Monday, February 23, 2009

U.S. Welcomes Mauritanian President's Proposed Dialogue

U.S. Welcomes Mauritanian President's Proposed Dialogue. By Robert Wood
Acting Department Spokesman, US State Dept, Washington, DC, February 23, 2009

The United States welcomes the proposal made by President Sidi Mohamed Ould Cheick Abdallahi to the International Contact Group that met in Paris on February 20, 2009 to discuss Mauritania. President Abdallahi proposed a dialogue that will develop a consensual and lasting solution predicated on restoring the President's constitutional functions, an honorable exit for the members of the junta, and early and transparent presidential and legislative elections. President Abdallahi's initiative conforms fully with the demands of the international community and offers an inclusive and democratic basis for a durable resolution of the current crisis. We call upon the people of Mauritania, as well as their international partners, to seize this opportunity to restore constitutional order and to end political paralysis and international estrangement.

PRN: 2009/142

Al Gore, CRED, disaster data

Al Gore’s Evolving Message, by Edward John Craig
Planet Gore/NRO, Feb 23, 2009

Via Marc Morano: Andy Revkin at Dot Earth notes that Roger Pielke Jr. has scientific cred. Pielke has shamed the Goracle into pulling the anthropogenic-natural-disasters slide from his global-warming climate-change presentation.
Former Vice President Al Gore is pulling a dramatic slide from his ever-evolving global warming presentation. When Mr. Gore addressed a packed, cheering hall at the annual meeting of the American Association for the Advancement of Science in Chicago earlier this month, his climate slide show contained a startling graph showing a ceiling-high spike in disasters in recent years. The data came from the Center for Research on the Epidemiology of Disasters (also called CRED) at the Catholic University of Louvain in Brussels.

The graph, which was added to his talk last year, came just after a sequence of images of people from Iowa to South Australia struggling with drought, wildfire, flooding and other weather-related calamities. Mr. Gore described the pattern as a
manifestation of human-driven climate change. “This is creating weather-related disasters that are completely unprecedented,” he said. (The preceding link is to a video clip of that portion of the talk; go to 7th minute.)

Now Mr. Gore is dropping the graph, his office said today. Here’s why.

Two days after the talk, Mr. Gore was sharply criticized for using the data to make a point about global warming by Roger A. Pielke, Jr., a political scientist focused on disaster trends and climate policy at the University of Colorado. Mr. Pielke noted that [CRED] stressed in reports that a host of factors unrelated to climate caused the enormous rise in reported disasters (details below).

"Unions are part of the problem, not part of the solution"

Summers Knows Best, by Fred Barnes
Unions are part of the problem, not part of the solution.
The Weekly Standard, Mar 02, 2009, Volume 014, Issue 23

Unions spur unemployment, and "there is no question" about it. "High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy." That is the unvarnished conclusion of one of the country's most admired economists. From 1970 to 1985, a state with average unionization had a rate of unemployment 1.2 percentage points higher than a state with no unions. This represented "about 60 percent of the increase in normal unemployment" in that period.

Okay, a finding from several decades ago may be a bit dated. But the phenomenon of how unionization affects unemployment isn't. Nor is the economist--Lawrence Summers, formerly president of Harvard and now President Obama's chief economic adviser. In this week's Fortune, Nina Easton calls him "the mastermind" of Obama's economic policy. His influence has limits, however, for Obama is aggressively promoting unionization at the worst possible time, smack in the teeth of a deepening recession with soaring unemployment.

Media attention has focused on the hot button issue of "card check." It would jettison labor's biggest impediment to signing up workers, the secret ballot. Naturally, it's labor's top priority in 2009. And though Obama and the vast majority of Democrats in Congress favor card check, its fate is unclear.

But Obama has already taken significant steps to aid unions. Steps that underscore his support for a surge in unionization. "I do not view the labor movement as part of the problem," he told union leaders at a White House event last month.

"To me, it's part of the solution." Summers must have winced when he heard that.

Obama has issued four executive orders to benefit unions, nominated a union pawn as labor secretary, and picked a union lawyer to head the National Labor Relations Board. Aside from ramming card check through Congress, there's not much more he could have done in his first month in office to please labor leaders.

One executive order says private contractors on federal construction projects should hire union workers. This puts non-union contractors, especially small minority companies who compete by making lower bids than contractors with unionized workers, at a distinct disadvantage. Another order bars federal contractors from being reimbursed for expenses incurred in trying to persuade employees not to form a union. A third would force contractors to retain workers when taking over a project from another contractor.

