. But the realpolitik solution would be to assist and encourage China to deal with the problem of a nuclear-armed and aggressive North Korea, the strategy being based on another old maxim: "Set a thief to catch a thief."

I don't envy those in Washington whose duty it is to resolve the dilemma between idealism and realpolitik. But they will not go far wrong if they respect the great tripod on which all geopolitical wisdom rests: the rule of law, the consultation of the people and the certitude that, however strong we may be, we are answerable to a higher power.

Tuesday, March 13, 2007

Feeny Takes on Sarbanes-Oxley - Federal Aid Propping Up Old TVs?

Concerned that some consumers would not be able to obtain television signals after the 2009 analog cutoff, Congress in 2005 authorized up to $1.5 billion to subsidize the cost of converter boxes. In July 2006, the Commerce Department -- tasked with administering the program -- proposed that funding be limited to households without cable or satellite service. As specified by Congress, each eligible household would be eligible for up to two $40 coupons to put toward the purchase of converter boxes, which are expected to cost $50 to $75 in retail stores.
Very intriguing what your tax dollars can end up doing.

Tom Feeney testified for reforming Congress' overreaction to Enron (Sarbanes-Oxley legislation) with some interesting perspective.

Sarbanes-Oxley has been implemented in Section 404. Section 404, essentially, requires not just an internal audit but an external audit. And Section 404, as implemented, has not given us any bright-line suggestions about what are good accounting standards and what are bad accounting standards. We don't know what a de min­imis error is, so that some accountants, for example, have looked at the newspaper subscriptions for the officers in a $2 billion or $5 billion company. We're talking about $70 or $100 or $150 a year for newspa­pers in a $2 billion company, and that has generated reviews that will cost hundreds of thousands of dol­lars. Procurement decisions on a very minor level have triggered these things. Why is this?...We have one estimate of the total indirect costs of Sarbanes-Oxley at somewhere between $1.1 trillion and $1.4 trillion; the American Enterprise Institute printed a study done by some professors that wrote a book referring to this. If this particular economist is anywhere close to right, this amounts to about an 8 or 9 percent regulatory tax on every good and ser­vice produced in the American economy. It's an enormous self-inflicted wound in terms of the cost, and it was totally unanticipated.

Tuesday, March 6, 2007

Screener Bargaining/Union Update: AP Botching Coverage

The AP messed up the facts, but the Senate did pass the measure slyly inserted into the 9/11 Commission bill to mandate collective bargaining between the TSA and screeners. The AP report repeatedly misspoke and misstated facts, casting it as a measure to provide "the same union rights that" others were getting. As I've stated in the past few posts, the TSA workers can join government worker labor unions like anyone else, they simply aren't mandated to collectively bargain. That's the purpose of this big-labor driven measure.

WSJ Screener Finance Follow-Up - Libby Conviction

The Wall Street Journal hopped onto the story I reported a couple of days ago regarding airport security collective bargaining, and continues to nail the lunacy of the idea.

Screeners need to adapt to changing threats, often with random and unpredictable methods. Union rules would require negotiating over these methods with labor chiefs at each work site, meaning at every airport. By TSA's estimate, union rules would also require pulling some 8% of the work force offline to meet new management demands. This would require either closing screening lanes or adding thousands of new screeners at more cost to taxpayers.

Additionally, Dick Cheney's former Chief of Staff and current political scapegoat I. Lewis "Scooter" Libby was convicted on four of the five charges against him, exonerated only on one charge of lying to FBI Agents.

This is the short story. Below is the slightly longer one.

The entire case has been a political teaser, beginning with a trip Amb. Joe Wilson was asked to take to Niger for purposes of investigating some British Intelligence claims. London said the Hussein regime had attempted to purchase uranium from several African countries, including Nigeria. Wilson's low-key report, which was based primarily on Nigerian government officials, concluded Hussein had attempted to purchase uranium but had been unsuccessful. The former was conspicuously absent from Wilson's NYT Op-Ed alleging the administration "twisted intelligence" on the subject and ignored his (comparatively unimportant) report. With attention like a pregnant poll vaulter, the story amassed criticism of the administration.

On another note (at that point quite unrelated), State Department official and war skeptic Richard Armitage was telling reporters that Wilson's wife worked at the CIA. Robert D. Novak published such in his column and publication (The Evans/Novak Political Report, a worthy read to which I subscribe) with Armitage as his confidential source. This sparked controversy as some believed Plame was a covert agent, thus the Bush Administration was taking revenge against Wilson's editorial. She wasn't, this was patently false, and the laws regarding the criminality of exposing agent's identity establish a number of criteria (e.g. the agent must be out of the country, expose must have malicious intent, etc.) which weren't met by this release of information by Armitage.

However, special prosecutor Patrick J. Fitzgerald indicted Scooter Libby on five counts, including perjury and obstruction of justice, while concluding there was no crime committed in the alleged "leak." There was some confusion on Libby's part as to when he knew that Plame was a CIA agent, claiming a conversation with Tim Russert was when he found out, and at that time he was "surprised." Russert denies as much. An earlier conversation was shown to be the point at which Libby learned of Plame's identity.

