Liberals issue dire warnings to argue for more stimulus spending. Conservative Republicans argue (quite plausibly) that hundreds of billions in "stimulus spending" has proven counterproductive so far.The economy isn't that bad.

Don't Believe the Double-Dippers. By ALAN REYNOLDS
Liberals issue dire warnings to argue for more stimulus spending. Conservative Republicans argue (quite plausibly) that hundreds of billions in "stimulus spending" has proven counterproductive so far.The economy isn't that bad.WSJ, Jun 10, 2010

'We're falling into a double-dip recession," former Labor Secretary Robert Reich declares in a Christian Science Monitor blog post. His evidence? The Bureau of Labor Statistics (BLS) estimated that only 41,000 private jobs were added in May. But that is much too flimsy a statistic to justify predicting an aborted recovery—something that has happened only once since 1933.

The only double-dip recession in modern times began during the election year of 1980, when President Jimmy Carter's newly appointed Fed Chairman Paul Volcker slashed the federal-funds rate to 9% that April from 17.5% in July. Inflation returned with a vengeance, so the Fed gradually reversed course by pushing the fed-funds rate above 19% by the time Ronald Reagan took office in January 1981. Are those currently predicting a double-dip recession expecting the Fed to raise interest rates to 19%?

It is also misleading to label this a "jobless" recovery, which indeed took place in the early 2000s. After the recession of 2001 ended that November, the number of private jobs continued to fall by 1.3 million through July 2003. Yet production continued to grow.

This year, by contrast, civilian employment has increased by more than 1.6 million jobs, according to the BLS Current Population Survey of households. True, the Current Employment Survey of employers shows a smaller gain of 982,000 in nonfarm jobs over the past five months, nearly half of which were government jobs. But that still leaves private employment up by 495,000 or roughly 100,000 a month.

Mr. Reich divined an imminent recession largely because the increase in private jobs supposedly slowed to 41,000 in May, according to the BLS. But these monthly estimates are much too rough and variable to be taken so seriously. The household survey, for example, would have us believe the labor force suddenly surged by 805,000 in April then collapsed by 322,000 in May. By smoothing out such wild gyrations, it turns out that the labor force rose by 267,000 a month this year, while employment rose by 326,000 a month. The combination was enough to trim unemployment, but not by much.

Double-dippers use dubious devices to make mediocre job gains appear much worse than they are. One is to claim, "There are still nearly six workers competing for every available job," as Rep. Jim McDermott (D., Wash.) wrote in a May 28 letter to this newspaper.

After talking to me about those figures, CNNMoney reporter Tami Luhby wrote, "Though Labor Department statistics say there are 5.5 job seekers for every opening, Reynolds said there is work available if people are willing to relocate or take jobs in a different field." What I actually told her was that it is completely untrue that BLS statistics "say there are 5.5 job seekers for every job opening." I also remarked, with less emphasis, that making 79-99 weeks of unemployment benefits available only in states with the highest unemployment rates has the perverse effect of punishing people for moving to the 14 states where unemployment ranges from 4% to 7%.

The myth that there are nearly six job seekers for every available job arises from the misnamed BLS "Job Opening and Turnover Survey" (JOLT), which asks a few thousand businesses how many new jobs they are actively advertising outside the firm. But note well that this concept of "job openings" does not purport to include "every available job." On the contrary, it is closer to being a measure of help wanted ads.

"Many jobs are never advertised," explains the BLS Occupational Outlook Handbook; "People get them by talking to friends, family, neighbors, acquaintances, teachers, former coworkers, and others who know of an opening." Because many jobs are never advertised they are also never counted as job openings!

The BLS Handbook also notes that, "Directly contacting employers is one of the most successful means of job hunting." Those jobs are also not counted as job openings. Job openings inside a firm are also excluded—including laid-off workers who are rehired or relocated within large corporations.

Despite these severe limitations, the trend has been more upbeat than you might gather from depressing news reports. "The number of job openings increased in April to 3.1 million," reports the BLS. "Since the most recent trough of 2.3 million in July 2009, the number of job openings has risen by 740,000."

Another popular device for denigrating this year's modest-yet-positive job gains is to claim the "real" unemployment rate is actually 16.6%. That figure, called U6, is the largest of six BLS measures. The more familiar U3 rate (now 9.7%) defines "unemployment" as people who say they have looked for work at some time during the past month but have not yet started a new job.

An alternative U2 measure includes only those who were unemployed because they were laid off or fired—not because they quit or were newcomers to the job market. That rate of job loss unemployment is 6%.

A broader U4 measure, by contrast, adds "discouraged workers." People need not have looked for a job recently to be counted as discouraged. It is sufficient for them to think no work is available, or think they are too young or too old, or think they lack the necessary schooling or training. Psychological discouragement adds relatively little to the conventional unemployment rate, lifting the U4 measure to 10.3% in May (down from 10.6% in April).

