Monday, January 5, 2009
The Corner/NRO, Jan 05, 2009, 05:23 PM
In the very early days of the Bush administration, Karl Rove asked a Washington policy wonk what personnel changes he'd recommend to newly arrived George W. The wonk said "there is one matter of life and death: he must replace Tenet at CIA and put in one of his own people, someone he absolutely trusts." Rove said "well, good luck with that one." Obama knows better, and he's putting Leon Panetta in Langley.
I always liked Panetta. He served in the Army and is openly proud of it. He seems to be a good lawyer (oxymoronic though it may seem). He's a good manager. And he's going to watch Obama's back at a place that's full of stilettos and a track record for attempted presidential assassination second to none. But Italians know all about political assassination; you may remember Julius Caesar. Or Aldo Moro. The self-proclaimed cognoscenti will deride his lack of "spycraft," and he's never worked in the intel bureaucracy or, for that matter, in foreign policy or national security. But he's been chief of staff, which involved all that stuff.
I think it's a smart move.
Progressive Policy Institute, January 5, 2009
With the U.S. economy in crisis, and the dollar weakening against most major currencies, trade has become the only bright spot in an otherwise bleak economic landscape. Indeed, exports have grown over 10 percent in 2008, while a decline in Americans' disposable incomes has caused imports to shrink for the first time in years -- bringing our trade deficit down with it.1
Yet while the net impact of trade on the U.S. economy is now at its most positive, helping prevent the current crisis from becoming even worse, there is still a common perception that trade is, at best, a mixed blessing.
After all, we like having expanded markets to sell our products and services, but we don't always like to accept that other countries will want to sell theirs to us. When it comes to trade, we just hope that the good somehow outweighs the bad.
This assumption that all imports are bad because they compete against U.S.-based companies is flawed, and needs to be examined. Normally, the best anyone can say for imports is that they allow consumers to buy things for less and therefore improve our standard of living. What is largely overlooked is that imported inputs -- the components used by U.S.-based companies to produce their finished goods -- are essential for our economy to remain competitive.
Imports in the Aggregate
It's surprising how little is mentioned about the linkage between foreign inputs and our competitiveness given how dependent U.S. producers have become on global supply chains.2 Census Bureau data for 2007 show that 47 percent of imports came from related-party companies, or cases when the U.S. importer was a subsidiary or parent company of the foreign exporter.3
In other words, almost half of all imported goods are not the traditional case of a foreign company selling directly to U.S. consumers, but rather are part of an intra-company global supply chain. Furthermore, almost 30 percent of all goods imported by U.S. affiliates of foreign companies were destined for further manufacturing within the United States.4 In cases such as these, where the importing company is using foreign inputs to build finished goods, restricting imports would directly affect U.S. production and employment.
Indeed, it's difficult to find any large U.S. manufacturer that doesn't depend on some foreign inputs. To name just a few examples:
- When Ford originally set out to build a hybrid SUV in the United States, it found that key components like the battery pack had to be sourced from Japan and Europe because U.S. suppliers lacked the leading-edge capabilities. Ford's ability to compete effectively against Toyota and others in the nascent hybrid market was therefore dependent on its access to high-quality imports.5
- Boeing is in the middle of a fierce battle with an Airbus joint venture to compete for a $35 billion Pentagon contract to build aerial refueling tankers. National allegiances have played a role in the competition, and while Boeing's bid would reportedly use more U.S. content than the Airbus bid, Boeing's own estimates say that about 15 percent of the tankers (including such high-value components as the fuselage and tail) would have to be imported to meet the Air Force's needs.6
- Dell is one of the last companies that still assembles computers in the United States, and is famous for its custom-configuration sales model. What is less known is how dependent Dell's U.S.-based manufacturing sites are on foreign suppliers, to the point where Dell had to charter a dozen and a half 747s to move necessary components from Asia to keep its U.S. plants from shutting down when a dock strike closed 29 ports along the West Coast in 2002.7
Unintended Consequences of So-Called Safeguards
Perhaps the clearest way to illustrate how much our economy has become dependent on high-quality, low-cost inputs from abroad is to look at what happens when that supply is temporarily disrupted.