These orders will have an immediate impact. Most (if not all) of the infrastructure projects funded in Obama's $787 billion stimulus plan will have union workers. Given the higher labor costs, this means fewer of the estimated 1 million construction workers currently unemployed will find work.

To make matters worse, the "prevailing wage" required on federal projects by the Davis-Bacon law will apply to all projects. This is supposed to be the average wage for construction workers in a region, but it usually turns out to be the higher union wage. So fewer workers will be employed even on non-union projects.

There's a double whammy here. Despite rising unemployment, a sharp limit is being imposed on hiring. And taxpayers will be required to pay considerably more for construction projects than necessary. This should be unacceptable in good times. In a recession, it's worse. This is flagrantly counterproductive.

Take one example. A non-union employer with the low bid wins the contract on a partially completed construction project. If the prior contractor had union workers, the new boss would have to retain them, their union wages, and possibly even their union.

As a devotee of the New Deal, Obama ought to have learned the lesson of increased unionization. After the Wagner Act of 1935 empowered labor organizers, unionization flourished and wages rose for those who had jobs. At the same time, unemployment went up.

If card check passes, this trend--more unions, fewer jobs--will shift into high gear. But the measure suffered a slight setback last week. Blue dog Democrats got House speaker Nancy Pelosi to postpone a vote until the Senate acts. The queasy moderates fear voting for an unpopular bill that could fail in the Senate. Labor leaders had hoped House approval would give card check a big boost in the Senate, where a handful of Democrats have voiced misgivings.

At the White House, organized labor's clout is still palpable. The president is indebted to union leaders for their lavish support for his campaign with money (hundreds of millions) and personnel (tens of thousands). And labor trumps Larry Summers. Too bad. On unions and unemployment, Summers knows best.

The U.S. Didn’t Cause the World Recession

The U.S. Didn’t Cause the World Recession, by Alan Reynolds
Cato, Feb 22, 2009

In the Washington Post, Ricardo Caballero of MIT has a novel and promising idea about “How to Lift a Falling Economy.” Unfortunately, he echoes the mantra that all the world’s economic problems can be traced to the U.S. in general, and to big U.S. banks in particular. “Already,” he says, “this illness has spread to the global economy.”

Already? Industrial production in Japan began collapsing in November 2007, two months ahead of the U.S., and the Japanese industrial decline has been twice as fast.

Unlike the U.S., real GDP began falling in the second quarter of 2008 in Germany, France, Italy, Japan, Singapore and Hong Kong. By no coincidence, that was when the price of oil rose as high as $145 a barrel. Soaring oil prices raise the cost of production and distribution for many industries, and reduce real household incomes and therefore consumption. Nine of the ten postwar U.S. recessions were preceded by a major spike in the price of oil.

In a piece for the Claremont Review of Books (written last November), I conclude , “This recession is not just a U.S. problem, not just about housing, and not just financial.”

Compare the decline in real GDP over the past 4 quarters (from The Economist):

U.S. -0.2%
France -1.0
Germany -1.6
Britain -1.8
Italy -2.6
Japan -4.6
Does it make sense to blame the largest declines in GDP on one country with the smallest decline? If so, then we need some explanation of how some uniquely American “illness has spread” to so many innocent victims.

If the explanation is supposed to be falling U.S. imports, then the worst decline by far would have been in Canada and Mexico (where real GDP was rising even in the third quarter). If the alleged causality is supposed to be because of some undefined links between financial centers, then Italy would not be among the hardest hit.

When it comes to trade, in fact, the shoe is mainly on the other foot: Collapsing foreign economies crushed U.S. exports.

In the second quarter of 2008, U.S. exports accounted for 1.54 percentage points of the 2.83% annualized rise in real GDP. But falling exports subtracted 2.84 percentage points from fourth quarter GDP. Falling exports, not falling consumption, were the biggest single contributor to the overall drop of 3.8%.

After looking at which economies fell first and fastest, it might be more accurate to say that some foreign illness has spread to the U.S. economy than to assert or assume the causality ran only in the opposite direction.

Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve - February 23, 2009

Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve February 23, 2009

Washington, DC – The U.S. Department of the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board today issued the following joint statement:

"A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.

