Wednesday, June 10, 2009

EPA's IRIS program (Integrated Risk Information System)

Stifling Innovation. By Dr. Gilbert Ross M.D.TCS Daily, Jun 04, 2009

Despite the plethora of bad economic news this year, good news abounds for pro-regulatory, litigation-happy "consumer activists" on the left -- and their attorney camp-followers.
Environmental Protection Agency Administrator Lisa Jackson recently announced her plan to subject chemicals in our environment to even more stringent risk assessments, chasing minuscule risks to human health for no real purpose. Her plan involves the IRIS program -- Integrated Risk Information System -- which will now be used to characterize health risks of chemicals, however tiny the exposure. The chemophobes running the EPA are once more taking the lead in promulgating junk science, likely in an effort to justify their request for a budget increase of 37%, amounting to over $10 billion.

It appears Jackson's unstated goal is to import here, by stealth, the European system, which employs the Precautionary Principle. This dogma asserts that substances in our environment are hazardous until proven otherwise, necessitating bans and product withdrawals until long-term studies prove them safe. This "better safe than sorry" tenet would lead to stagnation of new product development. What company with any sense would invest millions of dollars in formulating any truly new product, knowing that litigation and regulation will force them to delay marketing until some far-off approval from the EPA? Worse still, the "toxicity" of synthetic chemicals is inferred from high-dose rodent tests, bearing little or no relevance to human health.

While Jackson states that this overhaul is needed to improve "transparency" of risk assessment for public health entities, the real beneficiaries will be plaintiffs' attorneys, who will use these "risks" as a basis of litigation, alleging various adverse health effects. Even the threat of such lawsuits will likely cause many companies to cave in to activists' demands for product withdrawals or scary labeling -- with big settlements as part of the deal. None of this has anything to do with enhancing human health.

The new administration is pushing an anti-business agenda, cutting through resistance from industry and true consumer advocates. Recently, President Obama ruled that federal agencies must review regulations dating back to the Clinton years to eliminate some that relied on federal preemption (that is, even products deemed safe at the federal level will now be more easily subject to state-by-state lawsuits). With uniform federal-level regulations comes a stable business climate for development of innovative new products. Conversely, the imminent loss of such stability -- as federal dominance yields to a patchwork of unwieldy local laws -- will lead to risk-aversion and stagnation. Unmoored local standards will ultimately be deformed by persuasive trial lawyers and lay juries.

New product development will slow to a trickle -- consumer choice on a range of products will become the victim of stultifying intimidation from "consumer activists" and their coterie of lawyers, as has already been demonstrated in the area of innovative pharmaceuticals.

The Association of Trial Lawyers of America has lately refashioned itself as the "American Association for Justice," and its membership would have you believe they are now merely simple seekers of Truth and Justice -- but this tiger has not changed its stripes. The trial lawyers' concern with "the rule of law," which they claim motivates their new campaign against preemption, goes exactly as far as strategically necessary to produce big damage awards or settlements -- wrung from jury-fearing, meek corporate bottom-liners.

Add to this that Justice Souter, a relative moderate on many regulatory issues, will soon be replaced by the more "empathic" and lawsuit friendly Sonia Sotomayor, and we have a formula for even more trouble ahead.

In this climate, every time EPA -- with its new, stricter, more precautionary approach -- hints even in a non-committal fashion at the possible "toxicity" of some chemical or product, it will be inviting a wave of state-by-state lawsuits, with the plaintiffs stifling industry and likely getting a sympathetic hearing from the High Court at the end of the day. Let us hope Congress and the public are very cautious about embracing EPA's precautionary new mission.

Gilbert Ross, M.D., is Medical Director of the American Council on Science and Health (

The EPA’s risk-assessment practices are harming public health and the economy

The EPA’s Protection Racket. By Jeff Stier, Esq., Angela Logomasini
Its risk-assessment practices are harming public health and the economy
ACSH, Tuesday, June 9, 2009 ARTICLES Publication Date: June 9, 2009

This piece first appeared on on June 9, 2009:

The Environmental Protection Agency is making “significant strides” on issues such as “protecting children’s health” and “confronting climate change,” says a memo from EPA administrator Lisa P. Jackson. Not surprisingly, the agency has requested a 37 percent budget increase for fiscal year 2010.