The trial was a confusing one, with conflicting witnesses, several witnesses providing conflicting testimony on different days, and a jury quite lost. The defense claimed Libby had a bad memory, the prosecution claimed he lied. My analysis would be that the top gun under the Vice President has a quantum amount of more important things to remember than whether some incognito ambassador is married to a CIA office agent who's inconsequential in the grand scheme of things. The Wilson's argument and ensuing civil suit (unrelated to these convictions) was that the administration had a deep concern over Wilson's op-ed, so deep in fact that they were willing to go to great detail in order to have Plame's career "ruined." It strikes me as incredibly pompous and arrogant on the part of Wilson and Plame to assume that they're so pivotal to national security along with national policy that they consume the minds of the President and Vice President. Yes, a bit too much to the head.

The jury took ten days to deliberate, repeatedly asking for clarification on basic points (such as what charges were being levied), leading judicial analyst Judge Andrew Napolitano to suggest the defense will ask the judge to throw the ruling out due to a high level of confusion on the jury. This won't happen, but appeals will.

2008 Update: Slipping Big Three? - New Approval Ratings

The late February Presidential poll average shows my slightly preferred pick, Fmr. Gov. Romney (R-MA), sliding to fourth place, with Newt Gingrich (R-GA) in third. The spread:

RCP Average (02/19 - 02/28) Rudy: 36.6 McCain: 20.2 Mitt: 7.2 Newt: 10.8 Spread: Giuliani +16.4
The Democratic Congress' approval ratings haven't bounced any higher than Bush's, coming in a few points below his 36% approval at a 34% rate.

RCP Average02/21 - 02/28(A)34.0%(D)52.3%-18.3%

John Fund's weekly report to OpinionJournal claimed Romney nailed his Conservative Political Action Committee (CPAC) speech last weekend with a message "uniting fiscal, social, and defense conservatives." However, Giuliani also received a surprisingly positive response having his somewhat nervous speech (introduced by longtime conservative icon George F. Will) centered around conservative ideas from defense to school choice, but avoiding the issues of conflict (namely gun control and abortion).

I find myself ideologically aligned with Gingrich as much as any candidate, but electability remains a serious concern. I'm still waiting to see which of the conservative candidates--Romney, Gingrich, Huckabee (R-AR) or the extreme long-shots Brownback (R-KA) and Gilmore (R-VA)-- pulls ahead as the conservative front-runner. In his CPAC speech, Huckabee cracked the conference should be renamed the "Conservative Presidential Anxiety Conference" with a theme, "Dude, where's my candidate?"

Sunday, March 4, 2007

Castro Ditches His Own Economic Ideas

Investor's Business Daily reported a humorous spectacle in Cuba during Fidel Castro's severe health scares. The domestic policy cornerstone of the Castro Regime has been their universal health care coverage, internationally lauded and locally flaunted.

However, on while Castro was in critical condition he refused to use his own health care system. Instead, he brought in (lo and behold) free market physicians and equipment. IBD:

Spanish medics also brought in new capitalist-world medical equipment, part of a series of such shipments the Cuban government has been quietly provisioning for Castro since June, well before he ceded power to his brother, Raul...

But what a sorry spectacle, given the claims of Castro and his apologists that communist health care is a humane and superior alternative to that in the capitalist world of double-entry bookkeeping, where health care is not free but something of value.

The president of Madrid's regional government, Esperanza Aguirre, swiftly spotted the hypocrisy of Castro's special treatment. Castro supporters, she said, "practically justified dictatorship, and the lack of the most elemental human rights," by "claiming to have an extraordinary health service."

Saturday, March 3, 2007

Issues With the Skies and Their Finances

Interestingly, for the first time in several years the top economic issues for the airline industry aren't centered around bankruptcy. Two issues have unfolded in the past couple of weeks in regard to airlines and airport security.

The first came after a cunning idea to dryly slip a measure into the 9/11 commission report to force the Transportation Security Administration to collectively bargain with government worker's labor unions before modifying personnel policies. Of course, this is slightly dumbfounding if you notice that the 9/11 commission didn't give a rip about collective bargaining for the TSA. As a matter of fact, when the TSA was created the measure was considered, but the consensus was such a measure would impair threat reaction and flexibility.

One clear clarification needs to be made- the bill has nothing to do with allowing a TSA screener to join a union, they're more than happy to work with the American Federation of Government Employees (AFGE) until they're happy. It's not a matter of extending that privilege to screeners. It's a matter of whether or not the TSA should be forced to collectively bargain with government unions prior to making a policy change.

On the other side of the airline news, JetBlue's financially devastating meltdown resulting in a ten hour runway wait for some passengers gave a few ever politically-eager legislators an opportunity. Sen. Boxer (D-CA) has promised to introduce legislation to provide "adequate food, water, and restroom facilities" to passengers stranded on planes. Admirable as it may be, JetBlue pretty much got the picture. While the airlines are rolling out their own ideas, some senior officials at the Air Transport Association are worried that Washington Intervening would only make things worse. I'm inclined to agree. JetBlue has already announced it plans to provide thirty million dollars in refunds and vouchers, and the economic damage JetBlue sustained was massive. They could model some structure after Southwest, which has it's own officials solely for the purpose of dealing with crisis situations.