A very high-profile example of this occurred in 2002, when President Bush invoked a "safeguard" to protect U.S. steel producers. Tariffs ranging from 8 percent to 30 percent were increased on foreign steel in March 2002, with an original plan of holding them in place until 2005 so that U.S. steel companies could adjust to a surge in competition from low-cost imports.8
While U.S. steel companies undoubtedly benefited from this reduction in competition, what hadn't been fully anticipated was the negative impact on U.S.-based steel users. Manufacturers of steel-dependent goods like machine tools or auto parts suddenly saw their costs spike overnight.
Several studies have shown that more U.S. jobs were lost as a result of the tariffs than were saved, and even Bush allies like Sen. Lamar Alexander (R-Tenn.) concluded the tariffs had "shifted more steel-consuming jobs overseas than exist in the steel-producing industry in the United States."9
Eventually, the Bush administration caved in to pressure from steel users, as well as the threat of retaliation from the impacted foreign nations, and lifted the safeguard in December 2003, more than a year earlier than originally planned. The lesson was clear: the interdependence of U.S. producers with foreign suppliers has made it too complicated to easily protect one domestic industry without harming many others.
None of this is to say that imports don't affect U.S. jobs. We must recognize that some imports do replace domestic production -- and that, by doing so, they cost some Americans their livelihoods. For these reasons, it's critical that public policy be designed to both prepare workers for the demands of 21st century competition through efforts to improve worker productivity (including through training and education, as well as better infrastructure). We also need policies that will help cushion the blow for those who do lose their jobs. This should include effective unemployment and wage insurance, as well as universal and portable health coverage.
But the idea that jobs can be saved simply by raising barriers to imports is misguided, especially when those imports are inputs used for domestic production. As the steel example shows, even the best intentions to protect one set of U.S. companies will have costs and competitive effects on others, even ignoring the foreign retaliation that often hits unrelated U.S. industries.
Especially in this era of heightened globalization, in which technology can enable companies to move production and employment virtually anywhere in the world, it's imperative that U.S. companies and workers be as competitive as possible. One way of achieving this is to ensure that U.S.-based employers have access to the inputs they need, including those that arrive from overseas. Otherwise, we risk watching jobs cross the water -- in the opposite direction.
1. See Bureau of Economic Analysis, U.S. Department of Commerce, news release from September 26, 2008 for most current data on export and import growth.http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htmFor a discussion on the inverse relationship between import growth and unemployment, see "The Facts on Trade Deficits and Jobs," by Doug Karmin. Progressive Policy Institute, October 3, 2007.
2. For a less serious look at the impact of restricting inputs on competitiveness, see "GATT confusing? Canadian football provides some answers" by Doug Karmin in The Hill (November 30, 1994). It describes how the Canadian football league tilted the competitive balance against its own teams by restricting the number of foreign players allowed on Canadian teams while allowing U.S. teams to hire the best available talent.
3. Census Bureau, U.S. Department of Commerce, "U.S. Goods Trade: Imports & Exports by Related Parties 2007." May 9, 2008.
4. Bureau of Economic Analysis, U.S. Department of Commerce, Operations of Multinational Companies, Product Guide for Foreign Direct Investment in the U.S., 2002 Benchmark Survey, "U.S. Imports of Goods Shipped to Affiliates and Intended Use." Most recent data is for 2002, and it shows that U.S. affiliates imported $95 billion in goods destined for further manufacturing out of a total of $335 billion in imports (28.3%). Intended use of imports only exists for U.S. affiliates.
5. "Lack of Hybrids-Parts Suppliers Could Hurt U.S. Auto Makers," by Norihiko Shirouzu. The Wall Street Journal, August 16, 2004. The need for importing batteries for hybrid cars has continued since Ford's initial launch of their hybrid SUV. See "Hybrid Cars' Foreign Dependence," by Jim Ostroff. The Kiplinger Letter, September 9, 2008.