Politically speaking, the new Obama EPA may indeed be making some strides. But what concrete public-health benefits can Jackson — or any EPA administrator — realistically claim to have achieved?

The EPA’s public-health mission is misleading, because it is charged with addressing risks that are too small to measure or be regulated away. The agency’s current risk-assessment practices compound the problem, harming both public health and our economic well-being. The agency issues extremely high benefit estimates for its regulations. But these estimates are out of touch with reality.

For example, the White House Office of Information and Regulatory Affairs (OIRA) reported in 2004 that over a ten-year period, most of the benefits from significant federal regulations resulted from just four EPA Clean Air Act rules. The OIRA noted that the uncertainty related to EPA estimates was “large.” A better description would be to say that the estimates are “highly implausible.”

Retired scientist Michael Gough, formerly with the U.S. Office of Technology Assessment, has demonstrated that the total number of cancers that the EPA could feasibly regulate away is small. Gough came to this result by analyzing the data found in Sir Richard Doll and Richard Peto’s landmark 1981 study on the causes of cancer, along with risks estimates in the 1989 EPA study Reducing Risk.

Reducing Risk was an internal EPA research project designed to assess whether the agency was on the right track. It determined that the EPA had set the wrong priorities, devoting substantial resources to low-tier risks. This report remains relevant today, as do Gough’s findings.
Using data from Reducing Risk and the Doll-Peto study, Gough found that no more than 3 percent of all cancers can be associated with environmental pollution. “If the EPA risk assessment techniques are accurate,” he wrote, “and all identified carcinogens amenable to EPA regulations were completely controlled,” which is impossible, “about 6,400 cancer deaths annually (about 1.3% of the current annual total of 435,000 cancer deaths) would be prevented. When cancer risks are estimated using a method like that employed by the Food and Drug Administration (FDA), the number of regulatable cancers is smaller, about 1,400 (about 0.25%).”

It is worth emphasizing that the widely accepted Doll-Peto study shows that the overwhelming majority of cancers result from sources outside EPA control. That is why the World Health Organization has suggested in its World Cancer Report (2003) that cancer-prevention efforts should focus on three factors: tobacco use, diet, and infections — which together, the WHO notes, account for 75 percent of all cancer cases worldwide.

The EPA’s mission involves spending considerable amounts of tax dollars to regulate risks that are in most cases too insignificant to be scientifically demonstrated. The agency has compounded this problem by employing highly questionable scientific assumptions when assessing risks — such as emphasizing high-dose rodent studies.

The environmentalists like animal tests and the uncertainty of their results. These studies give the EPA an excuse to rely on the precautionary principle — the notion that, without full knowledge of the risks, it is “better to be safe than sorry,” and thus better to regulate even more tightly.

Reliance on animal studies also allows regulators to choose from a wide range of animals when extrapolating to humans. A certain chemical doesn’t cause cancer in rats? Try it on mice. Or monkeys. Then say that humans are just like whichever animal eventually got cancer after being given a very high dose — and add that humans (particularly children) may be even more sensitive. Regulations end up having layer after layer of extra precaution.

No wonder activists feigned outrage when the EPA considered a study to assess the effects of common household chemicals and pesticides on toddlers. The study wouldn’t have exposed kids to additional chemicals — only observed kids whose families already used existing, EPA-approved products sold on the market. The National Academy of Sciences approved the ethics of such an approach, but activists quashed it — knowing that the EPA would be left relying on vaguer animal studies when crafting regulations.

Further faulty studies and misguided regulations do more than hinder the economy. They also lead to bans on valuable products that otherwise could be saving lives, such as chemicals that fight disease-carrying insects, retard the spread of fires, and help grow healthy fruits and vegetables (one of the few dietary factors shown to combat cancer).

Ironically, contracting the EPA’s budget would do more for public health than increasing it. Congress should keep this in mind. Until the EPA refocuses its scientific assumptions to target genuine risk, lawmakers should not boost its funding.

Angela Logomasini is director of risk and environmental policy at the Competitive Enterprise Institute. Jeff Stier is an associate director of the American Council on Science and Health.

Brookings O'Hanlon: Obama's Defense Budget Gap

Obama's Defense Budget Gap. By Michael O'Hanlon
WaPo, Wednesday, June 10, 2009

After three months of very impressive decisions regarding national security, President Obama made perhaps his first significant mistake. It concerns the defense budget, where his plans are insufficient to support the national security establishment over the next five years. Thankfully, this mistake can be fixed before it causes big harm -- either by Congress this year or the administration itself next year.

