Thursday, May 20, 2010

Press Briefing

May 21, 2010

United States reaffirms commitment to addressing global hunger and food security through Feed the Future initiative

NGO's BPA Report Intended to Frighten, Not Enlighten. By Robert L. Brent MD, PhD, D.Sc

The Dangerous Illusion of 'Nuclear Zero' - Why even speculate about a nuclear posture that would require world peace as a precondition?

Timor-Leste Restoration of Independence Day

The Never Ending Renewable Energy Handout: Senate Committee seeks to make renewable energy handout “permanent”

Privatization Can Help Greece - Keynesians warned against Thatcher's policies in 1981. They were proven wrong

The Madness of Cotton - The feds want U.S. taxpayers to subsidize Brazilian farmers

Business Executives for National Security, Annual Policy Forum. Speech by Ellen Tauscher, Under Secretary for Arms Control and International Security
Washington, DC, May 19, 2010

Goodbye, Employer-Sponsored Insurance - Companies are discovering that it's cheaper to pay fines to the government than to cover workers

The Bankrupting of America - We have a ruinous collaboration of elected officials and unionized public workers

State of Metropolitan America

The Fear Returns - Europe's policy panic is feeding another financial panic

Estonia's Lessons for Greece - Europe's problem isn't the euro, but the failed fiscal policies of its political class

United States to Assist Palestinian Refugees in Syria

A Dose of Reality: Fact-Checking the White House on Health Insurance Policy

The White House Blog: Wall Street Reform and Sending Remittances

Junk Economics: A Closer Look at Those Shocking Health Insurance Profits

House Republicans Push Back Against Job-Killing Value-Added Tax

The Dangerous Illusion of 'Nuclear Zero' - Why even speculate about a nuclear posture that would require world peace as a precondition?

The Dangerous Illusion of 'Nuclear Zero'. By DOUGLAS J. FEITH AND ABRAM N. SHULSKY
Why even speculate about a nuclear posture that would require world peace as a precondition?
WSJ, May 21, 2010

Moving toward "nuclear zero" is a signature theme of this administration. President Barack Obama's vision of a world without nuclear weapons is certainly grand. The problem is that our current policies lack coherence and rest on other-worldly assumptions.

Consider the administration's recently released Nuclear Posture Review (NPR). One of the conditions that would permit the United States and others to give up their nuclear weapons "without risking greater international instability and insecurity" is "the resolution of regional disputes that can motivate rival states to acquire and maintain nuclear weapons." Another condition is not only "verification methods and technologies capable of detecting violations of disarmament obligations," but also "enforcement measures strong and credible enough to deter such violations."

The first condition would require ending the Arab-Israeli conflict, settling the Korean War, resolving Kashmir and the other India-Pakistan disputes, and defusing Iran's tensions with its neighbors and with the U.S. It also means solving any other significant conflicts that might arise.

Verification would be tough, but even if technology could solve the problem, the question remains: What kind of "enforcement measures" do those who drafted the NPR imagine?

As of now, the U.N. Security Council is the only conceivable policing agency and its record is weak. What, for example, did the Security Council do when Iraq violated the Geneva Convention on poison gas in the 1980s, or when North Korea recently violated the Nuclear Non-Proliferation Treaty? There simply are no good grounds for relying on the Security Council's will to enforce treaties.

U.S. efforts to organize sanctions in response to Iran's illegal pursuit of nuclear weapons have been exercises in frustration. The Security Council deal announced on Tuesday falls far short of the "crippling sanctions" the administration had once intended. This experience undermines the credibility of any threat of enforcement measures—even against a state not allied with a veto-wielding Security Council member. And if China, Russia or an ally of either were someday to cheat on the ban, enforcement would be precluded by veto.

Is some kind of "world executive" envisioned to implement, or at least authorize, enforcement measures over objections from major powers? If so, it's hard to see how the U.S. or any other great power would relinquish its sovereign rights to independent action and self-defense.

"Strong enough" enforcement would have to include military measures. Is the idea here a U.N. military force that could fight large wars, as some diplomats proposed when the U.N. Charter was negotiated in the late 1940s? Or would military enforcement be the duty of the strongest state, presumably the U.S.? Only an arrangement verging on world government—an entity that could deploy overwhelming military power against a violator without interference by other powers—could possibly fill the bill.

The administration recognizes that knowledge about physics cannot simply be eradicated. "In a world where nuclear weapons had been eliminated but nuclear knowledge remains, having a strong infrastructure and base of human capital would be essential to deterring cheating or breakout, or, if deterrence failed, responding in a timely fashion," the NPR says. So even in a world of nuclear zero, the U.S. would have to remain able to rebuild its nuclear capability in a "timely" fashion. Presumably other nuclear-capable states would conclude the same for themselves.