6. "Boeing, too, uses foreign parts," by Joelle Tessler. The Associated Press, March 7, 2008. It was also reported in September 2007 in China's "People's Daily Online" that Boeing's Vice President of China Operations stated that China had become one of Boeing's largest foreign suppliers with $2.5 billion in active contracts.
7. "Living in Dell Time," by Bill Breen. Fast Company.com, November 2004.
8. Remarks by Robert B. Zoellick, United States Trade Representative, on the decision by the president to terminate steel safeguards, December 4, 2003.
9. "Steel Tariffs Appear to Have Backfired on Bush," by Mike Allen and Jonathan Weisman. The Washington Post, September 19, 2003.
The Corner/NRO, Monday, January 05, 2009 @02:57 PM
From Patrick Semmens at National Right to Work Legal Defense Foundation:
Just to add to what others have written regarding Hoyer's comments on FNS. While it's often a fine line between gross misrepresentation and out and out lie, I'd say at least one aspect of Hoyer's comments fall into the second category:
Hoyer says "The employees currently have and will have the opportunity to opt for a secret ballot. They don't have to sign the card. They can say, 'Look, we'll have an election, and we may vote.' But they have that choice right now, and they will continue to have that choice."
But the fact is the so-called "authorization cards" that unions use to run a card check doesn't give employees the choice to opt for a secret ballot election. In fact, the cards often seem to intentionally bait-and-switch employees into thinking that they are supporting an election, when really they have done just the opposite by signing a card that will be later be counted as a "vote" for unionization under card check.
We have an example of a typical union card here. You'll see that on the top of the card in big bold print it says it is a request for a representation election. However, in fine print at the bottom it says that signing the card authorizes the union "also to represent me..." (meaning that it would count in a card check).
In short workers have no opportunity to request only a secret ballot vote... it's card check or nothing because the union controls the cards and what they are used for. Meanwhile as others have pointed out, union organizers technically could request a vote, but they never would because it is always easier to pressure or mislead 50% +1 workers into signing cards, than it is to get them to vote in a union within the privacy of the secret ballot.
Hope that helps.
Also, people need to be reminded that in most states (the 28 without Right to Work laws) once a union gets in (through card check or secret ballot) every worker must (1) accept the union's representation even if they don't want it and (2) pay dues to the union or be fired. So while obviously the secret ballot election is far less coercive than the card check scheme, let's not forget that both are still part of a fundamentally unjust system.
—Patrick T. Semmens
Legal Information Director
National Right to Work Legal Defense Foundation
US State Dept, Office of the Spokesman
Washington, DC, January 5, 2009
The United States Government continues to support the delivery of urgently needed food, health, shelter and other emergency assistance to the people of Gaza through our ongoing support for international organizations such as the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), the World Food Program (WFP), and the International Committee of the Red Cross (ICRC) and non-governmental organizations (NGOs).
On December 30, the United States announced a contribution to UNRWA for its 2009 appeals. Of the $85 million contribution, $5 million will directly support UNRWA’s Gaza Flash Appeal that will provide food, temporary shelter, and medical assistance for over 500,000 conflict-affected refugees in Gaza. The Flash Appeal funding will also supply up to 500,000 liters of fuel to municipalities and utilities for basic public services, including electricity and water treatment. $20 million will support UNRWA’s 2009 Emergency Appeal for the West Bank and Gaza, of which a large portion bolsters UNRWA’s ongoing emergency assistance activities for more than 1 million Palestinian refugees in Gaza. $60 million will support UNRWA’s General Fund for the provision of education, primary health care, and relief services to Palestinian refugees in the region, including Gaza.
The United States Government continues to provide food assistance through the World Food Program (WFP) to 20,000 non-refugee Palestinian households in Gaza with a bi-monthly package of five basic foods. Since December 28, WFP and its implementing partner, Community Housing Foundation (CHF), have distributed some 720 metric tons (MT) of food commodities to beneficiaries in Gaza. An additional 1,350 MT is available in Gaza for distribution when the security situation allows.