The administration is hardly slashing funds for defense; it is simply adopting a policy of zero real growth in the "base budget" (the part that does not include war costs, which are too unpredictable to include in this analysis). Specifically, the base budget is to grow 2 percent a year over the next five years. But with the inflation rate expected to average over 1.5 percent, the net effect is essentially no real growth. Cumulatively, that would leave us about $150 billion short of actual funding requirements through 2014. The administration is right to propose increasing resources for the State Department and aid programs. But it is unwise politics and unwise strategy to put these key elements of foreign policy in direct competition with each other, as appears to be the case in the new budget.

For the Defense Department to merely tread water, a good rule of thumb is that its inflation-adjusted budget must grow about 2 percent a year (roughly $10 billion annually, each and every year). Simply put, the costs of holding on to good people, providing them with health care and other benefits, keeping equipment functional, maintaining training regimes, and buying increasingly complex equipment tend to grow faster than inflation. This is, of course, no more an absolute rule than is Moore's law about changes in computing capacity. But like Moore's law, it tends to hold up remarkably well with time, especially when downsizing the Defense Department's force structure is not really an option, and it is not today.

It is easiest to understand this by examining the four main categories of Pentagon spending: military personnel, operations and maintenance, procurement, and research and development. Regarding the first, there were times in the 1970s when we starved personnel accounts, but the result was a dispirited and "hollow" force. At a time of war, when we are asking so few troops to do so much for so long, this is not a viable option. In fact, over the years of the Bush presidency, personnel spending increased 100 percent. About 25 percent of that was due to the cumulative effects of inflation and another quarter to mobilizing reservists and enlarging the force. But the remaining half was real cost growth averaging 5 percent a year. Even if we slow the trend, we can't realistically end it.

Operations and maintenance costs are always what budgeteers want to cut -- and always the area where they overestimate the potential for savings. This was the case in the 1990s; almost every year the Clinton administration hoped to economize on such expenses through new types of efficiencies, but almost every year it wound up needing to add to those accounts retroactively. Among defense budget specialists, the real debate is whether inflation-adjusted operations and maintenance costs per person grow at 2 percent annually or 3 percent or somewhere in between.

Procurement and research and development are the chief areas in which Defense Secretary Robert Gates has sought savings in the proposals he announced in April. He has proposed cuts to programs including the F-22 fighter, the DDG-1000 destroyer, the Army's Future Combat System, the presidential helicopter fleet, the transformational communications satellite, aircraft carrier production runs, the airborne laser missile defense program and the next-generation bomber. These are solid proposals; he could make additional cuts to the V-22 Osprey and the F-35 Joint Strike Fighter programs, as well as existing nuclear weapons platforms.

It is important to note, though, that these aren't cuts in current costs; they are cuts in plans. When you eliminate a defense program, you still typically must buy something to replace aging equipment, even if the alternative is less expensive. Moreover, a lot of equipment (much of it purchased under Ronald Reagan and the first President Bush) is wearing out, and we need to replace it soon. Making greater use of service-life extension programs, modifications to existing weapons, and inexpensive but high-performance modern technologies such as advanced munitions and robotics can keep a check on cost growth. But these steps can't freeze costs.

Putting all of this together, the Congressional Budget Office has estimated that real defense spending would have to be about 10 percent greater than today over roughly the next decade to afford what is on the Pentagon's books. The CBO has not recalculated in light of Gates's plans, but a rough estimate suggests the need for 7 to 8 percent higher spending for an average year in the future. That is another way of saying that we need roughly 2 percent real growth per year, while Obama offers zero. By 2014, this amounts to a difference of about $50 billion in the annual budget, and a cumulative five-year discrepancy of about $150 billion. Once increased, defense spending would still decline as a fraction of gross domestic product, but not as much as is currently forecast. The plan will have to change. The question is whether we do it now or do it later.

Michael O'Hanlon, a senior fellow at the Brookings Institution and a former analyst at the Congressional Budget Office, is the author of the new book "Budgeting for Hard Power."

