Head Start: A Tragic Waste of Money

Head Start: A Tragic Waste of Money. By Andrew J. Coulson

This article appeared in the New York Post on January 28, 2010.

Head Start, the most sacrosanct federal education program, doesn't work.

That's the finding of a sophisticated study just released by President Obama's Department of Health and Human Services.

Created in 1965, the comprehensive preschool program for 3- and 4-year olds and their parents is meant to narrow the education gap between low-income students and their middle- and upper-income peers. Forty-five years and $166 billion later, it has been proven a failure.

The bad news came in the study released this month: It found that, by the end of the first grade, children who attended Head Start are essentially indistinguishable from a control group of students who didn't.

What's so damning is that this study used the best possible method to review the program: It looked at a nationally representative sample of 5,000 children who were randomly assigned to either the Head Start ("treatment") group or to the non-Head Start ("control") group.

Random assignment is the "gold standard" of medical and social-science research: It gives investigators confidence that the treatment and control groups are essentially identical in every respect except their access to Head Start. So if eventual test performances differ, we can be pretty sure that the difference was caused by the program. No previous study of Head Start used this approach on a nationally representative sample of children.

When the researchers gave both groups of students 44 different academic tests at the end of the first grade, only two seemed to show even marginally significant advantages for the Head Start group. And even those apparent advantages vanished after standard statistical controls were applied.

In fact, not a single one of the 114 tests administered to first graders — of academics, socio-emotional development, health care/health status and parenting practice — showed a reliable, statistically significant effect from participating in Head Start.

Some advocates of the program have acknowledged these dramatic results, but suggest that it's not necessarily Head Start's fault if its effects vanish during kindergarten and the first grade — perhaps our K-12 schools are to blame.

But that's beside the point. Even if it's true, it means that Head Start will be of no lasting value to children until we fix our elementary and secondary schools. Until then, money spent on Head Start will continue to be wasted.

Yet the Obama administration remains enthusiastic. Health and Human Services Secretary Kathleen Sibelius and Education Secretary Arne Duncan both want to boost funding for Head Start — that is, to spend more on a program that's sure to fail. That's after the president already raised spending on the program from $6.8 billion to $9.2 billion last year.

Instead of throwing more dollars at this proven failure, President Obama might consider throwing his weight behind proven successes. A federal program that pays private-school tuition for poor DC families, for instance, has been shown to raise students' reading performance by more than two grade levels after just three years, compared to a control group of students who stayed in public schools. And it does so at about a quarter the cost to taxpayers of DC's public schools.

Sadly, Obama and Duncan have ignored the DC program's proven success. Neither lifted a finger to save it when Democrats in Congress pulled the plug on its funding last year.

Perhaps it's unrealistic to expect national Democrats to end a Great Society program, even when it's a proven failure. Perhaps it's unrealistic to expect them to stand up to teachers' union opposition and support private-school-choice programs that are proven successes.

Of course, until last week, it seemed unrealistic to expect a Republican to win the Senate seat long held by Ted Kennedy. If voters get angry enough with federal education politics, national Democrats may start learning from their state-level colleagues who are starting to support effective policies like school choice. Or they may just lose their seats, too.

Andrew J. Coulson directs the Cato Insti tute's Center for Educational Freedom.

Federal President Admits CBO Cost Estimates of ObamaCare Are Incomplete

Obama Admits CBO Cost Estimates of ObamaCare Are Incomplete

Posted by Michael F. Cannon

Yesterday — day #224 of the ObamaCare Cost-Estimate Watch — President Obama told House Republicans:

You can’t structure a bill where suddenly 30 million people have coverage and it costs nothing.

And just like that, the president admitted that the official Congressional Budget Office estimates of his health care plan do not reflect its full costs.

Both the House and Senate versions of ObamaCare would cover millions of uninsured Americans by requiring them to purchase private health insurance. As President Obama notes, even if you force people to spend their own money on health insurance, it still costs something to cover them. And if the government partly subsidizes those premiums, the remaining mandatory premium is still part of the cost of covering them.

Yet Democrats have systematically blocked the CBO from including those costs in its official cost projections. The Senate bill’s estimated price tag of $940 billion, for example, includes only the costs that bill would impose on the federal government. By my count, that’s only 40 percent of total costs. By Mr. Obama’s admission, that’s not the full cost of the bill.

Now that the President of the United States has acknowledged that the CBO’s cost estimates are incomplete, could we maybe get a complete cost estimate? Maybe just for the Senate bill?

Michael F. Cannon • January 30, 2010 @ 8:07 am

A Free Speech Landmark - Campaign-finance reform meets the Constitution

A Free Speech Landmark. WSJ Editorial
Campaign-finance reform meets the Constitution.
The Wall Street Journal, page A18, Jan 22, 2010

Freedom has had its best week in many years. On Tuesday, Massachusetts put a Senate check on a reckless Congress, and yesterday the Supreme Court issued a landmark decision [see slip op.] supporting free political speech by overturning some of Congress's more intrusive limits on election spending.

In a season of marauding government, the Constitution rides to the rescue one more time.

Justice Anthony Kennedy wrote yesterday's 5-4 majority opinion in Citizens United v. Federal Election Commission, which considered whether the government could ban a 90-minute documentary called "Hillary: the Movie" that was set to run on cable channels during the 2008 Presidential campaign. Because it was funded by an incorporated group and was less than complimentary of then-Senator Hillary Clinton, the film became a target of campaign-finance limits.

The 2002 Bipartisan Campaign Finance Act, aka McCain-Feingold, banned corporations and unions from "electioneering communications" within 30 days of a primary or 60 days of a general election. Yesterday, the Justices rejected that limit on corporate spending as unconstitutional. Corporations are entitled to the same right that individuals have to spend money on political speech for or against a candidate.

Justice Kennedy emphasized that laws designed to control money in politics often bleed into censorship, and that this violates core First Amendment principles. "Because speech is an essential mechanism of democracy—it is the means to hold officials accountable to the people—political speech must prevail against laws that would suppress it by design or inadvertence," he wrote. The ban on corporate expenditures had a "substantial, nationwide chilling effect" on political speech, he added.

In last year's oral argument for Citizen's United, the Court got a preview of how far a ban on corporate-funded speech could reach. Deputy Solicitor General Malcolm Stewart explained that, under McCain-Feingold, the government had the authority to "prohibit the publication" of corporate-funded books that called for the election or defeat of a candidate.

That was a shock and awe moment at the Court, as it also should have been to a Washington press corps that has too often been a cheerleader for campaign-spending limits. Mr. Stewart was telling a truth already familiar to campaign-finance lawyers and the speech police at the Federal Election Commission. Former FEC Commissioner Hans von Spakovsky recalled yesterday that in 2004 the agency investigated whether a book written by George Soros critical of George W. Bush violated campaign laws. Liberals as much as conservatives should worry about laws that allow such investigations.

The Court's opinion is especially effective in dismantling McCain-Feingold's arbitrary exemption for media corporations. Thus a corporation that owns a newspaper—News Corp. or the New York Times—retains its First Amendment right to speak freely. "At the same time, some other corporation, with an identical business interest but no media outlet in its ownership structure, would be forbidden to speak or inform the public about the same issue," wrote Justice Kennedy. "This differential treatment cannot be squared with the First Amendment."

For instruction and sheer entertainment, we also recommend Justice Antonin Scalia's concurring opinion that demolishes Justice John Paul Stevens's argument in dissent that corporations lack free speech rights because the Founding Fathers disliked them. "If so, how came there to be so many of them?" Mr. Scalia writes, in one of his gentler lines.

The landmark decision—which overturned two Supreme Court precedents—has already sent the censoring political class into orbit. President Obama was especially un-Presidential yesterday, putting on his new populist facade to call it "a major victory for big oil, Wall Street banks, health insurance companies" and other "special interests." Mr. Obama didn't mention his union friends as one of those interests, but their political spending will also be protected by the logic of this ruling. The reality is that free speech is no one's special interest.

New York Senator Chuck Schumer vowed to hold hearings, and the Naderite Public Citizen lobby is already calling for a constitutional amendment that bans free speech for "for-profit corporations." Liberalism's bullying tendencies are never more on display than when its denizens are at war with the speech rights of its opponents.

Perhaps one day the Court will go even further and overturn Buckley v. Valeo, the 1976 decision that was its original sin in tolerating limits on campaign spending. The Court did yesterday uphold disclosure rules, so a sensible step now would be for Congress to remove all campaign-finance limits subject only to immediate disclosure on the Internet. Citizens United is in any event a bracing declaration that Congress's long and misbegotten campaign-finance crusade has reached a Constitutional dead end.

The Real Blackwater Scandal - Another example of prosecutorial abuse in a political case

The Real Blackwater Scandal. WSJ Editorial
Another example of prosecutorial abuse in a political case.
WSJ, Monday, January 4, 2010

No, not as the left would have it, that Blackwater still exists. The scandal is that the Justice Department's case against five former security guards for the military contractor unraveled late last week in what appears to be another instance of gross prosecutorial misconduct, as abusive Justice lawyers went after an unsympathetic political target.