The United States Government also continues to support the International Committee of the Red Cross’s (ICRC 's) efforts to supply Gaza’s hospitals and clinics with urgently needed medicines, surgery kits, hygiene kits, intravenous fluids, bandages, plastic sheeting and other medical equipment. The ICRC is bringing two generators into Gaza to ensure continued operation of Gaza’s hospitals despite electricity cuts and maintenance problems resulting from a lack of spare parts.
The United States Government has provided other medical and food supplies to health care facilities in Gaza, including syringes, tubes, gloves, x-ray film, tape, silk for sutures and bedding (mattresses, blankets and linens), and 18,000 kilograms of plastic sheeting to cover broken windows and help mitigate the cold.
The United States is the largest bilateral donor to UNRWA, which provides essential services to hundreds of thousands of Palestinian refugees in Gaza, the West Bank, Lebanon and elsewhere.
The United States is deeply concerned about the safety of civilians caught up in this conflict, and urges all sides to facilitate the provision of humanitarian relief.
Released on January 5, 2009
Change.gov, Monday, January 5, 2009 11:49am EST
Claiborne Pell, a Rhode Island senator whose achievements brought about lasting change both at home and abroad, died on January 1st, 2009, at the age of 90.
In a statement, Vice President-elect Joe Biden honored Sen. Pell’s many accomplishments, noting that, “few Senators have done more to expand opportunity in America.”
Pell’s domestic efforts led to the establishment of the Pell Grant, a federal higher education subsidy that has defrayed the cost of college tuition for thousands of American students since their establishment in 1973.
In 2000, nearly 30% of public university students were Pell Grant recipients.
Still, many students and their families worry that the worsening economy will increase the burden of tuition and other college costs.
Carolyn from California shared some of her concerns:
“With the state of our current economy my parents are worried with how they are going to be able to support me and my younger brother as he goes off to college. We are considered upper-middle class (I think) and if we are having a hard time, I can only imagine what other families are facing. Please continue to support federal funding for higher education including the Pell Grant Program. Your proposed changes to the Financial Aid application would be very helpful, but at the same time increased funding of federal programs is necessary.”Making higher education more affordable is a priority for the Obama-Biden administration. Use the discussion forum below to tell us some of your concerns about education costs:
Washington Times, Wednesday, December 31, 2008
Many had warned, but few who were in a position to act even tried to avoid the very predictable economic calamities of 2008. This was the year that proved Ronald Reagan's old adage, "The government is not the solution; it is the problem." As we enter the New Year, the question is again, "Will those in charge do what is necessary to avoid the very obvious new economic wrecks coming?"
The U.S. government has now explicitly said there are financial institutions (and other companies - autos, etc.) that are "too big to fail." If that is (arguably) true, then they must be more highly regulated than the smaller institutions, particularly in terms of capital adequacy.
The reason is quite simple. If the government guarantees the debt of big companies, those institutions will have a much lower cost of capital than their smaller competitors, which is not only unfair but will destroy new and smaller companies, thus killing much of the job and productivity creating innovation in the U.S. economy. So far, the Washington governing class has failed to even discuss this disastrous consequence of the bailouts, let alone figure out a solution.
It is now widely understood that the current economic mess was a result of the Federal Reserve (Fed) keeping interest rates too low during the middle of this decade, as even Alan Greenspan now admits. Also, Congress pushed banks into providing mortgages to people who were insufficiently creditworthy, while at the same time resisting calls to provide more oversight and regulation of the two government-sponsored mortgage giants (Fannie Mae and Freddie Mac).
In addition, the Securities and Exchange Commission chose to take its eye off the ball of rooting out financial fraud and instead imposed very costly, counterproductive and destructive rules on the financial industry, including forcing companies to "expense" stock options and incomprehensible "mark to market" accounting rules.