When ‘Green’ Travel isn’t ‘Green’ - Thesis by Mikhail Chester

When ‘Green’ Travel isn’t ‘Green’. By Greg Pollowitz
Planet Gore/NRO, Monday, June 08, 2009

Here's a great article via Breitbart on the difficulty of determining what the "greenest" form of travel actually is. Worth reading in its entirety, but here's an excerpt:

So you always prefer to take the train or the bus rather than a plane, and avoid using a car whenever you can, faithful to the belief that this inflicts less harm to the planet.

Well, there could be a nasty surprise in store for you, for taking public transport may not be as green as you automatically think, says a new US study.

Its authors point out an array of factors that are often unknown to the public.

These are hidden or displaced emissions that ramp up the simple "tailpipe" tally, which is based on how much carbon is spewed out by the fossil fuels used to make a trip.

Environmental engineers Mikhail Chester and Arpad Horvath at the University of California at Davis say that when these costs are included, a more complex and challenging picture emerges.

In some circumstances, for instance, it could be more eco-friendly to drive into a city — even in an SUV, the bete noire of green groups — rather than take a suburban train. It depends on seat occupancy and the underlying carbon cost of the mode of transport.

"We are encouraging people to look at not the average ranking of modes, because there is a different basket of configurations that determine the outcome," Chester told AFP in a phone interview.

"There's no overall solution that's the same all the time."

The Infomercial Comes to Life in India's Remotest Villages

The Infomercial Comes to Life in India's Remotest Villages. By Eric Bellman
Traveling Salesman Mr. Sharma Sings, Jokes To Spread Gospel of Global Consumerism
WSJ, Jun 10, 2009, page A1

BENIPUR VILLAGE, India -- Advertisers in India can't rely on TV, radio or even newspapers to reach the country's 700 million rural consumers. So they use Sandeep Sharma.

On dirt roads across the subcontinent, the former wedding singer cracks jokes, gives demonstrations and stages game shows to spread global consumerism, one village at a time.

He is one of thousands of traveling performers who bring the world's biggest brands to audiences of a handful in the remotest reaches of the nation. He offers free Castrol oil changes for tractors. He dishes out bowls of Nestlé noodles in village schools. He pushes Unilever soaps and creams. He promotes tooth powder and condoms.

"Stick to the countryside if you want to be successful," the 34-year-old says, beaming after a recent performance before a small crowd of villagers in stifling heat. "When we arrive, the whole village comes out."

It's a good time to be a traveling salesman in India, relatively speaking. Insulated from the worst of the global recession, India's rural consumers are spending as never before. International brands -- eager for ways to offset contracting markets elsewhere -- are sending out armies of salesmen like Mr. Sharma. Overall advertising spending climbed about 10% in India last year. Rural advertising grew at more than four times that rate.

The standard procedure for Mr. Sharma starts with kowtowing to village elders in order to get permission to set up his mobile stage and to try to find out who in the village has money. He then rouses the villagers. He used to walk around with a megaphone announcing the show, but dogs chased him. Now he drives around in his truck with the music turned up or hands out candy to children, asking them to bring out their neighbors.

Mud Huts

One recent afternoon in the single-road village of Benipur (pop. 5,000), he opened the back of his truck to reveal a stage, speakers and bright posters. The village is a sandy strip of one-story houses and simple shops, most of them brick but a few made of mud with thatched roofs. The road up to the village is flanked with carefully constructed 10-foot towers of cow dung, burned as fuel for cooking and heating. Trucks, tractors, scooters and herds of goats slow as they see the stage. A curious crowd grows. The music starts. Mr. Sharma shouts into the microphone.

"You have to sacrifice so much in life, but these Nokia handsets have all the extras," he says, waving his hands. "Nokia makes life easier."

He pulls barefoot people onto the stage and quizzes them about the product. When they answer the questions correctly, they get a Nokia keychain in the shape of a guitar. Two other performers do a skit mimicking characters from a popular Hindi film.

"Brother, why would you need a cellphone?" one performer asks as he passes the only microphone. "To flirt with the most popular girl in the village," comes the answer. The crowd giggles.

As Mr. Sharma pitches, village life goes on. Next to his truck, villagers pump water from a well. Across the street, a couple of farmers shoe a horse. Two cows, unmoved, stand across the street for the whole show.

[See the full article at the link above.]

Get Ready for Inflation and Higher Interest Rates

Get Ready for Inflation and Higher Interest Rates. By Arthur Laffer
The unprecedented expansion of the money supply could make the '70s look benign.
WSJ, Jun 10, 2009

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be "wasted." Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs -- such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid -- are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base -- which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash -- by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.