The broadest U6 statistic goes much further by adding "all marginally attached workers, plus total employed part-time for economic reasons."

The phrase "working part-time for economic reasons" implies a clear divide between part-time and full-time status. That creates the misimpression that those working part-time for economic reasons means would rather have different ("full-time") jobs. In reality, only a fourth of them say they could not find a full-time job; the rest work in occupations where hours vary. The BLS counts anything below 35 hours as part-time, so those who normally work 9-to-5 are counted as working part-time for economic reasons if they report losing even a single hour due to "slack work or unfavorable business conditions . . . or seasonal declines in demand."

The "marginally attached" in the U6 statistic do not even claim to imagine they can't find work. They are not looking for work, the BLS explains, "for such reasons as school or family responsibilities, ill health, and transportation problems." To describe people who are not available for work as unemployed or even underemployed is a misuse of the language.

Using all of this statistical trickery to convert a weak job market into an imminent recession has become a bipartisan political strategy. Robert Reich and other big government Democrats play the "double dip" card to peddle more deficit spending on refundable tax credits and transfer payments. Conservative Republicans often become double-dippy for very different reasons—to argue (quite plausibly) that hundreds of billions in "stimulus spending" has proven counterproductive so far, contributed to the debt, and will eventually lead to higher taxes.

Those who want to know what is going on must sift through all of this bipartisan gloom to distinguish between (1) agenda-driven dire warnings and (2) the boring reality of a sluggish recovery being partially paralyzed by ominous threats of punitive taxes and onerous regulation.

Mr. Reynolds is a senior fellow with the Cato Institute and the author of "Income and Wealth" (Greenwood Press, 2006).

Press Briefing

Jun 10, 2010

The White House Blog: "The Toughest Sanctions Ever Faced by the Iranian Government"
http://www.whitehouse.gov/blog/2010/06/09/toughest-sanctions-ever-faced-iranian-government

Women as Agents of Change: Advancing the Role of Women in Politics and Civil Society. By Esther Brimmer, Assistant Secretary, Bureau of International Organization Affairs
House Foreign Affairs Subcommittee on International Organizations, Human Rights and Oversight, Washington, DC
http://www.state.gov/p/io/rm/2010/142907.htm

Tocqueville said that Americans 'love change but dread revolutions.'
http://online.wsj.com/article/SB10001424052748704342604575222194271251722.html

Gates Foundation and USAID Announce Innovative Fund to Incentivize Mobile Money Services in Haiti
http://www.usaid.gov/press/releases/2010/pr100608.html
Access to financial services by mobile phone can dramatically improve the lives of Haitians as country rebuilds from devastating earthquake

Stalin Storms Omaha Beach - The National D-Day Memorial has added a bust of Joseph Stalin
http://online.wsj.com/article/SB10001424052748704575304575296652965298806.html

Women Setting the Economic Policy Agenda. By Maria Otero, Under Secretary for Democracy and Global Affairs
National Press Club, Washington, DC
http://www.state.gov/g/142891.htm

Erdogan and the Israel Card - Last year the Turkish prime minister called Shimon Peres a killer at Davos. He returned home to a hero's welcome
http://online.wsj.com/article/SB10001424052748703302604575294523287747404.html

Assessing the Strength of Hizballah. By Jeffrey D. Feltman, Acting Assistant Secretary, Bureau of Near Eastern Affairs, and Daniel Benjamin, Coordinator, Office of the Coordinator for Counterterrorism
Testimony before the Subcommittee on Near Eastern and South and Central Asian Affairs of the Senate Committee on Foreign Relations, Washington, DC
http://www.state.gov/p/nea/rls/rm/142857.htm

Drilling Bits of Fiction - The Obama Administration is under political pressure to reverse its ill-considered deep water drilling moratorium, and the latest blowback comes from seven angry experts from the National Academy of Engineering who say their views were distorted to justify the ban
http://online.wsj.com/article/SB10001424052748704575304575296782675625258.html

Award-Winning DOE Technology Scores Success in Carbon Storage Project - Tracers Track Subsurface Movement of CO2 at New Mexico Pilot Test Site
http://www.fossil.energy.gov/news/techlines/2010/10016-Tracers_Track_Subsurface_Movement_.html

Atomic affairs - Nervousness over nuclear moves
http://www.armedforcesjournal.com/2010/06/4612614

National Deficit-Reduction Commissioner: "The market-worshipping, privatizing, de-regulating, dehumanizing American financial plan has failed and should never be revived"
http://reason.com/blog/2010/06/08/national-deficit-reduction-com