The indictments—which were thrown out by D.C. District Judge Ricardo Urbina in a derisive and detailed 90-page opinion—stemmed from a 2007 firefight in Baghdad's Nisour Square that left 14 Iraqis dead and others wounded. The government contends that five Blackwater guards, who were providing tactical support for the State Department after an IED exploded in the vicinity of a meeting with Iraqi officials, went on an unprovoked killing spree against unarmed civilians. The guards maintain that they came under attack by insurgents and were responding in self-defense to a mortal threat.

Judge Urbina dismissed the charges because prosecutors misused sworn statements the guards were compelled to make to investigators after the shooting, under the threat of job loss. This was routine practice under military contracting rules, though the statements could not be used in criminal prosecutions. Promptly after the Nisour incident these statements were also leaked to the media, which ran with the narrative of modern-day Hessians gone berserk.

"In their zeal to bring charges against the defendants in this case," Judge Urbina ruled, prosecutors had violated Fifth Amendment protections against self-incrimination by using these compelled statements to formulate their case and ultimately obtain indictments against the guards. The judge calls it "the government's reckless violation of the defendants' constitutional rights."

Because of prior contact with the compelled statements, the Justice Department's entire criminal division had recused itself from the case, which was handed over to national-security prosecutors and later to Assistant U.S. Attorney for the District of Columbia Kenneth Kohl. The veteran Justice public-integrity lawyer Raymond Hulser was eventually assigned to lead a "taint team" to rebuild the case without using the off-limits statements, and he repeatedly warned the trial team that their evidence was "thoroughly tainted."

"By all accounts these prophylactic measures fell well short of expectations," Judge Urbina notes with some understatement. In "direct contravention of the clear directives" of Mr. Hulser, the statements were used to obtain a search warrant against Blackwater, figured into plea discussions, and exposed in testimony to the grand jury, forcing Justice to withdraw the case and present it to a new panel.

In the second round that featured redacted testimony from the first grand jury, prosecutors also excised what Judge Urbina calls "substantial exculpatory evidence." The judge goes on to say that Justice's "inconsistent, extraordinary explanations" for its conduct "smack of post hoc rationalization and are simply implausible," and ultimately "lacking in credibility."

Certainly the shootings at Nisour are a tragedy that strained U.S. relations with the Iraqi government, though the details seem reminiscent of the 2005 incident at Haditha, which the Washington political class played as another My Lai massacre but in reality was the product of the complex, asymmetrical combat conditions in a war zone. The courts martial against all but one of the Marines at Haditha have been dismissed or collapsed.

In this case, too, one question is whether prosecutors felt they could get away with such abusive behavior because Blackwater was such a politically unpopular defendant. The firm had political ties to Republicans, and Democrats and their media allies had made Blackwater a whipping boy to further undermine public support for the Iraq war. (Blackwater is now renamed Xe Services and no longer contracting in Iraq.)

This marks the fourth recent example in which judges have tossed out cases citing Justice Department abuse involving easy political targets. In the last year it has become clear that the ethics conviction against former Alaska Senator Ted Stevens was likely a miscarriage of justice, with prosecutors covering up evidence and trying to keep a witness from testifying.

There's also the vendetta against two former executives at Broadcom in the forgotten political uproar over backdating stock options. That case was thrown out last month after a judge ruled that prosecutors had improperly pressured witnesses and leaked information to the press. Earlier this decade, a federal judge tossed out multiple tax evasion cases against former KPMG partners.

Something is rotten in the culture of Justice, leading ambitious government crusaders to think they can get away with flouting due process when the political winds are blowing hot. Congress and the press corps may be too politically implicated to police this prosecutorial malpractice, so it may be up to the judiciary to apply more stringent sanctions.

How Abdulmutallab got on the plane - was granted Fourth Amendment reasonableness rights

Intelligence Is a Terrible Thing to Waste. By L. GORDON CROVITZ
President Obama doesn't need an investigation to figure out how Umar Farouk Abdulmutallab got on a Detroit-bound plane.
WSJ, Monday, January 4, 2010

Intelligence about terror threats rarely comes on such a silver platter: A Nigerian banker went to the U.S. Embassy in Lagos to warn that his son had fallen under "the influence of religious extremists based in Yemen" and was a security risk. This came after months of U.S. intelligence intercepts about al Qaeda plans for an attack using a Nigerian man. Umar Farouk Abdulmutallab paid for his ticket with cash and didn't check any luggage.

Yet a headline in the Washington Post summed up the current state of our intelligence: "Uninvestigated Terrorism Warning About Detroit Suspect Called Not Unusual."

President Obama promises to investigate what went wrong, but there's no big mystery. He should simply review testimony put in the public record in early December, before the Christmas Day incident. Sen. Joe Lieberman's Homeland Security Committee heard an explanation of how U.S. intelligence agencies decide when to put suspected terrorists on a watch list or a no-fly list.

Timothy Healy, the head of the FBI's Terrorist Screening Center, explained the unit's "reasonable suspicion" standard like this:

"Reasonable suspicion requires 'articulable' facts which, taken together with rational inferences, reasonably warrant a determination that an individual is known or suspected to be or has been engaged in conduct constituting, in preparation for, in aid of, or related to, terrorism and terrorist activities, and is based on the totality of the circumstances. Mere guesses or inarticulate 'hunches' are not enough to constitute reasonable suspicion."

If this sounds like legalistic language, it is. Indeed, a quick Web search was a reminder that this language is adapted from Terry v. Ohio, a landmark Supreme Court case in 1968 that determined when Fourth Amendment protection against unreasonable searches allows the police to frisk civilians or conduct traffic stops. In other words, foreign terrorists have somehow now been granted Fourth Amendment reasonableness rights that courts intended to protect Americans being searched by the local police. Thus was Abdulmutallab allowed on the airplane with his explosives.

The difference between law-enforcement procedures and preventing terrorism could not be clearer. If a well-respected banker takes the initiative to come to a U.S. embassy in Nigeria to report that he thinks his son is a terrorist, we expect intelligence officers to make "hunches," such as that this person should have his visa reviewed and be searched before getting on a plane. Information is our defense against terrorism, but evidence of terror plots is often incomplete, which is why intelligence requires combining facts with hunches.

The result of prohibiting hunches was that Abdulmutallab was waved through. Information about suspected terrorists flows into a central Terrorist Screening Database, which is then analyzed by the Terrorist Screening Center, where FBI agents apply the "reasonable suspicion" standard to assign people to various watch lists including "selectee" lists and the "no-fly" list. It's at this point where an approach based on domestic law enforcement trump prevention, undermining the use of information.

Aside from concluding that we are misapplying a reasonableness test, the Abdulmutallab investigation likely will conclude that information in the databases of the National Security Agency, CIA and State Department weren't properly mined to connect dots. His name went onto the list of 400,000 people who might have links to terror, but not the list of 14,000 subject to multiple screenings before boarding an airplane or the list of 3,400 people who are not permitted to fly.

The Obama administration has leaned toward treating terrorism as a matter for domestic law enforcement, such as trying terrorists in civilian courts instead of in military tribunals. But this legalistic culture also undermined intelligence in the Fort Hood case in November. The FBI knew that Maj. Nidal Malik Hasan had been exchanging emails with a Yemen-based imam with ties to the 9/11 hijackers. The agency, operating by the standards of domestic law enforcement instead of applying information to prevention, surmised that the "content was explainable by his research" and failed to warn the Army of its potential risk.

In contrast, British authorities last May denied Abdulmutallab the right to re-enter the United Kingdom, where he had been president of an Islamic Society while in college. In Britain, domestic intelligence is the job of M15, which unlike the FBI has no power to arrest or responsibility for criminal prosecutions. Instead, it is free to focus on gathering intelligence, making hunches and preventing wrongdoing. The British ban on Abdulmutallab didn't require any FBI-like "reasonable suspicion" test.

After 9/11, the key political issue that went unresolved was what Americans expect from their intelligence agents. We send the mixed message that we want them to prevent attacks, but only if they operate under strict restrictions based on rules crafted for domestic law enforcement.

We have a choice. We can limit how information is used or we can allow smart use of information to prevent attacks. If we continue to choose to limit how information can be used in our defense, we shouldn't be surprised when our defenses fail.

A tax increase that will cause many seniors to lose private benefits

ObamaCare on Drugs. WSJ Editorial
A tax increase that will cause many seniors to lose private benefits.
The Wall Street Journal, page A10, Jan 02, 2009

Democrats are starting to mash together the Senate and House health-care bills, all of the negotiations taking place in secret. One reason to keep quiet is so voters don't discover items like the Senate's destructive change in the way retiree health benefits are taxed. This is a revenue grab that will cost many retirees their private drug benefit coverage, with knock-on harm for the federal budget and financial markets.

When the Medicare prescription drug benefit was created in 2003, one concern was that businesses that provided private drug coverage for seniors would dump them into the new taxpayer-funded plan. So Congress created a modest tax subsidy—equal to 28% of the total cost of a drug plan—to encourage employers to maintain coverage for retirees who would otherwise enroll in Medicare. On average, this subsidy will cost the government about $665 per person in 2011, according to the Employee Benefit Research Institute, while the same Medicare coverage would run about $1,209.