"We announced on February 10, 2009, a Capital Assistance Program to ensure that our banking institutions are appropriately capitalized, with high-quality capital. Under this program, which will be initiated on February 25, the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government. This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis. Instead, it is available to provide a cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares. The conversion feature will enable institutions to maintain or enhance the quality of their capital.

"Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized. This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery, even under an economic environment that is more challenging than is currently anticipated. The customers and the providers of capital and funding can be assured that as a result of this program participating banks will be able to move forward to provide the credit necessary for the stabilization and recovery of the U.S. economy. Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands."

WaPo: Mileage Tax, LaHood's Good Idea

Mr. LaHood's Good Idea. WaPo Editorial
The transportation chief's mileage tax shouldn't be a nonstarter.
The Washington Post, Monday, February 23, 2009; Page A18

TRANSPORTATION SECRETARY Ray LaHood told a reporter Friday that he was considering a tax on vehicle miles traveled as an alternative to the gas tax. Faster than you could say "smack-down," press secretary Robert Gibbs unleashed a White House scolding. Mr. Gibbs said, "I can weigh in on it and say that it is not and will not be the policy of the Obama administration."

Too bad. You'd think this young administration would be encouraging an open exchange of innovative ideas.

As automobiles become more efficient and make use of new fuels, the gas tax -- which, we note here for the umpteenth time, should be raised -- will be less effective in capturing revenue. Mr. LaHood's comments reflected what many transportation experts and economists are coming to believe: A tax on vehicle miles traveled, or VMTs, is the most promising, fairest, most environmentally responsible replacement for the gas tax.

There are, of course, serious kinks to work out. Charging drivers for the miles they travel isn't as easy as tacking a few pennies onto your bill at the gas station. But a pilot program in Oregon proved the feasibility of the idea. Twenty-two percent of 300 participants drove less during peak hours. Most drivers said they thought the rates were reasonable; nine out of 10 said they preferred a mileage tax to a gas tax.

Most proposals require a GPS-like "mileage-counter" to be installed in vehicles. When drivers stop to fill up, a tax based on the miles they've driven would be added to their bill in place of a gas tax. The tax rate could be adjusted based on whether someone was driving in rush hour or off-peak times, on clogged freeways or less busy roads.

What, then, prevents the proposal from being taken more seriously? Some opponents fear that the government could use the mileage counters to monitor drivers. There's also criticism that the tax would unfairly burden less affluent motorists.

These obstacles are significant, but they are not impossible to overcome. Already, there is evidence that time is running out for the gas tax. Last year, the Highway Trust Fund, which helps pay for roads, flirted with insolvency until Congress shoveled $8 billion into it. The next time the fund runs short -- which could happen as early as this fall -- we hope the mere suggestion of a VMT tax doesn't earn an automatic rebuke from Mr. Gibbs.

WaPo: A special election to replace Sen. Roland Burris -- if he resigns. Which he should.

The Right Call. WaPo Editorial
A special election to replace Sen. Roland Burris -- if he resigns. Which he should.
The Washington Post, Monday, February 23, 2009; Page A18

GOV. PAT Quinn (D-Ill.) added his name Friday to the growing list of people who have joined our call for Sen. Roland Burris (D-Ill.) to resign. But he went a step further. If Mr. Burris does give up the Senate seat, Mr. Quinn would fill it with a temporary appointment until the state legislature passed a special elections law. That's the right call.

Mr. Quinn's predecessor, Rod Blagojevich (D), was removed from office in January after he was arrested in December for, among other things, allegedly trying to auction the Senate seat. Mr. Blagojevich used his power of appointment to install Mr. Burris. And now Mr. Burris's hold on the seat once occupied by Barack Obama is increasingly tenuous after he acknowledged that he tried to raise money for Mr. Blagojevich while vying for the appointment. That revelation contradicted the senator's earlier statements. In fact, with each successive utterance, Mr. Burris further undermines his insistence that he was forthcoming from the start.

Gubernatorial appointments to fill U.S. Senate seats are undemocratic and, in extreme cases -- i.e., in Illinois -- ripe for corruption. A special election would give the power to fill a vacant Senate seat to the voters. But this will require a change in state law, something the Democratic-controlled legislature shied away from last year for fear of losing the seat to a Republican. Mr. Quinn's support of special elections should bolster lawmakers' courage to get it done when the time arises.