In 2009, only 25 new drugs were approved—less than half the number in the mid-’90s. Why are new pharmaceuticals so hard to bring to market?
http://www.theatlantic.com/magazine/archive/2010/07/no-refills/8133/

Don't Believe the Double-Dippers - Liberals issue dire warnings to argue for more stimulus spending. Conservative Republicans argue (quite plausibly) that hundreds of billions in "stimulus spending" has proven counterproductive so far.The economy isn't that bad.
http://www.bipartisanalliance.com/2010/06/liberals-issue-dire-warnings-to-argue.html

Unions Just Flushed $5 Million of Your Tax Dollars Down the Toilet
http://blog.heritage.org/2010/06/09/morning-bell-unions-just-flushed-5-million-of-your-tax-dollars-down-the-toilet

Press Briefing

Jun 09, 2010

Another Reason to Vaccinate Against HPV
http://www.acsh.org/factsfears/newsID.1508/news_detail.asp

Washington and Your Retirement - The agency that guarantees private-sector pensions is deep in the red
http://online.wsj.com/article/SB10001424052748704764404575286933806096818.html
The Pension Benefit Guaranty Corporation (PBGC) Is Billions in Deficit

The White House Blog - On Board with the VP: Day 2 in Kenya
http://www.whitehouse.gov/blog/2010/06/08/board-with-vp-day-2-kenya

Conservatives: Freer Political Speech - The Ninth Circuit loses again - suspension of part of Arizona's political matching-fund law
http://online.wsj.com/article/SB10001424052748703302604575294870895840844.html

Remarks by the First Lady at Congressional Service Event
http://www.whitehouse.gov/the-press-office/remarks-first-lady-congressional-service-event-0

Two Steps Forward in the War Against Cancer - The time from lab to market for new drugs keeps getting shorter, but bad government policies threaten to reverse this trend
http://online.wsj.com/article/SB10001424052748703302604575294233359450658.html

Wall Street Still Doesn't Get It - The business community has fueled populist anger by disclaiming responsibility for the excesses of the last bubble
http://online.wsj.com/article/SB10001424052748703303904575293163584472470.html

Helen Thomas never shied from piping up. In the end, that was the problem.
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/07/AR2010060701493.html

Remarks by the President at a Tele-Town Hall with Seniors
http://www.whitehouse.gov/the-press-office/remarks-president-a-tele-town-hall-with-seniors

A Second Oil Disaster - The deep water drilling moratorium threatens Gulf state economies
http://online.wsj.com/article/SB10001424052748703303904575293063057023350.html

U.S. Soccer Team Connects With South African Youth
http://blogs.state.gov/index.php/site/entry/soccer_youth

Libertarians: Liberals discover regulatory capture, one of the right's critique of regulation
http://online.wsj.com/article/SB10001424052748703302604575295051484827946.html

The President Meets with His Cabinet on BP Spill: "This Will Be Contained"
http://www.whitehouse.gov/blog/2010/06/07/president-meets-with-his-cabinet-bp-spill-will-be-contained

The Alien in the White House - The distance between the president and the people is beginning to be revealed
http://online.wsj.com/article/SB10001424052748703302604575294231631318728.html

The Affordable Care Act: Strengthening Medicare, Combating Misinformation and Protecting America's Senior
http://www.whitehouse.gov/the-press-office/affordable-care-act-strengthening-medicare-combating-misinformation-and-protecting-

CBS Reporter: Thin-Skinned White House Won't Tolerate Reports Elena Kagan Is Liberal
http://www.mrc.org/biasalert/2010/20100608120411.aspx

Naive Keynesianism and Other Fallacies, by Roger Kerr
http://www.nzbr.org.nz/documents/articles/0610%20Naive%20Keynesianism%20and%20Other%20Fallacies.pdf

Self-identified liberals and Democrats do badly on questions of basic economics

Are You Smarter Than a Fifth Grader? By DANIEL B. KLEIN
Self-identified liberals and Democrats do badly on questions of basic economics.WSJ, Jun 08, 2010

Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey that I write about in the May issue of Econ Journal Watch, the answer is unequivocal: The left flunks Econ 101.

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents' (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.

Rather than focusing on whether respondents answered a question correctly, we instead looked at whether they answered incorrectly. A response was counted as incorrect only if it was flatly unenlightened.

Consider one of the economic propositions in the December 2008 poll: "Restrictions on housing development make housing less affordable." People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

Therefore, we counted as incorrect responses of "somewhat disagree" and "strongly disagree." This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer "not sure," which we do not count as incorrect.

In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.

The other questions were: 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree).

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

Americans in the first three categories do reasonably well. But the left has trouble squaring economic thinking with their political psychology, morals and aesthetics.