The economic situation will not appreciably improve without corrective action on the above-mentioned items. In the late 1990s, the Fed implicitly followed the Taylor Rule, a formula developed in 1992 by John Taylor, a former member of the President's Council of Economic Advisers and undersecretary of the U.S. Treasury, that indicated when to increase or decrease interest rates in conducting monetary policy. This resulted in relatively low inflation and strong growth.
The Fed made an exception to the rule in 2000 because of the anticipated Y2K problem, which turned out not to be a problem - but this Fed policy deviation largely caused the 2000-01 recession.
In addition to the Fed's actions, the mortgage meltdown was caused by banks being forced, by regulatory actions and the Community Reinvestment Act (CRA), to make loans to unqualified people; plus irresponsible behavior and undercapitalization at Fannie Mae, Freddie Mac and a number of private financial institutions. For at least a decade, many economists and noted financial experts had warned about the debacle that would occur at Fannie and Freddie. They were ignored by the members of Congress (because all too many of them were on the take - that is, recipients of large political donations from Freddie and Fannie).
The same congressional committee chairmen, Barney Frank in the House and Chris Dodd in the Senate, who failed in their oversight responsibilities, now say they want to "reform" rather than abolish Fannie and Freddie - which will almost certainly result in a repeat of the current disaster. (Nonconflicted experts, such as former Treasury General Council, Peter Wallison, have advocated a phaseout of the two organizations - which is the correct course of action.)
The SEC also needs to be abolished, and the Sarbanes-Oxley bill should be repealed. The SEC has repeatedly failed in its primary mission - investor protection - as has been all too evident in the world record Madoff Ponzi scheme - while at the same time destroying the U.S. Initial Public Offering market, which is the engine of future economic growth. (Where would the United States be without Intel, Microsoft, Apple, Google, Amazon, etc? Under the new SEC rules, it would have been almost impossible to create these innovative powerhouses.) There are plenty of federal and state laws against financial fraud, which makes the SEC redundant at best.
As for Ponzi schemes - when will Congress address the world's largest Ponzi scheme - Social Security, which it created? Social Security depends on an ever-increasing number of new taxpayers to fund the retirement payments of the ever-growing numbers of the longer-living elderly. The only question is, "In what year will it fail?"
Finally, the new administration and Congress are promising a big increase in federal spending, ignoring the fact that historically when government spending rises as a percentage of gross domestic product, growth falters and vice versa. A major reason growth has been relatively weak during George W. Bush's term is that, unlike Ronald Reagan and Bill Clinton, he allowed (by not using his veto pen) government spending to grow more rapidly than the economy.
Those who want to replicate Herbert Hoover's and Franklin Roosevelt's spending increases will find that if they succeed, they too will replicate a decade without growth.
Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.
January 5, 2009, page A20
Unlike President Bush, Barack Obama is going to enter office with a clear appreciation of the urgent problems of climate change and America’s growing dependency on foreign oil — and a strong commitment to address both.
One way he can do this is to give mass transit — trains, buses, commuter rails — the priority it deserves and the full financial and technological help it needs and has long been denied.
Mass transit has always played second fiddle to the automobile, so Mr. Obama will need strong allies. Ray LaHood, Mr. Obama’s choice for transportation secretary, must be not only an ally but a champion for mass transit. Mr. LaHood is a Republican and former member of Congress from rural Illinois, where farmers produce a lot of ethanol and where people mostly drive. His résumé on transportation issues is thin, and we fear he may need some coaxing in this new direction.
Another important ally should be — and almost certainly will be — James Oberstar, a Minnesota Democrat who is chairman of the House Transportation and Infrastructure Committee.
For years, the division of transportation money in Washington has heavily favored cars and trucks — more than 80 percent of the big transit money from gas taxes goes to highways and bridges, and less than 20 percent to railroads or mass transit. Mr. Oberstar is leading the charge to change that formula and divide this money a little more evenly. This will not be easy. Automobiles will be with us a long time, and old spending habits die hard. But as part of the stimulus package now under discussion for transportation, Mr. Oberstar is proposing $30 billion for highways and bridges and $12 billion for public transit. That is certainly a far healthier mix.