Currently, the $665 a business gains by providing benefits—and keeping one senior off Medicare—is not taxed. By instead treating the subsidy as income taxed at the 35% corporate rate, Democrats expect to raise about $5.4 billion for ObamaCare—and while that's a pittance in the scheme of a new multitrillion-dollar price tag, it's also based on a static tax analysis that is surely wrong.

The cost of offering drug benefits will rise by about $233 per retiree, making Medicare a far more attractive option for businesses. Private drug coverage is already on the decline, but Verizon, Xerox, Boeing, Metlife, Caterpillar and other companies are already warning that they may be forced to cut benefits. (Consider this another reward for the Business Roundtable's decision to promote ObamaCare.)

As more employers drop drug coverage, Congress won't be dispensing as many subsidies with the one hand that it can tax with the other, so revenue will fall. The retirees who lose private benefits will simply move onto Medicare, so public drug spending will also rise. The American Benefits Council, which represents the largest employers, estimates the tax will be a net loser for the government if just one out of four retirees is crowded out of private coverage.

That $233 may not sound like a lot, but under an accounting rule established in 1990, companies are required to report and expense their long-term retiree health liabilities on their financial statements, including actual paid claims and certain future payments. The deferred losses from the tax change thus must be immediately reflected on their balance sheets, which would take a huge bite out of reported earnings in 2010. Given the shaky economy, not to mention the political uncertainty that Washington continues to generate, is this really the best idea?

This is merely one example of how careless Democrats have been about the details as they dash to pass ObamaCare, even as they behave as if the results of their major changes to the health market will match perfectly with their perfectly unrealistic rhetoric.

"One of the things I've learned is that the Econ 101 approach to life where all that matters is the direct financial incentives or penalties is just wrong," Obama budget director Peter Orszag said in December. "Not to say that it doesn't matter, but exclusive focus on rational, perfectly optimizing behavior is just not, not where it's at."

When even the budget scorekeeper spurns economic incentives, you know pure politics is in charge. We suspect the White House will discover soon enough that everyone is a lot more rational, and a lot smarter, that it presumes.

Why the Health-Care Bills Are Unconstitutional. - If the government can mandate the purchase of insurance, it can do anything

Why the Health-Care Bills Are Unconstitutional. By Orrin Hatch, J Kenneth Blackwell and Kenneth Klukowski
If the government can mandate the purchase of insurance, it can do anything.
The Wall Street Journal, page A11, Jan 02, 2009

President Obama's health-care bill is now moving toward final passage. The policy issues may be coming to an end, but the legal issues are certain to continue because key provisions of this dangerous legislation are unconstitutional. Legally speaking, this legislation creates a target-rich environment. We will focus on three of its more glaring constitutional defects.

First, the Constitution does not give Congress the power to require that Americans purchase health insurance. Congress must be able to point to at least one of its powers listed in the Constitution as the basis of any legislation it passes. None of those powers justifies the individual insurance mandate. Congress's powers to tax and spend do not apply because the mandate neither taxes nor spends. The only other option is Congress's power to regulate interstate commerce.

Congress has many times stretched this power to the breaking point, exceeding even the expanded version of the commerce power established by the Supreme Court since the Great Depression. It is one thing, however, for Congress to regulate economic activity in which individuals choose to engage; it is another to require that individuals engage in such activity. That is not a difference in degree, but instead a difference in kind. It is a line that Congress has never crossed and the courts have never sanctioned.

In fact, the Supreme Court in United States v. Lopez (1995) rejected a version of the commerce power so expansive that it would leave virtually no activities by individuals that Congress could not regulate. By requiring Americans to use their own money to purchase a particular good or service, Congress would be doing exactly what the court said it could not do.

Some have argued that Congress may pass any legislation that it believes will serve the "general welfare." Those words appear in Article I of the Constitution, but they do not create a free-floating power for Congress simply to go forth and legislate well. Rather, the general welfare clause identifies the purpose for which Congress may spend money. The individual mandate tells Americans how they must spend the money Congress has not taken from them and has nothing to do with congressional spending.

A second constitutional defect of the Reid bill passed in the Senate involves the deals he cut to secure the votes of individual senators. Some of those deals do involve spending programs because they waive certain states' obligation to contribute to the Medicaid program. This selective spending targeted at certain states runs afoul of the general welfare clause. The welfare it serves is instead very specific and has been dubbed "cash for cloture" because it secured the 60 votes the majority needed to end debate and pass this legislation.

A third constitutional defect in this ObamaCare legislation is its command that states establish such things as benefit exchanges, which will require state legislation and regulations. This is not a condition for receiving federal funds, which would still leave some kind of choice to the states. No, this legislation requires states to establish these exchanges or says that the Secretary of Health and Human Services will step in and do it for them. It renders states little more than subdivisions of the federal government.

This violates the letter, the spirit, and the interpretation of our federal-state form of government. Some may have come to consider federalism an archaic annoyance, perhaps an amusing topic for law-school seminars but certainly not a substantive rule for structuring government. But in New York v. United States (1992) and Printz v. United States (1997), the Supreme Court struck down two laws on the grounds that the Constitution forbids the federal government from commandeering any branch of state government to administer a federal program. That is, by drafting and by deliberate design, exactly what this legislation would do.

The federal government may exercise only the powers granted to it or denied to the states. The states may do everything else. This is why, for example, states may have authority to require individuals to purchase health insurance but the federal government does not. It is also the reason states may require that individuals purchase car insurance before choosing to drive a car, but the federal government may not require all individuals to purchase health insurance.

This hardly exhausts the list of constitutional problems with this legislation, which would take the federal government into uncharted political and legal territory. Analysts, scholars and litigators are just beginning to examine the issues we have raised and other issues that may well lead to future litigation.

America's founders intended the federal government to have limited powers and that the states have an independent sovereign place in our system of government. The Obama/Reid/Pelosi legislation to take control of the American health-care system is the most sweeping and intrusive federal program ever devised. If the federal government can do this, then it can do anything, and the limits on government power that our liberty requires will be more myth than reality.

Mr. Hatch, a Republican senator from Utah, is a former chairman of the Senate Judiciary Committee. Mr. Blackwell is a senior fellow with the Family Research Council and a professor at Liberty University School of Law. Mr. Klukowski is a fellow and senior legal analyst with the American Civil Rights Union.

The States and the Stimulus - How a supposed boon has become a fiscal burden

The States and the Stimulus. WSJ Editorial
How a supposed boon has become a fiscal burden.
The Wall Street Journal, page A10, Saturday, January 2, 2010

Remember how $200 billion in federal stimulus cash was supposed to save the states from fiscal calamity? Well, hold on to your paychecks, because a big story of 2010 will be how all that free money has set the states up for an even bigger mess this year and into the future.

The combined deficits of the states for 2010 and 2011 could hit $260 billion, according to a survey by the liberal Center on Budget and Policy Priorities. Ten states have a deficit, relative to the size of their expenditures, as bleak as that of near-bankrupt California. The Golden State starts the year another $6 billion in arrears despite a large income and sales tax hike last year. New York is literally down to its last dollar. Revenues are down, to be sure, but in several ways the stimulus has also made things worse.

First, in most state capitals the stimulus enticed state lawmakers to spend on new programs rather than adjusting to lean times. They added health and welfare benefits and child care programs. Now they have to pay for those additions with their own state's money.

For example, the stimulus offered $80 billion for Medicaid to cover health-care costs for unemployed workers and single workers without kids. But in 2011 most of that extra federal Medicaid money vanishes. Then states will have one million more people on Medicaid with no money to pay for it.

A few governors, such as Mitch Daniels of Indiana and Rick Perry of Texas, had the foresight to turn down their share of the $7 billion for unemployment insurance, realizing that once the federal funds run out, benefits would be unpayable. "One of the smartest decisions we made," says Mr. Daniels. Many governors now probably wish they had done the same.

Second, stimulus dollars came with strings attached that are now causing enormous budget headaches. Many environmental grants have matching requirements, so to get a federal dollar, states and cities had to spend a dollar even when they were facing huge deficits. The new construction projects built with federal funds also have federal Davis-Bacon wage requirements that raise state building costs to pay inflated union salaries.

Worst of all, at the behest of the public employee unions, Congress imposed "maintenance of effort" spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.

One provision prohibits states from cutting Medicaid benefits or eligibility below levels in effect on July 1, 2008. That date, not coincidentally, was the peak of the last economic cycle when states were awash in revenue. State spending soared at a nearly 8% annual rate from 2004-2008, far faster than inflation and population growth, and liberals want to keep funding at that level.

A study by the Evergreen Freedom Foundation in Seattle found that "because Washington state lawmakers accepted $820 million in education stimulus dollars, only 9 percent of the state's $6.8 billion K-12 budget is eligible for reductions in fiscal year 2010 or 2011." More than 85% of Washington state's Medicaid budget is exempt from cuts and nearly 75% of college funding is off the table. It's bad enough that Congress can't balance its own budget, but now it is making it nearly impossible for states to balance theirs.