To be sure, none of the eight questions specifically challenge the political sensibilities of conservatives and libertarians. Still, not all of the eight questions are tied directly to left-wing concerns about inequality and redistribution. In particular, the questions about mandatory licensing, the standard of living, the definition of monopoly, and free trade do not specifically challenge leftist sensibilities.

Yet on every question the left did much worse. On the monopoly question, the portion of progressive/very liberals answering incorrectly (31%) was more than twice that of conservatives (13%) and more than four times that of libertarians (7%). On the question about living standards, the portion of progressive/very liberals answering incorrectly (61%) was more than four times that of conservatives (13%) and almost three times that of libertarians (21%).

The survey also asked about party affiliation. Those responding Democratic averaged 4.59 incorrect answers. Republicans averaged 1.61 incorrect, and Libertarians 1.26 incorrect.

Adam Smith described political economy as "a branch of the science of a statesman or legislator." Governmental power joined with wrongheadedness is something terrible, but all too common. Realizing that many of our leaders and their constituents are economically unenlightened sheds light on the troubles that surround us.

Mr. Klein is a professor of economics at George Mason University. This op-ed is based on an article published in the May 2010 issue of the journal he edits, Econ Journal Watch, a project sponsored by the American Institute for Economic Research.

Press Briefing

Jun 08, 2010

Economic Growth and Institutional Innovation: Outlines of a Reform Agenda
http://www.brookings.edu/papers/2010/0601_innovation_galston.aspx

The Obama Spending Nightmare Continues
http://blog.heritage.org/2010/06/08/morning-bell-the-obama-spending-nightmare-continues

ACLU's Shapiro: The Thompkins Decision: A Threat to Civil Liberties . . . The Supreme Court has undermined our Miranda protections
http://online.wsj.com/article/SB10001424052748704764404575286931630242298.html

Yoo: The Thompkins Decision, A Sensible Bow to Post-9/11 Reality - The Supreme Court may mitigate the harm of the president's weak antiterror policies
http://online.wsj.com/article/SB10001424052748704764404575286394060691572.html?mod=WSJ_newsreel_opinion

Gates on China - Speaking the truth makes the Pacific a safer place
http://online.wsj.com/article/SB10001424052748704183204575289743788180892.html

The White House Blog: "Every Child, Every Opportunity, Every Time"
http://www.whitehouse.gov/blog/2010/06/07/every-child-every-opportunity-ever-time

Obama's 'Whisper Number' - White House jobs predictions are confusing investors
http://online.wsj.com/article/SB10001424052748703303904575292891145193022.html

Travel Diary: Secretary Clinton Addresses Organization of American States 40th General Assembly
http://blogs.state.gov/index.php/site/entry/travel_diary_clinton_oas_40th_general_assembly

Auctions for Overbooking - A better idea than airline bumping
http://online.wsj.com/article/SB10001424052748703303904575293011757655060.html

Are You Smarter Than a Fifth Grader? - Self-identified liberals and Democrats do badly on questions of basic economics
http://online.wsj.com/article/SB10001424052748703561604575282190930932412.html

The Bullish Case for U.S. Equities - Though America faces long-term problems, our economy is making extraordinary improvements, especially compared to Europe
http://online.wsj.com/article/SB10001424052748703561604575282893796461472.html

Arrogance in the Executive - What the oil spill has revealed about the Obama presidency
http://weeklystandard.com/articles/arrogance-executive

In Praise of Blockades - Israel upholds an honorable tradition
http://weeklystandard.com/articles/praise-blockades

Public Education Costlier Than You Think
http://www.cato.org/pub_display.php?pub_id=11869

Press Briefing

Jun 07, 2010

Press Briefing on the New START Treaty. By Rose Gottemoeller, Assistant Secretary, Bureau of Verification, Compliance, and Implementation, Geneva, Switzerland
http://www.state.gov/t/vci/rls/142776.htm

With Friends Like the United States . . . President Obama has emboldened America's adversaries and unnerved its allies
http://online.wsj.com/article/SB10001424052748704875604575280462094012870.html

Travel Diary: “Wheels Up” With Secretary Clinton to Latin America and the Caribbean
http://blogs.state.gov/index.php/site/entry/travel_diary_wheels_up_latin_america_caribbean

Jack McConnell, The Judge From Motley Rice - The lead paint lawsuit king gets a judgeship
http://online.wsj.com/article/SB10001424052748703338004575230320609179424.html

Bailouts as Usual - The credit-raters say 'too big to fail' is alive and well
http://online.wsj.com/article/SB10001424052748704764404575286911196081790.html

Stop The Fearmongering Over Cancer - Despite recent hysteria, cancer mortality rates have fallen throughout the past decade
http://www.forbes.com/2010/06/01/cancer-hysteria-health-media-opinions-columnists-robert-lichter.html