The new administration could further help mass transit by shelving the unfair “cost effectiveness index” that President Bush put in place several years ago for new transit programs. The net effect of this index was to make it easier to build highways and almost impossible to use federal money for buses, streetcars, light rail, trolleys — indeed, any commuter-rail projects.
For Mr. Obama’s transit agenda and for Mr. LaHood, the next big challenge will be a transit bill that Congress must pass by September. Mr. LaHood is widely praised for his management skills and his ability to work well with others. Those abilities will certainly be needed if he and the Congress are to find and then finance the best, the most-efficient and the most-advanced ways for Americans to move around.
Real Climate, Jan 03, 2009
At RealClimate, we have more than once been accused of being imbalanced — criticizing those who would deny the basic science of climate change, while leaving inflammatory statements by what might be called the "environmentalist side" without comment. It's not an entirely a fair criticism, because there is a world of difference between the willful obfuscation of science and the naive exaggeration of it. There are however plenty of silly, and sometimes outrageous, claims made - see e.g. the Telegraph on Jan. 3rd — and we probably ought to do a better job of calling these out, particularly when they show up in prominent places. So to inaugurate the New Year, I humbly offer a rant about a minor but illustrative example that I happened to notice because there was a link to it on Nature Reports Climate Change.
The subject of the linked article, in the British online newspaper The Independent, is the decline of various bird and butterfly species in England. The article, entitled Changing climate devastates UK species, reports that "insects in particular, and creatures that feed on insects…were sharply reduced in numbers" due to a "cold late spring, a wet summer, with few sunny days, and the long dry autumn…." Now I have no reason to doubt the accuracy of the claim that 2008 was a hard year for UK insects and insectivores. But this is weather we're talking about, not climate. And while it is true that at least one prominent study shows that there has been an overall increase in rainfall in the latitude band that includes the UK, and that climate models reproduce this trend (see e.g. the Zhang et al. article in Nature, in 2007), one cannot, as we are fond of pointing out, attribute a single, or even several individual extreme weather events to "climate change".
Indeed, Peter Stott, a co-author on the Zhang et al. study noted, in reference to 2007 (the wettest summer on record in the UK) that "This latest study cannot make the link between climate change and what we have experienced so far this summer." Moreover, most projections actually suggest drier summers in the UK in the future, though with increased convection (so less total precipitation, but bigger rainstorms).
Another thing that bugs me about the Independent article is the suggestion that climate is becoming "more unpredictable". I suspect what is meant here is that we used to know what a mean season and normal variations were, and now we don't. That's valid, since the baseline climate is changing. But saying it this way — that "climate is becoming more unpredictable" is misleading. In fact, climate may, if anything, become more predictable as anthropogenic forcing becomes even more dominant (as greenhouse gas concentrations increase), relative to natural forcing and variability. And what is definitely not the case — but might be inferred from the article — is that weather is becoming more unpredictable. Weather prediction is based on observations just a few days in advance — climate and climate trends have nothing to do with it.
The point here is not that we shouldn't be concerned about the fate of insects and birds in the UK (that would be the kind of conclusion that only the most willfully ignorant would draw.) They have been in decline for a long time (mostly due to land use change and pesticides) and there is little doubt that climate change will continue to add insult to injury. But it is simply wrong to confuse a year or even two years of unfavorable weather with a change in climate, and it is irresponsible to headline an article that is really about weather with the provocative juxtaposition of "climate" and "devastates". Doing so gives the average reader the sense that their personal observations about "weird weather patterns" or fewer sightings of Parus caeruleus represent definitive manifestations of climate change. The fact is, climate changes are — so far — small enough in most places, relative to the natural variability, that one's personal experience is a very poor guide to what is happening over the long term (observations of sea ice changes by those that live in the high Arctic notwithstanding).