These spending requirements come when state revenues are on a downward spiral. State revenues declined by more than 10% in 2009, and tax collections are expected to be flat at best in 2010. In Indiana, nominal revenues in 2011 may be lower than in 2006. Arizona's revenues are expected to be lower this year than they were in 2004. Some states don't expect to regain their 2007 revenue peak until 2012.

So when states should be reducing outlays to match a new normal of lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes to meet their constitutional balanced budget requirements. Thank you, Nancy Pelosi.

This is the opposite of what the White House and Congress claimed when they said the stimulus funds would prevent economically harmful state tax increases. In 2009, 10 states raised income or sales taxes, and another 15 introduced new fees on everything from beer to cellphone ringers to hunting and fishing. The states pocketed the federal money and raised taxes anyway.

Now, in an election year, Congress wants to pass another $100 billion aid package for ailing states to sustain the mess the first stimulus helped to create. Governors would be smarter to unite and tell Congress to keep the money and mandates, and let the states adjust to the new reality of lower revenues. Meanwhile, Mr. Perry and other governors who warned that the stimulus would have precisely this effect can consider themselves vindicated.

Questions for Abdulmutallab - The would-be airplane bomber needs to be interrogated

Questions for Abdulmutallab. By VICTORIA TOENSING
The would-be airplane bomber needs to be interrogated.
WSJ, Dec 31, 2009

On the third day after Umar Farouk Abdulmutallab's attempt to blow up a Detroit-bound airliner, President Barack Obama finally interrupted his Hawaiian vacation to announce that our government "will not rest until we find all who were involved and hold them accountable." But how are we going to do that now that the terrorist is lawyered up and is even challenging what should be a legal gimme: giving the government a DNA sample?

It was not wise to try enemy combatants such as Zacarias Moussaoui, the so-called 20th hijacker in the 9/11 attacks, in our regular criminal courts. And it is unwise that Mr. Obama has decided to try some Guantanamo detainees in New York City. Never in our country's history prior to 2001 have we done so, for good reason.

The constitutional protections designed to ensure a person is not wrongfully convicted have no relevance to wartime military needs. The argument that our system is strong enough to try a terrorist is a non sequitur. It equates to the argument that if a person is in excellent health, she can withstand being set ablaze.

Moussaoui tied the Virginia federal court in knots for over three years, principally by insisting on the Brady rule, which requires that the defendant be given access to any evidence that could be exculpatory. (Moussaoui was convicted because he pleaded guilty, not because there was a trial and jury decision.)

The Brady rule is a needed constitutional protection for the accused bank robber, where the government wants to produce only the one witness who identifies the defendant as the perpetrator but not the other six witnesses who cannot identify him. It does not work where a terrorist demands access to all the servicemen and women who witnessed his capture on the battlefield.

Yet even the legal issues of a trial are of little importance compared to the threat to our security putting this terrorist into the regular criminal justice system presents. Abdulmutallab is in effect in possession of a ticking bomb, but we cannot interrogate him. His right to remain silent, as required by the Miranda rule, thwarts Mr. Obama's hollow attempt on Tuesday to "assure" us he is "doing everything in [his] power" to keep us safe.

Questions need to be answered. Where was Abdulmutallab trained? Who trained him? Where is the training facility located? Where is the stash of PETN, the explosive used in the bomb? What are the techniques he was told to use for getting through airport security? Was there a well-dressed man who helped him board the plane without a passport as claimed by another passenger? And, most important, are future attacks planned?

Yes, we could try him first and then interrogate him. But by then the information is stale, especially if he utilizes the same legal challenges Moussaoui did to drag out the process for years.

As the president told us, there were indeed "human and systemic failures" that "contributed to this potential catastrophic breach of security." By placing this terrorist into the regular criminal process, he continues and magnifies those failures, which could leave to an actual catastrophe.

Abdulmutallab is not a United States citizen. By detonating a bomb on an airplane filled with 269 civilians, he committed an illegal act of war. A military commission, which has been used for such conduct since Gen. George Washington, will give him due process. But first, he must be interrogated.

Ms. Toensing was deputy assistant attorney general in the Reagan administration, where she supervised all terrorist cases.

No Place to Write Detention Policy

No Place to Write Detention Policy. By Benjamin Wittes, and Jack Goldsmith
Brookings, December 22, 2009

Since U.S. forces started taking alleged terrorists to Guantanamo Bay, Cuba, the task of crafting American detention policy has migrated decisively from the executive branch to federal judges. These judges, not experts in terrorism or national security and not politically accountable to the electorate, inherited this responsibility because of the Supreme Court's intervention in detention policy. Over time they maintained it because legislative and executive officials of both political parties refused to craft a comprehensive legislative approach to this novel set of problems that cries out for decisive lawmaking.

Many commentators have complained about this state of affairs and the contradictory and incoherent body of law it is producing and have urged the political branches to enact legislation to create a uniform and democratically legitimate detention policy.

Now a more important voice has joined the call for legislative reform.

Judge Thomas F. Hogan of the U.S. District Court in Washington is one of the most respected federal district judges on the bench. And he has a particularly informed view of the disarray of modern detention policy. Not only is he one of the judges hearing detainee habeas appeals, but he was asked by most of his judicial colleagues to consolidate and manage common issues in their cases. He is, in short, one of the people to whom Congress has effectively delegated the task of writing these rules -- a person with as holistic and in-the-weeds an understanding of the issues as is possible.

Last week, in ruling on the merits of a detainee's case, he issued a scathing indictment of the current litigation and an urgent plea for congressional participation in cases that "go to the heart of our judicial system."

"It is unfortunate," he said in an oral opinion from the bench, "that the Legislative Branch of our government and the Executive Branch have not moved more strongly to provide uniform, clear rules and laws for handling these cases." While allowing that the various judges were "working very hard and in good faith," he lamented that "we have different rules and procedures being used by the judges," as well as "different rules of evidence" and "a difference in substantive law." For Judge Hogan, it all "highlights the need for a national legislative solution with the assistance of the Executive so that these matters are handled promptly and uniformly and fairly for all concerned."

Congress has avoided these issues for a number of reasons. Initially, it was a combination of the Bush administration's failure to seek congressional help and lawmakers' natural inclination to avoid taking responsibility for hard decisions for which they might later be held accountable. More recently, the Obama administration has been loath to spend any more political capital than necessary in cleaning up what it views as its predecessor's messes. Instead of dealing with detention policy proactively, it has largely adopted the Bush approach of grinding out detention policy in the courts. Ironically, the president's political base seems to prefer his adoption of the Bush approach -- an approach liberals previously decried -- to any effort to write detention rules and limitations into statutory law.

As Judge Hogan made clear, this is a bad way to craft policy. It generates uncertainty about the lawful parameters of detentions, ensures longer adjudication times and lessens accountability for difficult decisions.

The Guantanamo closure process and the appropriations process for the new terrorist detention facility in Illinois offer a perfect opportunity to correct this long-festering problem. The administration will have to work with Congress, if only to permit Obama to move detainees to the new site. Yet if legislation stops there, the political branches can congratulate themselves only on moving the location of terrorist detention and not on strengthening and clarifying detention policy.

By contrast, if Congress and the administration were inclined to perform their constitutional duties, they could draw on eight years of judicial decisions, legal briefs and scholarship to craft clear, stable rules. There are myriad issues for a responsible Congress to address, but at a minimum it should offer a clear definition of who can be detained, a coherent set of evidentiary and procedural rules to determine who fits the definition of an enemy, and guidance concerning the scope of the government's obligation to disclose evidence to detainees' lawyers.

The goal, simply put, should be to replace what Judge Hogan called "procedures drawn up by the court, and principally [by] myself . . . in a new venue that has been untested" with one that carries the legislature's stamp and the president's signature, and that answers some of the hard policy questions our political institutions have punted to the courts. The courts' job, in such a world, would be to adjudicate detainee cases, rather than to write conflicting rules that they then have to apply.

"[C]reating a new entitlement program, which, once established, will be virtually impossible to rescind"

Confessions of an ObamaCare Backer. WSJ Editorial
A liberal explains the political calculus.
The Wall Street Journal, page A24

The typical argument for ObamaCare is that it will offer better medical care for everyone and cost less to do it, but occasionally a supporter lets the mask slip and reveals the real political motivation. So let's give credit to John Cassidy, part of the left-wing stable at the New Yorker, who wrote last week on its Web site that "it's important to be clear about what the reform amounts to." [http://www.newyorker.com/online/blogs/johncassidy/2009/11/some-vaguely-heretical-thoughts-on-health-care-reform.html]

Mr. Cassidy is more honest than the politicians whose dishonesty he supports. "The U.S. government is making a costly and open-ended commitment," he writes. "Let's not pretend that it isn't a big deal, or that it will be self-financing, or that it will work out exactly as planned. It won't. What is really unfolding, I suspect, is the scenario that many conservatives feared. The Obama Administration . . . is creating a new entitlement program, which, once established, will be virtually impossible to rescind."