Response to Paul Krugman's "Things Everyone In Chicago Knows Which happen not to be true"
http://blogs.chicagobooth.edu/n/blogs/blog.aspx?nav=main&webtag=faultlines&entry=11

James R. Clapper Jr. as DNI: "Four Decades of Service"
http://www.whitehouse.gov/blog/2010/06/05/james-r-clapper-jr-dni-four-decades-service

Obama's Oil Crisis Politics - Democrats want to change the subject from the Gulf spill to cap and tax. BP approves.
http://online.wsj.com/article/SB10001424052748704025304575284534183463428.html

Cooperation and Pragmatism: Malaysian Foreign Policy under Najib. By Joshua R. Johnson
http://www.eastwestcenter.org/publications/search-for-publications/browse-alphabetic-list-of-titles/?class_call=view&mode=view&pub_ID=3472

News briefing at WH to discuss the progress of the ongoing crisis in the Gulf.
 Watch live: http://on.cnn.com/cnndcl1

Why Obama’s Stimulus Failed
http://blog.heritage.org/2010/06/07/morning-bell-why-obamas-stimulus-failed

Homeownership Is Overrated - Today's economy requires a more mobile workforce
http://online.wsj.com/article/SB10001424052748703559004575256703021984396.html

The Ongoing Administration-Wide Response to the Deepwater BP Oil Spill: June 5 and June 6, 2010
http://www.whitehouse.gov/blog/2010/06/06/ongoing-administration-wide-response-deepwater-bp-oil-spill-june-5-and-june-6-2010

Pelosi's Loss Could Be Obama's Gain - A pivot to the center (and re-election) would be easier without the House speaker
http://online.wsj.com/article/SB10001424052748703703704575276931429180508.html

The U.S.-ROK Alliance and China: Beyond the Sinking of the Cheonan. By Ji-Young Lee
http://www.eastwestcenter.org/publications/search-for-publications/browse-alphabetic-list-of-titles/?class_call=view&mode=view&pub_ID=3469

Tax Hikes and the 2011 Economic Collapse - Today's corporate profits reflect an income shift into 2010. These profits will tumble next year, preceded most likely by the stock market
http://online.wsj.com/article/SB10001424052748704113504575264513748386610.html

Press Briefing

Jun 05, 2010

Indicting the First Amendment - Bruce Shore's case
http://www.cato.org/pub_display.php?pub_id=11866

The Ongoing Administration-Wide Response to the Deepwater Oil Spill: June 4, 2010
http://www.whitehouse.gov/blog/2010/06/04/ongoing-administration-wide-response-deepwater-bp-oil-spill-june-4-2010

America and the Meaning of Courage - Abraham Lincoln called the U.S. last best hope of earth—and that description is at least as true in our own day as it was in his
http://online.wsj.com/article/SB10001424052748704875604575280771383483024.html

Weekly Address: President Obama Outlines Administration Response Efforts to the BP Oil Spill from Grand Isle, LA
http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-outlines-administration-response-efforts-bp-oil-spil

Storming the School Barricades - A new documentary by a 27-year-old filmmaker could change the national debate about public education
http://online.wsj.com/article/SB10001424052748704635204575242123324855474.html

How to Prevent the Next 'Flash Crash' - Nasdaq is committed to protecting you from excessive volatility
http://online.wsj.com/article/SB10001424052748704764404575286430133595388.html

California's Pension Protection Bill - Unions try to block the bankruptcy option
http://online.wsj.com/article/SB10001424052748704342604575222642585307912.html

The 2010 U.S. QDR and Its Impact on China, by Shen Dingli
http://www.eastwestcenter.org/publications/search-for-publications/browse-alphabetic-list-of-titles/?class_call=view&mode=view&pub_ID=3460

Slouching Towards Athens - The Obama agenda and the Europeanization of America
http://online.wsj.com/article/SB10001424052748704764404575286451653109876.html

U.S., India Partnership Goes Beyond Government-to-Government Linkages
http://blogs.state.gov/index.php/site/entry/us_india_partnership_beyond_government_to_government

Employers on Strike - Congress keeps giving business reasons not to hire
http://online.wsj.com/article/SB10001424052748704764404575286831965692578.html

Larry Lindsey: Up to 20% of May Private Sector Job Growth May Be Due to BP Oil Spill
http://republicanleader.house.gov/blog/?p=898

Federal President's Meeting with Arizona's Governor
http://www.whitehouse.gov/blog/2010/06/03/meeting-with-arizonas-governor

The Jobless Obama Recovery
http://blog.heritage.org/2010/06/04/morning-bell-the-jobless-obama-recovery

Dead in the Water: A Floating Cemetery for Hong Kong
http://www.fastcompany.com/1654972/dead-in-the-water-designer-floats-harborside-columbarium-in-hong-kong

Hoosiers vs. Crony Capitalism - How Indiana took on the federal bailout machine and restored the rule of law

Hoosiers vs. Crony Capitalism. By MITCH DANIELS
How my state took on the Obama bailout machine and restored the rule of law.WSJ, June 04, 2010

June 10 will be a silent anniversary, but one worth noting by those alarmed at the past year's assault on free institutions. It was last June 10 when the federal government tossed aside the option of proven, workable bankruptcy procedures in order to nationalize Chrysler on behalf of its union allies.