WaPo: Why stock investments and Supreme Court service don't mix

Justice Roberts's Portfolio. WaPo Editorial
Why stock investments and Supreme Court service don't mix
The Washington Post, Monday, February 23, 2009; Page A18

THE PLANNED merger of pharmaceutical firms Pfizer Inc. and Wyeth has created a complication in one of the most important business cases before the Supreme Court this term.
The case of Wyeth v. Levine was heard by the justices in November; no decision has yet been rendered. The case, which involves the obscure but important concept of federal preemption, has potential ramifications not just for Wyeth and the pharmaceutical industry, but for a host of other regulated entities looking to shield themselves from state court lawsuits.

According to his financial disclosure form, Chief Justice John G. Roberts Jr. owns stock in Pfizer. Now that Pfizer plans to merge with Wyeth, the chief justice's investment will be directly affected by the court's decision.

Even though the deal has not closed, probably will not be finalized before the end of the term and could fall apart, Chief Justice Roberts should divest himself of the Pfizer stock.

Chief Justice Roberts and others on the court, particularly relative newcomer Justice Samuel A. Alito Jr., have gradually been selling individual stock holdings that most often trigger conflicts. Avoiding such conflicts, which can require justices to recuse themselves, is particularly important at the Supreme Court because no other jurist can substitute for an absent justice. And when the court is evenly split -- and this happens almost exclusively when the court is short-handed -- the lower court's judgment is automatically upheld and the results are not applicable nationwide. An opportunity to clarify murky law or conflicting lower-court decisions is squandered.

A special law allows judges to avoid capital gains taxes if they are forced to sell holdings to eliminate a conflict of interest. This provision may offer little solace, given the recent losses in the stock market. Still, the chief justice should move quickly to clear up the potential conflict.

Libertarian on "Wind jobs outstrip the coal industry"

The Pitfalls in Job Counting (”Green” jobs versus economic jobs), by Robert Murphy
Master Resource, February 22, 2009

It’s understandable that this happens during a recession, but nonetheless a very bad trend in policy analysis is the narrowminded focus on jobs per se. Thus the ~$800 billion spending package is evaluated according to how many jobs it will create or save, rather than according to its promotion of efficient resource allocation.

This focus on employment for its own sake is most evident in the “green jobs” rhetoric. There are two major problems with the typical claims in this area. First, advocates will offer statistics showing that a tax on fossil fuels coupled with, say, subsidies to wind power will create jobs on net, because it takes more people to produce a given amount of electricity through wind than through coal.

But far from being an advantage, this is prima facie evidence against the use of wind power. (The correct criterion, of course, is total cost, including capital and labor.) We want to get as many kilowatt-hours as possible from a given amount of resources. The goal of the electricity sector isn’t to employ workers, it’s to power homes and businesses. If Martians showed up and offered to beam unlimited amounts of electricity to every building on the planet as a token of goodwill, that would be fantastic. But I suspect some energy “experts” would warn that this would throw the world into a catastrophic depression because of all the unemployed workers.

Besides its misguided elevation of workers over consumers, the typical rhetoric on green jobs often uses very expansive definitions to generate optimistic projections. For example, Roger Pielke links to a Christian Science Monitor analysis of such chicanery:

Earlier this week, Fortune’s eco-blog, Green Wombat, ran a story under the headline, “Wind jobs outstrip the coal industry.

Blogger Todd Woody cites [a] new report from the American Wind Energy Association that about 85,000 people are now employed by the wind power industry, up from 50,000 a year ago. Mr. Woody then says that “the coal industry employs about 81,000 workers,” citing a 2007 report from the Department of Energy.

…But it’s a bogus comparison. According to the wind energy report, those 85,000 jobs in wind power are as “varied as turbine component manufacturing, construction and installation of wind turbines, wind turbine operations and maintenance, legal and marketing services, and more.” The 81,000 coal jobs counted by the Department of Energy are only miners. Their figure excludes those who haul the coal around the country, as well as those who work in coal power plants.

To be fair, Woody…does say that “[t]he wind industry now employs more people than coal mining in the United States.” But his story then immediately abandons this distinction, and then goes on to characterize those 81,000 jobs as comprising the total employment of the coal industry.

These are just two of the problems with the “green jobs” rhetoric. Another flaw is that such analyses often assume that unemployed workers will stay idle indefinitely, if not for government spending programs. For a full critique of the most popular green jobs studies, see my paper with Robert Michaels.