Why are they doing it? Because, according to Mr. Cassidy, ObamaCare serves the twin goals of "making the United States a more equitable country" and furthering the Democrats' "political calculus." In other words, the purpose is to further redistribute income by putting health care further under government control, and in the process making the middle class more dependent on government. As the party of government, Democrats will benefit over the long run.

This explains why Nancy Pelosi is willing to risk the seats of so many Blue Dog Democrats by forcing such an unpopular bill through Congress on a narrow, partisan vote: You have to break a few eggs to make a permanent welfare state. As Mr. Cassidy concludes, "Putting on my amateur historian's cap, I might even claim that some subterfuge is historically necessary to get great reforms enacted."

No wonder many Americans are upset. They know they are being lied to about ObamaCare, and they know they are going to be stuck with the bill.

Almost two-thirds of all bad mortgages in our financial system were bought by government agencies or required by government regulations

Barney Frank, Predatory Lender. By PETER J. WALLISON
Almost two-thirds of all bad mortgages in our financial system were bought by government agencies or required by government regulations.
WSJ, Oct 16, 2009

Recent reports that the Federal Housing Administration (FHA) will suffer default rates of more than 20% on the 2007 and 2008 loans it guaranteed has raised questions once again about the government's role in the financial crisis and its efforts to achieve social purposes by distorting the financial system.

The FHA's function is to guarantee mortgages of low-income borrowers (the mortgages are then sold through securitizations by Ginnie Mae) and thus to take reasonable credit risks in the interests of making mortgage credit available to the nation's low-income citizens. Accordingly, the larger than normal losses that will result from the 2007 and 2008 cohort could be justified by Barney Frank, the chairman of the House Financial Services Committee, as "policy"—an effort to ease the housing downturn through the application of government credit. The FHA, he argued, is buying more weak mortgages in order to help put a floor under the housing market. Eventually, the taxpayers will have to judge whether this policy was justified.

Far more interesting than the FHA's prospective losses on its 2007 and 2008 book are the agency's losses on its 2005 and 2006 guarantees, when the housing bubble was inflating at its fastest rate and there was no need for government support. FHA-backed loans during those years also have delinquency rates between 20% and 30%. These adverse results—not the result of a "policy" effort to shore up markets—pose a significant challenge to those who are trying to absolve the U.S. government of responsibility for the financial crisis.

When the crisis first arose, the left's explanation was that it was caused by corporate greed, primarily on Wall Street, and by deregulation of the financial system during the Bush administration. The implicit charge was that the financial system was flawed and required broader regulation to keep it out of trouble. As it became clear that there was no financial deregulation during the Bush administration and that the financial crisis was caused by the meltdown of almost 25 million subprime and other nonprime mortgages—almost half of all U.S. mortgages—the narrative changed. The new villains were the unregulated mortgage brokers who allegedly earned enormous fees through a new form of "predatory" lending—by putting unsuspecting home buyers into subprime mortgages when they could have afforded prime mortgages. This idea underlies the Obama administration's proposal for a Consumer Financial Protection Agency. The link to the financial crisis—recently emphasized by President Obama—is that these mortgages would not have been made if regulators had been watching those fly-by-night mortgage brokers.

There was always a problem with this theory. Mortgage brokers had to be able to sell their mortgages to someone. They could only produce what those above them in the distribution chain wanted to buy. In other words, they could only respond to demand, not create it themselves. Who wanted these dicey loans? The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending. When Fannie and Freddie were finally taken over by the government in 2008, more than 10 million subprime and other weak loans were either on their books or were in mortgage-backed securities they had guaranteed. An additional 4.5 million were guaranteed by the FHA and sold through Ginnie Mae before 2008, and a further 2.5 million loans were made under the rubric of the Community Reinvestment Act (CRA), which required insured banks to provide mortgage credit to home buyers who were at or below 80% of median income. Thus, almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.

The role of the FHA is particularly difficult to fit into the narrative that the left has been selling. While it might be argued that Fannie and Freddie and insured banks were profit-seekers because they were shareholder-owned, what can explain the fact that the FHA—a government agency—was guaranteeing the same bad mortgages that the unregulated mortgage brokers were supposedly creating through predatory lending?

The answer, of course, is that it was government policy for these poor quality loans to be made. Since the early 1990s, the government has been attempting to expand home ownership in full disregard of the prudent lending principles that had previously governed the U.S. mortgage market. Now the motives of the GSEs fall into place. Fannie and Freddie were subject to "affordable housing" regulations, issued by the Department of Housing and Urban Development (HUD), which required them to buy mortgages made to home buyers who were at or below the median income. This quota began at 30% of all purchases in the early 1990s, and was gradually ratcheted up until it called for 55% of all mortgage purchases to be "affordable" in 2007, including 25% that had to be made to low-income home buyers.

It was not easy to find candidates for traditional mortgages—loans to people with good credit records or the resources for a substantial downpayment—among home buyers who qualified under HUD's guidelines. To meet their affordable housing requirements, therefore, Fannie and Freddie reduced their lending standards and reached into the FHA's turf. The FHA, although it lost market share, continued to guarantee what it could, adding to the demand that the unregulated mortgage brokers filled. If they were engaged in predatory lending, it was ultimately driven by the government's own requirements. The mortgages that resulted are now problem loans for the GSEs, the FHA and the big banks that were required to make them in order to burnish their CRA credentials.

The significance of the FHA's troubles is that this agency had no profit motive. Yet it dipped into the same pool of subprime and other nontraditional mortgages that the GSEs and Wall Street were fishing in. The left cannot have it both ways, blaming the private sector for subprime lending while absolving the government policies that created the demand for subprime loans. If the financial crisis was caused by subprime mortgages and predatory lending, the government's own policies made it happen.

Mr. Walllison is a senior fellow at the American Enterprise Institute.

Islamists misrepresent the liberal legacy of the Ottoman Empire

Bring Back the Caliphate. By Soner Cagaptay
Islamists misrepresent the liberal legacy of the Ottoman Empire.
WSJ, Oct 08, 2009

The reaction in Turkey to the recent death of Ertugrul Osman, heir to the Ottoman throne and successor to the last Caliph, could not be more shocking. Islamists in kaftans and long beards gathered in Istanbul two weeks ago to bury the titular head of the world Muslim community, a scotch-drinking, classical music-listening Western Turk who until recently lived on New York City's Upper East Side.

The Islamists' embrace of Osman, a descendant of the westernized Ottoman sultans, provides a periscope into the Islamist mind: Islamism is not about religion or reality. Rather it is a myth and a subversion of reality intended to promote Islamism, a utopian ideology. Osman, raised by a line of West-leaning caliphs and sultans, loved Atatürk's Turkey, yet the Islamists abused his funeral and the memory of the caliphate, changing it into a symbol for their anti-Western, anti-secular and anti-liberal agenda.

Were Ertugrul Osman alive and were the Ottomans around today, he would be Sultan Osman V and no doubt, he would be going after the fundamentalists who abused his funeral in an attempt to distort his legacy.

Despite what the Islamists want the world to believe, the Ottoman caliphate was not anti-Western. The Ottoman Empire always interacted with the West—an interaction that goes all the way back to 16th-century Sultan Suleyman the Magnificent, who envisioned himself as the Holy Roman emperor. In the 18th and 19th centuries, the Ottoman sultans and caliphs embarked on a program of intense reforms to remake the Ottoman Empire in the Western image to match up with European powers. To this end, the caliphs launched institutions of secular education, and paved the way for women's emancipation by enrolling them in those schools. By the beginning of the 19th century, the sultans and caliphs of the Ottoman Empire embodied Western life and Western values. The last caliph, Abdulmecid Efendi, considered the Ottoman state a Western power with a Western destiny. An enlightened man and avid artist, the caliph's sought-after paintings, including nudes, are on exhibition at various museums, such as Istanbul's new museum of Modern Art.

It is therefore wrong to represent the Ottoman Empire as the antithesis to the secular republic Atatürk founded in 1923. True, when Atatürk turned Turkey into a secular republic in 1923 by abolishing the Ottoman state and the caliphate, Atatürk did noteradicate the sultan-caliphs' legacy. Rather, he fulfilled their dream of making Turkey a full-fledged Western society. Atatürk's reforms are a continuation of the late Ottoman Empire—he merely pursued Ottoman reforms to their logical conclusion.

Moreover, Atatürk was the product par excellence of the Ottoman Empire. He was raised in Salonika, the hub of cosmopolitanism and Western culture in the reforming empire. He studied in secular Ottoman schools, and he was trained in the Westernized Ottoman military.

The debate over the Ottoman caliphate's legacy has ramifications not only for Turkey, but also for contemporary Muslims and the Western world's desire to counter radical Islamists. Years before emergence of al Qaeda, the caliphs produced an antidote against radical jihadists, a progressive vision for a Western-oriented Muslim society. The sultan-caliphs built the institutional foundations of this society, including the first Ottoman parliament and constitution of 1876, and planted in it seeds of Western values, such as secular education and women's emancipation. Modern Turkey owes its existence as much to Atatürk as to the sultan-caliphs who were among the first to promote liberal and Western values in a Muslim society.