[graph, annual percentage change in the monetary base, 1961-2009]

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base -- which prior to the expansion had comprised 95% of the monetary base -- has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base. Yikes!

Bank reserves are crucially important because they are the foundation upon which banks are able to expand their liabilities and thereby increase the quantity of money.

Banks are required to hold a certain fraction of their liabilities -- demand deposits and other checkable deposits -- in reserves held at the Fed or in vault cash. Prior to the huge increase in bank reserves, banks had been constrained from expanding loans by their reserve positions. They weren't able to inject liquidity into the economy, which had been so desperately needed in response to the liquidity crisis that began in 2007 and continued into 2008. But since last September, all of that has changed. Banks now have huge amounts of excess reserves, enabling them to make lots of net new loans.

The way a bank or the banking system makes new loans is conceptually pretty simple. Banks find an entity that they believe to be credit-worthy that also wants a loan, and in exchange for the new company's IOU (i.e., loan) the bank opens up a checking account for the customer. For the bank's sake, the hope is that the interest paid by the borrower more than makes up for the cost and risk of the loan. The recently ballyhooed "stress tests" on banks are nothing more than checking how well a bank can weather differing levels of default risk.

What's important for the overall economy, however, is how fast these loans are made and how rapidly the quantity of money increases. For our purposes, money is the sum total of all currency in circulation, bank demand deposits, other checkable deposits, and travelers checks (economists call this M1). When reserve constraints on banks are removed, it does take the banks time to make new loans. But given sufficient time, they will make enough new loans until they are once again reserve constrained. The expansion of money, given an increase in the monetary base, is inevitable, and will ultimately result in higher inflation and interest rates. In shorter time frames, the expansion of money can also result in higher stock prices, a weaker currency, and increases in commodity prices such as oil and gold.

At present, banks are doing just what we would expect them to do. They are making new loans and increasing overall bank liabilities (i.e., money). The 12-month growth rate of M1 is now in the 15% range, and close to its highest level in the past half century.

With an increased trust in the overall banking system, the panic demand for money has begun to and should continue to recede. The dramatic drop in output and employment in the U.S. economy will also reduce the demand for money. Reduced demand for money combined with rapid growth in money is a surefire recipe for inflation and higher interest rates. The higher interest rates themselves will also further reduce the demand for money, thereby exacerbating inflationary pressures. It's a catch-22.

It's difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed's actions because, frankly, we haven't ever seen anything like this in the U.S. To date what's happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn't a pretty picture.

Now the Fed can, and I believe should, do what it must to mitigate the inevitable consequences of its unwarranted increase in the monetary base. It should contract the monetary base back to where it otherwise would have been, plus a slight increase geared toward economic expansion. Absent this major contraction in the monetary base, the Fed should increase reserve requirements on member banks to absorb the excess reserves. Given that banks are now paid interest on their reserves and short-term rates are very low, raising reserve requirements should not exact too much of a penalty on the banking system, and the long-term gains of the lessened inflation would many times over warrant whatever short-term costs there might be.

Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury's planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.

In addition, a rapid contraction of the monetary base as I propose would cause a contraction in bank lending, or at best limited expansion. This is exactly what happened in 2000 and 2001 when the Fed contracted the monetary base the last time. The economy quickly dipped into recession. While the short-term pain of a deepened recession is quite sharp, the long-term consequences of double-digit inflation are devastating. For Fed Chairman Ben Bernanke it's a Hobson's choice. For me the issue is how to protect assets for my grandchildren.

Mr. Laffer is the chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let It Happen" (Threshold, 2008).

GM Needs a Political Strategy

GM Needs a Political Strategy. By Holman W Jenkins, Jr
Whitacre is not there to sell cars.
WSJ, Jun 10, 2009

What's good for Ma Bell is good for GM.

That was our second thought on hearing that former AT&T chief Ed Whitacre would become the new GM board chairman once the company reorganized under Obamaruptcy. Our first thought was: Now Ivan Seidenberg has to get a car company.

Mr. Whitacre came up as an engineer and ran AT&T from 1990 to 2007. He'll feel right at home. Whether he liked it or not, government was his partner all the way at AT&T. The company may not have been owned by the feds, as GM now is, but government had its finger in every decision he made. Then again, politics was and ever has been integral to GM long before it turned to the government for a bailout. Succeeding for Mr. Whitacre will mean, first and foremost, making sense of GM's relationship with Washington.