In order to provide preferential treatment to its cronies, the Obama administration confiscated the property of those creditors who had lent money to Chrysler in good faith, believing that their interest was legally secured and that they stood at the head of the line in the event of the auto company's failure.

The shock wave through the economic markets from this arbitrary redefinition of "secured creditors" rights was profound. Could centuries of crystal-clear law really be overthrown by executive fiat? Apparently, yes. The Supreme Court declined to intervene in the takeover. The cost of corporate borrowing was clearly headed upward as the U.S. for the first time imitated those Third World despotisms where economic rules can be changed without warning at the ruler's whim and convenience.

Equally profound was the message sent to the legal community, which quickly began to cite the "Chrysler precedent" as the now-acceptable judicial model for stripping secured creditors' rights in the name of expediency. Just days after the decision, the Phoenix Coyotes of the National Hockey League invoked the Chrysler case in an attempt to undermine secured creditors' rights and hasten bankruptcy.

Those brave few who protested the brute force taking of their money were attacked by administration apparatchiks for the sin of doing their fiduciary duty to their investors and shareholders. Calls went out from the White House, encouraging submission and warning of the consequences of opposition. One by one, potential plaintiffs surrendered.

The one effort to stop the Chrysler cramdown was launched by three Indiana pension funds. Believing they were making both a wise investment and a gesture supportive of a longtime state employer, Hoosier retired teachers and state policemen had purchased some $19 million in Chrysler's secured debt. The market consensus at the time was that, at 43 cents to par, the bonds were well below their value if bankruptcy ultimately came.

Bankruptcy came, all right, but in a new, extra-legal form run by the federal government. The United Auto Workers, who owned no interest in the company, were simply handed a 55% interest, a gift valued then at $4.5 billion. When no one else wanted to buy the firm, Fiat was given a 20% stake for free to take it over. After this looting, the legitimate creditors were told to be happy with the remnants. For Indiana's retired teachers and state policemen, this amounted to 29 cents on the dollar, a loss of $6 million versus the purchase price and millions more below the expected value in a standard Chapter 11 proceeding.

When, alone among the victims, Indiana retirees went to court, they caused a lot of discomfort but no change in the outcome. The Second District U.S. Court of Appeals declined to overturn the cramdown, but the judges refused to go within a mile of the merits. How could they? The law calls certain instruments "secured" credit for a reason, and there was absolutely zero precedent for the Chrysler confiscation.

In an article by Zach Lowe published last fall in the Am Law Daily and the American Lawyer magazine, UCLA Law School Prof. Lynn LoPucki said of the cramdown: "What happened . . . was so outrageous and illegal that until March of this year [2009], nobody even conceptualized it." The Second Circuit opinion, like the Supreme Court's refusal to stay the nationalization, went out of its way to state that the ruling did not reach the substantive issues raised.

Aided by incensed counsel donating much of their time pro bono, Indiana returned to the Supreme Court with a slim hope of recovering its pensioners' assets, reinstating traditional American property rights and making secured credit secure once more. It seemed to some an exercise in futility: The judge in the Coyotes case commented from the bench that the "poor pension manager from Indiana . . . was kind of like the gentlemen in Tiananmen Square when the tanks came rolling."

On Dec. 14, 2009, in the under-reported news story of the year, the Supreme Court granted the request of Indiana pensioners and took the case. The Court immediately ruled from the bench to strike down the decision of the Second Circuit Court of Appeals, eliminating it as a possible precedent in any future proceeding. Our retirees are still out the $6 million but enjoyed the small vindication of being awarded the court clerk's costs at Chrysler's expense.

The nation is not safe from crony capitalism. In the past year we've experienced the nationalization of the student loan industry and the passage of national health-care and financial-services regulation, each of which is rife with new opportunities for government favoritism and preferential handouts to favored corporations like Chrysler.

But thanks to a quiet correction by the Supreme Court—and a little Hoosier stubbornness—the rule of law has been re-established. The greatest benefits will accrue not to lenders and borrowers but to all those whose jobs are created because investors once again can trust that the money they've risked is safe from seizure by the state.

Mr. Daniels, a Republican, is the governor of Indiana.