Now, the Islamists want to usurp the caliphate and its legacy. The fundamentalists first distort the caliphate's politics, reimagining it as an anti-Western institution. Then, they portray the revival of this invented caliphate as the ultimate political dream in an anti-Western ideology.

Eighty years ago, the Ottoman caliph-sultans imagined a Turkey that is more akin to modern Turkey than to the Islamist society envisioned by al Qaeda or others who dismiss Atatürk's dream of a Western Turkey and liberal values as anomalies. Ertugrul Osman himself told Turkish journalist Asli Aydintasbas shortly before his death that "the republic has been devastating for our family, but very good for Turkey."

Caliph Osman was Turkish by birth, Muslim by religion, and a Westerner by upbringing. I want my caliph back, and so should all Muslims who want deliverance from the distorted and illiberal world envisioned by the Islamists.

Mr. Cagaptay is a senior fellow at the Washington Institute for Near East Policy and author of "Islam Secularism and Nationalism in Modern Turkey: Who is a Turk?" (Routledge, 2006).

Down with capitalists, nations, bosses, families, etc. - Commonwealth

Brothers in Marx. By Brian C Anderson
Down with capitalists, nations, bosses, families, etc.
WSJ, Oct 08, 2009

Review of: Commonwealth
By Michael Hardt and Antonio Negri
Harvard University Press, 434 pages, $35

Astonishingly, given the ruin associated with his name, Karl Marx is back in fashion. The global economic downturn has spurred sales of "Das Kapital" to an all-time high; Michael Moore with his latest movie rivals the Original Communist in denouncing the evils of capitalism; and for the past year the news media seem to have delighted in running obituaries for the owners of the means of production. Michael Hardt and Antonio Negri, then, are nicely positioned to take advantage of Marx's revival with the publication of "Commonwealth," which re-imagines Marxism for the 21st century.

Mr. Hardt teaches literature at Duke University and is a postmodernism-steeped radical—that is to say, he is an American college professor. Mr. Negri, a political theorist, has a more unusual background. Three decades ago, the Italian government believed that he was the secret intellectual leader of the leftist terrorists called the Red Brigades and that he was the architect of the group's 1978 kidnapping and murder of Christian Democratic Party leader Aldo Moro. Unable to build a sufficient case to try Mr. Negri for murder—he has always denied the allegation—Italian authorities convicted him of "armed insurrection against the state." Facing 30 years in the slammer, Mr. Negri scooted to France, where he remained, a philosopher in exile, until 1997, when he returned to Italy to serve the remainder of a reduced sentence. He is a left-wing guru whose field work has occurred far from the faculty lounge.

"Commonwealth" completes a trilogy that began in 2000 with "Empire" and continued with "Multitude" in 2004. The book is a witch's brew of contemporary radicalism. Capitalism deserves to die, Messrs. Hardt and Negri believe, for it has abused and corrupted "the common." The common isn't just "the fruits of the soil, and all nature's bounty," they tell us; it is the universe of things necessary for social life—"knowledges, languages, codes, information, affects." Under capitalism, nature is ravaged, society brutalized.

Yet the conditions for people's emancipation are budding within capitalism, the authors believe (just as Marx believed in the mid-19th century). Unlike the factory laborer of yesterday, today's knowledge worker has less and less need for a boss. Companies extract the most value from the worker, we're told, when he is left alone to create, connect and collaborate as he sees fit. This is also true of "affective labor" that offers services to the public, "even in the most constrained and exploited circumstances, such as call centers."

Messrs. Hardt and Negri propose getting rid of bosses, of course, but they also target another bugaboo of the hard left, private property. The possession of property supports unjust power structures—why not agree that the "common wealth" of the human and natural worlds should be everyone's responsibility, everyone's resource? Welcome to The Communist Manifesto 2.0.

"Commonwealth" updates Marx's championing of the proletariat as the agent of revolution. The authors prefer "the multitude," which includes workers of all kinds, naturally, but also gathers the mighty forces of identity politics: black and Hispanic activists, radical feminists, "queer" transgressives and others purportedly harmed by global capitalism. They don't all get along, Messrs. Hardt and Negri admit, so the left must persuade this army-in-waiting to value the importance of "revolutionary parallelism." No Black Power movement that treats woman or homosexuals badly, for instance, will win the day. After the revolution, we're told, identity politics, like class warfare, will dissolve.

For the revolution to succeed, three supposedly corrupt forms of the common must be destroyed. Some of the harshest language in "Commonwealth" targets the family: Mom, dad and the kids might not know it, but they are part of a "pathetic" institution, a "machine" that "grinds down and crushes the common" with "the blindest egoism." Messrs. Hardt and Negri cry: "Down with the family!" The two other killers of the world's spirit: the corporation and the nation. When the multitude seizes "control of the means of production and reproduction," we're promised, the evil trio will wind up on Marx's ash heap of history.

The authors warn the rulers of the capitalist world that if they want to survive a little longer, they need to enact reforms, including global citizenship, a right to income for everyone and participatory democracy. But Messrs. Hardt and Negri don't think that their warning will be heeded. Revolution will erupt—and soon. It could be violent, a prospect that does not seem to trouble them: "What is the best weapon against the ruling powers—guns, peaceful street demonstrations, exodus, media campaigns, labor strikes, transgressing gender norms, silence, irony, or many others—depends on the situation." Pirates, the rioting Muslim banlieusards of Paris and the Black Panthers all are praised in "Commonwealth" as heroes of disruption.

Messrs. Hardt and Negri make little effort to build arguments in support of their wild assertions and predictions. They write as if ignorant of the 20th century and of much else, including economics and social science. (They still quote Lenin and Mao as if they were sources of wise political and economic analysis.) How would abolishing private property not lead to a threadbare totalitarian state, as it has in the past? The authors promise it will be different this time, without explaining why. If you abolish the family, how will children grow into flourishing adults? We must take it on faith that the post-family world will be just fine. (The word "children" almost never appears in the book.) How do the authors explain away capitalist globalization's record of elevating millions of people out of poverty? Answer: They don't.

"Commonwealth" is a dark, evil book, and it is troubling that it appears under the prestigious imprimaturof Harvard University Press. Countless millions were slaughtered by adherents of Karl Marx in the 20th century. God help us if the scourge returns in the 21st.

Mr. Anderson, the editor of City Journal, is the author of "Democratic Capitalism and Its Discontents" and, with Adam Thierer, "A Manifesto for Media Freedom."

Cato: The Government Robbed Chrysler Creditors

The Government Robbed Chrysler Creditors. By Ilya Shapirohttp://www.cato-at-liberty.org/2009/10/

In January 2009, Chrysler stood on the brink of insolvency. Purporting to act under the Emergency Economic Stabilization Act, the Treasury extended Chrysler a $4 billion loan using funds from the Troubled Asset Relief Program (TARP). Still in a bad financial situation, Chrysler initially proposed an out-of-court reorganization plan that would fully repay all of Chrysler’s secured debt. The Treasury rejected this proposal and instead insisted on a plan that would completely eradicate Chrysler’s secured debt, hinging billions of dollars in additional TARP funding on Chrysler’s acquiescence.

When Chrysler’s first lien lenders refused to waive their secured rights without full payment, the Treasury devised a scheme by which Chrysler, instead of reorganizing under a chapter 11 plan, would sell its assets free of all secured interests to a shell company, the New Chrysler. Chrysler was thus able to avoid the “absolute priority rule,” which provides that a court should not approve a bankruptcy plan unless it is “fair and equitable” to all classes of creditors.

Cato joined the Washington Legal Foundation, Allied Educational Foundation, and George Mason law professor Todd Zywicki on a brief supporting the creditors’ petition asking the Supreme Court to review the transaction’s validity. We argue that the forced reorganization amounted to the Treasury redistributing value from senior, secured creditors to debtors and junior, unsecured creditors.

The government should not be allowed, through its own self-dealing, to hand-pick certain creditors for favorable treatment at the expense of others who would otherwise enjoy first lien priority. Further, a lack of predictability and consistency with regard to creditors’ expectations in bankruptcy will result in a destabilization of existing and future credit markets.

The Court will be deciding whether to hear the case later this fall. Thanks very much to Cato legal associate Travis Cushman for his help with the brief.

Paul H Robinson: Many restrictions on the use of force against aggressors make no moral sense

Israel and the Trouble With International Law. By PAUL H. ROBINSON
Many restrictions on the use of force against aggressors make no moral sense.
The Wall Street Journal, page A25, Sep 22, 2009

Last week the United Nations issued a report painting the Israelis as major violators of international law in the three-week Gaza war that began in December 2008. While many find the conclusion a bit unsettling or even bizarre, the report's conclusion may be largely correct.

This says more about international law, however, than it does about the propriety of Israel's conduct. The rules of international law governing the use of force by victims of aggression are embarrassingly unjust and would never be tolerated by any domestic criminal law system. They give the advantage to unlawful aggressors and thereby undermine international justice, security and stability.