Mildly laughable is the recent published insistence by Obama car czars Steve Rattner and Ron Bloom that GM would be run on a strictly commercial basis while in government hands. Would that it had ever been so.

Already federal money is clearly being used to provide a softer landing for the UAW than labor would have gotten in a bankruptcy reorganization under private investors. The bailout has also deeply politicized the company's business model by privileging its money-losing domestic operations, saddled with the UAW, over its money-making foreign ones. A truly commercial vulture investor would have done the opposite: dumped North America and kept the promising businesses in China, Russia, Europe and Latin America.

More than that, the bailout has disassembled what was finally becoming an integrated, global GM, rather than a collection of rivalrous regional interests. Australia's GM Holden Ltd. had emerged as the engineering center for GM's new rear-drive platform, underlying the rightly praised Pontiac G8 and Chevy Camaro. Now GM, under the terms of the federal bailout, won't be able to invest in its Australian affiliate until it has paid back its government loans.

But then GM has suffered from excessive political attention for most of its existence. Wonder where its famously defensive, obfuscatory "culture" comes from? This is where. The company never has been able to launch a model or close a factory without weighing the political consequences. It can't control its dealer network because dealers are a powerful interest group in every state capital. GM cannot market a car without first knowing how regulators will treat it for fuel-economy purposes, so GM can know how many it can afford to sell (if it's a big car) or how many it must sell (if it's a small one).

Most of all, GM cannot sit down with the UAW without knowing that Democratic politicians, on whom GM relies for help in Washington, will only be satisfied if the UAW (with its power over the re-election hopes of officeholders all over the upper Midwest) is satisfied.

All this means Mr. Whitacre may well be the right man for GM. What the company needs more than anything else is a political strategy. Its loss of political clout has been catastrophic, leading to (among other things) devastating new CAFE regs. But he has one big leg up on his GM predecessors: A Democratic administration now owns GM and needs it to succeed financially. The voice of reason will be heard because it's in Democrats' interest to hear it. He can surely expect, for instance, to find Team Obama amenable to a certain amount of quiet fudging of its new fuel mileage rules to keep GM's pickup and SUV profits flowing.

Make no mistake. Mr. Whitacre's task won't be selling cars (somebody else can do that) but reshaping the policy environment in which GM must operate. His model should be another Ed -- Ed Jordan, who as chief of the nationalized Conrail never received the credit he deserved for rescuing the carrier by leading the charge for regulatory reform on Capitol Hill.

His braintruster was Leo Mullin, who went on to lead Delta Air Lines, and who as a young Conrail veep built the case that Conrail would become a permanent drain on taxpayers unless the rail industry were free to design and price its services with the sole object of making a profit for investors.

Mr. Mullin later recalled for author Rush Loving Jr: "Most people would say you're kind of crazy. It's your job to run your company in the environment you have. And Jordan said, 'No, it can't be done that way.' . . . And he deserves a hell of a lot of credit for that." Without the Jordan strategy, Conrail never would have been successfully privatized after he left.

Mr. Whitacre hasn't spoken, but we suspect he's going to GM for the same reason Ed Liddy (another Ed) went to AIG or David Petraeus went to Iraq: patriotism. His job will bring lots of battles, but none more important than untangling the unholy conflict between Mr. Obama's fuel-mileage goals and his hopes for a "viable" domestic auto industry. Good luck.

North Korea Deserves the Diplomacy of Silence

North Korea Deserves the Diplomacy of Silence. By Edward N Luttwak
What Churchill called 'jaw-jaw' has produced nothing, except more provocations.
WSJ, Jun 0, 2009

Mr. Luttwak, a senior adviser at the Center for Strategic and International Studies, is the author of "Strategy: The Logic of War and Peace" (Belknap, 2002).

Iran's Potemkin Election: Only candidates vetted by the ruling clerics have been allowed to stand

Iran's Potemkin Election. By Con Coughlin
Only candidates vetted by the ruling clerics have been allowed to stand.
WSJ, Jun 10, 2009

Mr. Coughlin is the executive foreign editor of the Daily Telegraph in London and the author of "Khomeini's Ghost: The Iranian Revolution and the Rise of Militant Islam" (Ecco, 2009).