Press Briefing

Jun 04, 2010

Consensus Achieved at Critical Nuclear Nonproliferation Conference
http://blogs.state.gov/index.php/site/entry/nuclear_nonproliferation_conference_consensus

Hoosiers vs. Crony Capitalism - How Indiana took on the federal bailout machine and restored the rule of law
http://online.wsj.com/article/SB10001424052748703561604575282412364326230.html

Capital Gains Taxes and the Recovery - Long-term investments should be rewarded with lower rates
http://online.wsj.com/article/SB10001424052748704025304575284440473588862.html

The Gaza Blockade and International Law - Israel's position is reasonable and backed by precedent
http://online.wsj.com/article/SB10001424052748704025304575284210429984110.html

'To Be Fair' - When does the statute of limitation run out on blaming George W. Bush for all the world's problems?
http://online.wsj.com/article/SB10001424052748704025304575285032699457228.html

Federal Spending by the Numbers 2010
http://www.heritage.org/Research/Reports/2010/06/Federal-Spending-by-the-Numbers-2010

New Treatments Needed to Alleviate Growing Burden of Alzheimer's Disease
http://www.innovation.org/index.cfm/NewsCenter/Newsletters/Newsletters?NID=183

Could More Cancer Be a Good Sign?
http://www.acsh.org/factsfears/newsID.1487/news_detail.asp

iRobot Demonstrates New Weaponized Robot
http://spectrum.ieee.org/automaton/robotics/military-robots/irobot-demonstrates-their-latest-war-robot

Turkey's Radical Drift - The Islamic charity behind the Gaza flotilla and its links to terror
http://online.wsj.com/article/SB10001424052748703561604575282423181610814.html

Wireless Heart Pressure Monitor Promises Revolution In Coronary Care
http://spectrum.ieee.org/riskfactor/biomedical/devices/wireless-heart-pressure-monitor-promises-revolution-in-coronary

Tom Vilsack’s Unconvincing Case for Farm Subsidies
http://yglesias.thinkprogress.org/archives/2010/06/tom-vilsacks-unconvincing-case-for-farm-subsidies.php

Obama and the Oil Spill
http://blog.heritage.org/2010/06/03/morning-bell-obama-and-the-oil-spill

Press Briefing

Jun 03, 2010

Health and Safety Tips for Your Summer Vacation (Update 2010)
http://www.acsh.org/docLib/20100528_summer_tips_2010.pdf

How Far Will the Gulf Gusher Spread? - Trapped in water pockets, the oil from Deepwater Horizon will ride the Gulf Stream across the Atlantic. In years to come, some will even wash up on European shores
http://online.wsj.com/article/SB10001424052748703561604575282420254222384.html

Central bank co-operation and international liquidity in the financial crisis of 2008-9. By Richhild Moessner and William Allen. Working Papers No 310. June 2010
http://www.bis.org/publ/work310.htm
The financial crisis that began in August 2007 has blurred the sharp distinction between monetary and financial stability.It has also led to a revival of practical central bank co-operation. This paper explains how things have changed. The main innovation in central bank cooperation during this crisis was the emergency provision of international liquidity through bilateral central bank swap facilities, which have evolved to form interconnected swap networks. We discuss the reasons for establishing swap facilities, relate the probability of a country receiving a swap line in a currency to a measure of currency-specific liquidity shortages based on the BIS international banking statistics, and find a significant relationship in the case of the US dollar, the euro, the yen and the Swiss franc. We also discuss the role and effectiveness of swap lines in relieving currency-specific liquidity shortages, the risks that central banks run in extending swap lines and the limitations to their utility in relieving liquidity pressures. We conclude that the credit crisis is likely to have a lasting effect on the international liquidity policies of governments and central banks.


India’s Future Aircraft Carrier Force and the Need for Strategic Flexibility
http://www.idsa.in/idsacomments/IndiasFutureAircraftCarrierForceandtheNeedforStrategicFlexibility_irehman_010610

Entitlement Reform and the Global Budget Crisis - Putting Social Security on a sustainable path isn't nearly enough. But it would do a lot to convince markets that Washington can be serious
http://online.wsj.com/article/SB10001424052748704269204575270702838532246.html

Introducing U.S. Cyber Command, by William J Lynn III, Deputy Defense Sec
http://online.wsj.com/article/SB10001424052748704875604575280881128276448.html
More than 100 foreign intelligence agencies and militaries threaten U.S. defense networks.