Article 51 of the U.N. Charter forbids all use of force except that for "self-defense if an armed attack occurs." Thus the United Kingdom's 1946 removal of sea mines that struck ships in the Strait of Corfu was held to be an illegal use of force by the International Court of Justice, even though Albania had refused to remove its mines from this much used international waterway. Israel's raid on Uganda's Entebbe Airport in 1976—to rescue the victims of an airplane hijacking by Palestinian terrorists—was also illegal under Article 51.

Domestic criminal law restricts the use of defensive force in large part because the law prefers that police be called, when possible, to do the defending. Force is authorized primarily to keep defenders safe until law enforcement officers arrive. Since there are no international police to call, the rules of international law should allow broader use of force by victims of aggression. But the rules are actually narrower.

Imagine that a local drug gang plans to rob your store and kill your security guards. There are no police, so the gang openly prepares its attack in the parking lot across the street, waiting only for the cover of darkness to increase its tactical advantage. If its intentions are clear, must you wait until the time the gang picks as being most advantageous to it?

American criminal law does not require that you wait. It allows force if it is "immediately necessary" (as stated in the American Law Institute's Model Penal Code, on which all states model their own codes), even if the attack is not yet imminent. Yet international law does require that you wait. Thus, in the 1967 Six Day War, Israel's use of force against Egypt, Syria and Jordan—neighbors that were preparing an attack to destroy it—was illegal under the U.N. Charter's Article 51, which forbids any use of force until the attack actually "occurs."

Now imagine that your next-door neighbor allows his house to be used by thugs who regularly attack your family. In the absence of a police force able or willing to intervene, it would be quite odd to forbid you to use force against the thugs in their sanctuary or against the sanctuary-giving neighbor.

Yet that is what international law does. From 1979-1981 the Sandinista government of Nicaragua unlawfully supplied arms and safe haven to insurgents seeking to overthrow the government of El Salvador. Yet El Salvador had no right under international law to use any force to end Nicaragua's violations of its sovereignty. The U.S. removal of the Taliban from Afghanistan in 2001 was similarly illegal under the U.N. Charter (although it earned broad international support).

An aggressor pressing a series of attacks is protected by international law in between attacks, and it can take comfort that the law allows force only against its raiders, not their support elements. In 1987, beginning with a missile strike on a Kuwaiti tanker, the Iranians launched attacks on shipping that were staged from their offshore oil platforms in the Persian Gulf. While it was difficult to catch the raiding parties in the act (note the current difficulty in defending shipping against the Somali pirates), the oil platforms used to stage the attacks could be and were attacked by the U.S. Yet these strikes were held illegal by the International Court of Justice.

Social science has increasingly shown that law's ability to gain compliance is in large measure a product of its credibility and legitimacy with its public. A law seen as unjust promotes resistance, undermines compliance, and loses its power to harness the powerful forces of social influence, stigmatization and condemnation.

Because international law has no enforcement mechanism, it is almost wholly dependent upon moral authority to gain compliance. Yet the reputation international law will increasingly earn from its rules on the use of defensive force is one of moral deafness.

True, it will not always be the best course for a victim of unlawful aggression to use force to defend or deter. Sometimes the smart course is no response or a merely symbolic one. But every state ought to have the lawful choice to do what is necessary to protect itself from aggression.

Rational people must share the dream of a world at peace. Thus the U.N. Charter's severe restrictions on use of force might be understandable—if only one could stop all use of force by creating a rule against it. Since that's not possible, the U.N. rule is dangerously naive. By creating what amount to "aggressors' rights," the restrictions on self-defense undermine justice and promote unlawful aggression. This erodes the moral authority of international law and makes less likely a future in which nations will turn to it, rather than to force.

Mr. Robinson, a professor of law at the University of Pennsylvania, is the co-author of "Law Without Justice: Why Criminal Law Does Not Give People What They Deserve" (Oxford, 2006).

The ICC Investigation in Afghanistan Vindicates U.S. Policy Toward the ICC

The ICC Investigation in Afghanistan Vindicates U.S. Policy Toward the ICC. By Brett D. Schaefer and Steven Groves
Heritage, September 14, 2009
WebMemo #2611

Last week, the prosecutor for the International Criminal Court (ICC) stated that investigations into alleged war crimes and crimes against humanity in Afghanistan may result in the prosecution of U.S. policymakers or servicemen. The potential prosecution of U.S. persons by the court over incidents that the U.S. deems lawful is one of the prime reasons why the Bush Administration did not seek U.S. ratification of the treaty creating the court, rejected ICC claims of authority over U.S. persons, and sought to negotiate agreements with countries to protect U.S. persons from being arrested and turned over to the ICC.[1]

The investigation is not complete, the prosecutor has not determined if he will seek warrants against U.S. officials or servicemen, and Afghanistan is constrained from turning over U.S. persons to the ICC under existing agreements. However, the potential legal confrontation justifies past U.S. policy, emphasizes the need to maintain and expand legal protections for U.S. persons against ICC claims of jurisdiction, and should lead the Obama Administration to endorse the Bush Administration's policies toward the ICC.

U.S. Policy toward the ICC

The U.S. initially was an eager participant in the effort to create the ICC in the 1990s. However, America's support waned because many of its concerns about the proposed court were ignored or opposed. Among other concerns, the U.S. concluded that the ICC lacked prudent safeguards against political manipulation, possessed sweeping authority without accountability to the U.N. Security Council, and violated national sovereignty by claiming jurisdiction over the nationals and military personnel of non-party states in some circumstances.

In the end, U.S. efforts to amend the Rome Statute were rejected. President Bill Clinton urged President George W. Bush not to submit the treaty to the Senate for advice and consent necessary for ratification. After additional efforts to address key U.S. concerns failed, President Bush felt it necessary to "un-sign" the Rome Statute and take additional steps to protect U.S. nationals, officials, and service members from the ICC, including passing the American Service-Members' Protection Act of 2002, which restricts U.S. interaction with the ICC and its state parties, and seeking Article 98 agreements to preclude nations from surrendering, extraditing, or transferring U.S. persons to the ICC or third countries for that purpose without U.S. consent.[2]

The Afghan Investigation

On September 10, the Prosecutor for the International Criminal Court, Argentinean Luis Moreno Ocampo, announced that ICC investigators had begun looking into allegations of war crimes and crimes against humanity, including torture, "massive attacks," and collateral damage resulting from military action in Afghanistan. The allegations were made by human-rights groups and the Afghan government. According to Béatrice Le Fraper du Hellen, a special adviser to Ocampo, the ICC has been "collecting data about allegations made against the various parties to the conflict" since 2007.[3]

Since Afghanistan acceded to the Rome Statute--the treaty establishing the ICC-- on February 10, 2003, the prosecutor is empowered to receive and investigate crimes alleged to have occurred in Afghanistan after the establishment of the court in July 2002.[4]

Although the investigation will also look into crimes allegedly committed by the Taliban, Ocampo confirmed that North Atlantic Treaty Organization troops participating in the United Nations mandated International Security Assistance Force (ISAF) mission to bolster the Afghan government could become a target of ICC prosecution. A decision to prosecute ISAF forces for actions in Afghanistan would almost certainly involve American servicemen which, as of July 23, 2009, constituted nearly half of all foreign troops involved in the mission (29,950 out of 64,500[5]) and represent one of the few countries willing to fully engage in military action to confront Taliban forces.

The ICC investigation is at an early stage. According to du Hellen, "[I]t's particularly complex. It's taking time to gather information on crimes allegedly committed on the government side, on the Taliban side and by foreign forces." [6] In the end, the ICC may find no evidence to proceed with a warrant against anyone--American or otherwise.

Status of Forces Agreement

The ICC can act only if a country is unwilling or unable to pursue the alleged crimes. However, in a situation like Afghanistan, it is very likely that the ICC would have to assert jurisdiction because the government of Afghanistan has extremely limited legal jurisdiction over U.S. officials and service members. Specifically, the U.S. and the Afghan government entered into a Status of Forces Agreement (SOFA) regarding military and civilian personnel in Afghanistan engaged in "cooperative efforts in response to terrorism, humanitarian and civic assistance, military training and exercises, and other activities." Under the SOFA,

U.S. personnel are immune from criminal prosecution by Afghan authorities, and are immune from civil and administrative jurisdiction except with respect to acts performed outside the course of their duties. [The agreement] explicitly authorized the U.S. government to exercise criminal jurisdiction over U.S. personnel, and the Government of Afghanistan is not permitted to surrender U.S. personnel to the custody of another State, international tribunal [including the ICC], or any other entity without consent of the U.S. government.[7]

Although the SOFA was signed by the interim government, it remains binding on the current government and the Afghan government could not try U.S. officials or service members for acts committed during the "course of their duties," even if it wanted to.