In the event of a serious crisis, countries would race to reconstitute their nuclear arsenals. The winner would enjoy a fleeting nuclear monopoly, and then come under severe pressure to use its nuclear weapons decisively. The resulting instability could make the competitive mobilizations of the European armies in 1914 look like a walk in the park.

So what are the benefits of endorsing nuclear zero as America's goal? Proponents argue that embracing nuclear zero will increase cooperation from other countries against proliferators like North Korea and Iran. But what is this hope based on? America's embracing nuclear zero may take away a debating point from countries unwilling to cooperate with us, but it does nothing to change their interests. The deal Brazil and Turkey cut with Iran this week shows that Mr. Obama's embrace of nuclear zero does not translate into international cooperation where it really matters.

Endorsing nuclear zero makes it even harder for the U.S. government to maintain the nuclear infrastructure that the president says is essential for our security. Why should a bright young scientist or engineer enter a dying field—especially when innovation is discouraged by support for a permanent ban on weapons testing, and by the renunciation of new weapons development? The NPR states that the administration aims to "enhance recruitment and retention" of technical personnel, but its policies seem sure to drive them away.

The NPR stresses that the world's nonproliferation regime requires a strong U.S. nuclear umbrella. Yet the proposal can hardly increase confidence in America's determination to maintain its longstanding global role. U.S. friends overseas worry about their security in a world where America seems determined to shed its burdens as a nuclear power. This will likely spur nuclear proliferation—not discourage it.

President Obama has constructed U.S. nuclear-weapons policy on the assumption that it is helpful to set our goal as the complete abolition of such weapons. But the NPR makes clear that not even the Obama administration can really imagine a world without nuclear weapons. Meanwhile, the president's visionary notions appear likelier to undermine rather than further his own goals of nuclear nonproliferation and stability.

Mr. Feith, a former under secretary of defense for policy, is a senior fellow at the Hudson Institute and the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008). Mr. Shulsky is a senior fellow at the Hudson Institute and was director of strategic arms control policy at the Department of Defense from 1982 to 1985.

Privatization Can Help Greece - Keynesians warned against Thatcher's policies in 1981. They were proven wrong.

Privatization Can Help Greece. By ALLAN H. MELTZER
Keynesians warned against Thatcher's policies in 1981. They were proven wrong.
WSJ, May 21, 2010

What could the leaders of the International Monetary Fund and the European Union have had in mind when they agreed to lend Greece more than $100 billion in exchange for promises to restore stability? After initial relief, markets soon recognized that the program was not sufficient and not likely to be maintained.

When countries joined the common European currency, they gave up the right to use monetary policy to inflate or devalue. That left wage reduction and fiscal restraint as the only recourse in a crisis. With Greece's money wages and government debt too high, the IMF-EU relief effort does not add any new options. Instead it delays default by offering yet more debt as a solution to too much debt, and it gives the Greek government more time to do what it has been unable to do—lower public-sector wages by about 20% and reduce the budget deficit by 10% of GDP.

This only prolongs uncertainty and offers debt-holders a promise by the Greek government that will be hard to honor. No wonder markets are skeptical.

What would have worked? Much of Greece's industry and commerce, including much of the tourist industry, is owned by the state. It should be sold with the proceeds used to reduce public debt. That would make the remainder of the debt more sustainable and transfer workers to the private sector where competitive pressures for lower wages and increased productivity would more closely align employment costs and reality. If the socialist government returned more of the economy to the private sector, Greece would have a better chance of economic recovery.

Much of the Greek economy not owned by the state is "underground," in the so-called informal sector, where wages and incomes adjust quickly to the market. Greece also should offer an amnesty for unpaid back taxes to those who join the legal sector.

If after selling assets the remaining debt is still unsustainable, Greece will have to default (it will be called restructuring, but it is nonetheless default). To lessen the pain from losses borne by Greek and foreign lenders following default, the country should commit to fiscal policies monitored by the European Union. But it should reject the IMF-EU loan. More debt, even subsidized debt, is not the right answer.

The main benefit to Europe of the IMF-EU program is that the Spanish government has agreed to additional reductions in current and future spending. This was a difficult and unpopular political decision given the very high level of unemployment in Spain. A Spanish default would force France and Germany to choose either massive help to Spain or bailing out the losses on Spanish debt at German and French banks. German banks hold $240 billion of Spanish debt but only $43 billion of Greek debt.