Iran's Nuclear Progress - Even the U.N. now says Iran has enough fuel for two weapons
http://online.wsj.com/article/SB10001424052748704875604575280783424640448.html

Pacific Partnership Arrives in Vietnam
http://blogs.state.gov/index.php/entries/pacific_partnership_vietnam

Maybe the constitutional case for ObamaCare isn't so open and shut: Justice Needs More Time
http://online.wsj.com/article/SB10001424052748704596504575272882527805408.html

Taiwan’s Unending Dialogue over ECFA. By Jagannath P. Panda
http://www.idsa.in/idsacomments/TaiwansUnendingDialogueoverECFA_jppanda_010610

The Blue Dogs Roll Over - How they abet Pelosi's spending agenda
http://online.wsj.com/article/SB10001424052748704875604575280260628776940.html

Erdogan and the Decline of the Turks - When I asked the prime minister about stories alleging a U.S.-Israeli murder and organ selling scheme in Iraq, he could not bring himself to condemn them
http://online.wsj.com/article/SB10001424052748704875604575281392195250402.html

Remarks Before the Ministerial Meeting at the Alliance of Civilizations Rio Forum. By Esther Brimmer, Assistant Secretary, Bureau of International Organization Affairs. Rio de Janeiro, Brazil, May 28, 2010
http://www.state.gov/p/io/rm/2010/142493.htm

Rethinking Darfur, by Marc Gustafson
http://www.cato.org/pub_display.php?pub_id=11862

Remarks by the President After Meeting with BP Oil Spill Commission Co-Chairs
http://www.whitehouse.gov/the-press-office/remarks-president-after-meeting-with-bp-oil-spill-commission-co-chairs

BP Oil Spill: Who's Your Daddy?, by Gene Healy
http://www.cato.org/pub_display.php?pub_id=11859

Breast Cancer Vaccine (For Mice)
http://www.acsh.org/factsfears/newsID.1486/news_detail.asp

Obamacare’s True Costs Coming to Light
http://blog.heritage.org/2010/06/02/morning-bell-obamacares-true-costs-coming-to-light

ObamaCare's Ever-Rising Price Tag - Voters will understand plenty about the hidden costs of the law by November
http://online.wsj.com/article/SB10001424052748703561604575282482320389198.html

Press Briefing

Jun 02, 2010

Pacific Partnership Arrives in Vietnam
http://blogs.state.gov/index.php/entries/pacific_partnership_vietnam

The Meaningless Mantra of 'Border Security' - It's become the most overused—and least understood—concept in the struggle over what to do about our broken immigration system
http://online.wsj.com/article/SB10001424052748704269204575270810940585150.html

Afghanistan: Building Partnerships Through Humanitarian Mine Action
http://blogs.state.gov/ap/index.php/site/entry/afghanistan_humanitarian_mine_action

Strategy vs. Tactics in Afghanistan - Good counterinsurgency can't make up for the lack of a political plan
http://online.wsj.com/article/SB10001424052748704875604575280340680176022.html

What Issue Is Critical To Building a 21st Century U.S.-India Partnership?
http://blogs.state.gov/index.php/site/entry/q_issue_india_partnership

The Gulf Spill and Alaska - We see signs that the Obama administration wants to use the disaster to shut down oil production even in the safest areas
http://online.wsj.com/article/SB10001424052748704596504575272991022477222.html

Voters vs. George Soros - Taking judicial selection away from the lawyers guild
http://online.wsj.com/article/SB10001424052748704370704575228461914892980.html

Another Terror War Success - Drones are a crucial U.S. advantage.
http://online.wsj.com/article/SB10001424052748704875604575280643044606292.html

Buffett and the Ratings Cartel - How the Moody's investor can reduce the odds of another credit meltdown
http://online.wsj.com/article/SB10001424052748704717004575268622397797094.html

The Obama administration's plan to raise California's Nummi auto plant from the dead, at least until the November midterm elections.
http://online.wsj.com/article/SB10001424052748703325104575280380064974048.html

The Irish Example - Dublin is showing other indebted governments how to cut spending
http://online.wsj.com/article/SB10001424052748703703704575276602447506106.html

Economic Growth and Institutional Innovation: Outlines of a Reform Agenda
http://www.brookings.edu/papers/2010/0601_innovation_galston.aspx

HSAs an Endangered Species under Obamacare
http://blog.heritage.org/2010/06/01/hsas-an-endangered-species-under-obamacare

Assessing the New Course in U.S.-Italian Relations
http://www.brookings.edu/papers/2010/0525_us_italian_relations_alessandri.aspx

Why Our Poverty Measure Misleads
http://www.realclearmarkets.com/articles/2010/05/31/why_our_poverty_measure_misleads_98490.html

What is going on in Turkey?
http://rodrik.typepad.com/dani_rodriks_weblog/2010/05/what-is-going-on-in-turkey.html

Time to Change Course in the Middle East
http://blog.heritage.org/2010/06/01/morning-bell-time-to-change-course-in-the-middle-east

Anti-Salt Crusaders' Bland Arguments
http://www.acsh.org/factsfears/newsID.1484/news_detail.asp