Keynesians who think reducing public spending during a recession is a disastrous error should recall that they warned British Prime Minister Margaret Thatcher in 1981 that Britain would never recover if she continued with her tight fiscal and monetary policy during Britain's deep recession. Mrs. Thatcher declined to take their advice. Expectations about Britain's future changed for the better, and a long, productive recovery began soon after.

Greece's government should take heart from her example. The new government in Britain might remember this as well. And so might the Keynesians in the Obama administration.

Mr. Meltzer is a professor of economics at Carnegie Mellon University, the author of "A History of the Federal Reserve" (University of Chicago Press, 2004), and a visiting scholar at the American Enterprise Institute.

The Madness of Cotton - The feds want U.S. taxpayers to subsidize Brazilian farmers

The Madness of Cotton. WSJ Editorial
The feds want U.S. taxpayers to subsidize Brazilian farmers
WSJ, May 21, 2010

U.S. cotton farmers took in almost $2.3 billion dollars in government subsidies in 2009, and the top 10% of the recipients got 70% of the cash. Now Uncle Sam is getting ready to ask taxpayers to foot the bill for another $147.3 million a year for a new round of cotton payments, this time to Brazilian growers.

We realize that in today's Washington this is a rounding error. But the reason for the new payments to foreign farmers deserves attention. If it becomes a habit, it is unlikely to end with cotton.

Here's the problem: The World Trade Organization has ruled that subsidies to American cotton growers under the 2008 farm bill are a violation of U.S. trading commitments. The U.S. lost its final appeal in the case in August 2009 and the WTO gave Brazil the right to retaliate.

Brazil responded by drafting a retaliation list threatening tariffs on more than 100 U.S. exports, including autos, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruits, nuts and cotton. The exports are valued at about $1 billion a year, and the tariffs would go as high as 100%. Brazil is also considering sanctions against U.S. intellectual property, including compulsory licensing in pharmaceuticals, music and software.

The Obama Administration appreciates the damage this retaliation would cause, so in April it sent Deputy U.S. Trade Representative Miriam Sapiro to negotiate. She came back with a promise from Brazil to postpone the sanctions for 60 days while it considers a U.S. offer to—get this—let American taxpayers subsidize Brazilian cotton growers.

That's right. Rather than reduce the U.S. subsidies to American cotton farmers that are the cause of the trade fight, the Administration is proposing that U.S. taxpayers also compensate Brazilian cotton farmers for the harm done by the U.S. subsidies. Thus the absurd U.S. cotton program would dip into the Commodity Credit Corporation to pay what is a bribe to Brazil so it won't retaliate.

Talk about taxpayer double jeopardy. As Senator Richard Lugar (R., Ind.) said recently, the commodity credit program was established to assist U.S. agriculture, "not to pay restitution to foreign farmers who won a trade complaint against a U.S. farm subsidy program."

Mr. Lugar wants the subsidies to U.S. farmers cut by the amount that will have to be sent to Brazil. He adds that a better option would be to take on the trade-distortions of the cotton program. "I am prepared to introduce legislation to achieve these immediate reforms," he wrote in an April 30 letter to President Obama.

This is probably tilting at political windmills, since Mr. Obama has shown no appetite for trade promotion, much less confronting a cotton lobby supported by such Democrats as Arkansas Senator Blanche Lincoln. But we're glad to see that at least Mr. Lugar is willing to call out the absurdity of U.S. taxpayers subsidizing foreign farmers to satisfy the greed of a few American cotton growers.

Press Briefing

May 20, 2010

The Conference Room That Re-Arranges Itself

Scientists Create First Synthetic Cell, Opening New Era in Biology

Our Global Challenges: Improving the Resources Trade. By Robert D. Hormats. Under Secretary for Economic, Energy and Agricultural Affairs
CSIS-University of Miami Council on Foreign Relations Roundtable. Washington, DC, May 18, 2010

The Tax Cuts Didn't Cause the Budget Deficit

Remarks by President Obama at Official Arrival Ceremony

Dodd Bill is Just the Beginning of 'Too Big to Fail'

United States-Mexico Security Partnership: Progress and Impact

How About a Good Catholic Story? - Cristo Rey students work hard inside and outside the classroom

Public Schools Need a Bailout - Washington didn't let Wall Street fail. Why should we do less for our kids? By Randi Weingarten, president, American Federation of


The Reduced Credit Act - Seventeen Senate Republicans vote for price controls

Germany Shoots the Messengers - First thing we do, let's kill all the short sellers

Deal with Fannie and Freddie Now or We'll Pay Later