Thus, the ICC would undoubtedly find the Afghan government unable to pursue the alleged crimes. Such a finding would raise another issue. Under the Article 98 agreement with Afghanistan, the government has agreed not to turn over U.S. persons to the ICC or to allow a third party to do so without U.S. permission--an unlikely development, given that a U.S. official has stated that the United States has no reason to believe that U.S. persons have committed crimes in the conduct of their official duties under ISAF that have not been properly investigated and adjudicated.[8]

These safeguards are not a guarantee of protection from the illegitimate claims of ICC jurisdiction, but U.S. officials and service members are much more protected than they would be without them. Most likely, an ICC warrant would be executed against a U.S. person in Afghanistan only if that person traveled to an ICC state party that does not have an Article 98 agreement with the U.S. The current scenario, therefore, only underscores the urgency of negotiating more such agreements.

Reject the Rome Statute

The Obama Administration is reportedly close to announcing a change in U.S. policy toward the ICC, including affirming President Clinton's 2000 signature on the Rome Statute and increasing U.S. cooperation with the court. Weakening protections against ICC prosecution of U.S. officials and service members would be a grave mistake, as illustrated by the ongoing investigation in Afghanistan.

The ICC's Afghan investigation is a testament to the wisdom of the Bush Administration. To protect its officials and servicemen, the U.S. should continue to insist that it is not bound by the Rome Statute and does not recognize the ICC's authority over U.S. persons, maintain and expand legal protections like Article 98 agreements, and exercise great care when deciding to support the court's actions.

Brett D. Schaefer is Jay Kingham Fellow in International Regulatory Affairs and Steven Groves is Bernard and Barbara Lomas Fellow in the Margaret Thatcher Center for Freedom, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.

References at the original article

Beijing Plays Hedge Ball - A contract should be a contract

Beijing Plays Hedge Ball. WSJ Editorial
A contract should be a contract.
WSJ, Sep 09, 2009

Beijing needs to clarify whether a contract is a contract, and fast. Recent suggestions that the government might allow or even encourage companies to challenge derivatives contracts that went against them send a bad signal to foreign companies and countries doing business with China.

The controversy stems from commodities hedges gone wrong. When fuel prices were high, airlines like China Eastern, Air China and Shanghai Airlines and shippers like China Ocean Shipping crafted derivatives contracts with foreign banks to protect the companies from even higher fuel prices. Instead the price of oil has fallen, leaving the companies on the hook for the downside risk of their hedge—a total of about $2 billion for the airlines alone, by some counts.

The companies are crying foul, and several reportedly sent a letter to the banks that sold them the derivatives suggesting they may be "void, invalid or unenforceable." Worse, the government is getting into the act. The state-owned Assets Supervision and Administration Commission, which oversees these companies, on Monday posted a statement on its Web site suggesting that Beijing might countenance efforts to sue to nullify the contracts.

China has been down this road before, pushing foreign counterparties several times over the past decade to back down from derivatives contracts that had turned against a Chinese company. In those cases, the companies or the government variously argued that the firms had been illegally speculating or had not understood the risks they were taking—or even that the people signing the papers on behalf of the Chinese companies hadn't been authorized to do so. It's hard to see how such arguments could apply to the kind of bread-and-butter fuel hedging at issue here.

Policy makers might think the government holds a lot of cards in this case, and in some respects it does. While the derivatives contracts would be tough to wriggle out of legally since they're enforceable through courts in Hong Kong, Singapore or Britain, it would be hard for the banks to collect on any judgment unless they're willing to seize planes at Heathrow or Changi airports.

The banks would have strong incentives not to try, too. Regulators in Beijing decide whether the foreign banks receive various business licenses, for instance, and state-owned enterprises constitute some of the biggest bank clients. Especially since the goal could only be to renegotiate the contracts instead of canceling them, policy makers and executives might think the banks will be willing to pay that price to continue doing business in China.

But this kind of bullying is not free. Most immediately, hedging is a risk-management tool that many Chinese companies can't afford to live without. It works on trust between counterparties that each side will hold up its end of the bargain. Already banks reportedly are demanding higher collateral for derivatives contracts like those at issue here to compensate for the loss of trust. That's an added cost of doing business not faced by other airlines that take their lumps when hedges go wrong. like Hong Kong's Cathay Pacific or America's United.

This incident will leave foreign investors wondering where China stands on its road to commercial rule of law. Following the arrests of Rio Tinto executives in a dispute over ore prices, foreign businesses already have to wonder about their physical safety if they run afoul of Chinese companies in contract negotiations. Now it appears foreign companies can be in financial danger simply for ending up on the "wrong" side of a standard off-the-shelf derivatives transaction.

Beijing officials may not realize the potential effects of this controversy on Chinese companies investing abroad. Chinese mergers and acquisitions in countries like America or Australia have been controversial in large part because politicians in those countries have worried about a lack of transparency within Chinese companies, and whether those companies would play by the rules once they hit foreign shores. Politicians already predisposed to oppose Chinese investment—and perhaps some who'd otherwise support allowing such investments—will hardly take comfort from a sign that Chinese companies won't play by the rules if it doesn't suit them. If Beijing is actively trying to dissuade foreign investment, it's on the right track.

Beijing might be responding to a political storm over the notion Chinese companies have been exploited by Western banks (one wag has called derivatives "financial opium," a charged phrase in China). Or it could be trying to bail out a few companies that made bad fuel-price bets. Or some other political motivation could be at work. Whatever the cause, though, Beijing's only smart way forward is to state clearly that a contract is a contract and that Chinese companies must abide by theirs.

The SEC vs. CEO Pay

The SEC vs. CEO Pay. By RUSSELL G. RYAN
The agency stretches the law to confiscate a bonus.
WSJ, Aug 05, 2009

A lawsuit filed on July 22 by the Securities and Exchange Commission (SEC) should send a mid-summer chill down the spine of every chief executive and chief financial officer of a U.S. public company.

Exploiting an ambiguously worded phrase in Sarbanes-Oxley, the agency has for the first time claimed that it may under that law “claw back”—some might say confiscate—bonus money and stock sale proceeds from CEOs and CFOs even when it lacks evidence to charge them with wrongdoing.

Sarbanes-Oxley was rushed through Congress in the summer of 2002 in reaction to public outrage over notorious corporate accounting failures at Enron, WorldCom and other companies. As is often the case with such far-reaching and hastily conceived legislation, many of its details were half-baked, poorly worded, and riddled with ambiguity.

A prime example was the so-called clawback feature of Section 304, which was designed to prevent crooked CEOs and CFOs from taking home big bonuses and cashing out company stock while they were knowingly defrauding shareholders. It empowered the SEC to force these executives to reimburse their companies for all bonuses and stock sale proceeds received during any financial period for which their company was later required to restate its financial statements due to “misconduct.”

But in its haste to “do something” about the scandal of the day, Congress muddied the question of whether the “misconduct” required for such a clawback had to be committed by the executive himself (or at least known to him), or could be that of a subordinate, completely unbeknownst to the executive.

Many executives and legal advisers have cautiously assumed that bonuses and stock proceeds were at risk only for executives who actually engaged in misconduct themselves—or at least were aware of it and acquiesced. In fact, the SEC itself has rarely used this feature of Sarbanes-Oxley at all, and had done so only in cases where it alleged personal misconduct by the targeted chief executives or chief financial officers. A prominent example was the agency’s stock-option backdating case against Dr. William McGuire, the former CEO of UnitedHealth Group.

But the SEC has abruptly changed course. It has sued Maynard Jenkins, the former CEO of CSK Auto Corporation, an auto-parts company that had previously settled with the agency on charges of accounting fraud after restating three years’ worth of financial statements.
Several subordinate executives have been charged with both civil and criminal securities law violations. But the SEC has never accused Mr. Jenkins of any wrongdoing. In a press release announcing this case, the agency highlighted its novel position that no such accusation—much less proof—was necessary to claw back his bonuses and stock sale proceeds for the three years in question, which totaled more than $4 million.

Mr. Jenkins is contesting the lawsuit, and he has grounds for optimism. On a visceral level, it seems shocking that a U.S. law enforcement agency could take more than $4 million from any citizen without so much as an accusation of personal misconduct, or at least knowing acquiescence in someone else’s misconduct. Indeed, according to a report by Bloomberg, two of the SEC’s five commissioners voted not to file the lawsuit at all.

In an unrelated case earlier this year, the SEC unsuccessfully argued an equally aggressive interpretation of Section 304. Stretching the law’s wording that clawbacks are appropriate only when a company is “required to prepare an accounting restatement,” the agency argued that Section 304 also allows clawbacks when no restatement is actually prepared, so long as the SEC later concluded the company should have done so.

A federal judge in St. Louis rejected that theory and threw out the charge. In recent years, courts have similarly rejected the agency’s overly aggressive interpretations of laws preventing “selective disclosure,” insider trading, aiding and abetting, and other violations.

The irony is this. Despite all the recent criticism the SEC has taken for supposed laxity in its enforcement program, the agency has in fact consistently taken very aggressive positions in its enforcement cases, such as with laws concerning foreign bribery, market timing of mutual funds, and many forms of insider trading.

For the most part, investors expect the SEC to push the envelope to protect their interests. But the wisdom and fairness of pursuing no-fault clawbacks from unaccused executives is dubious at best.

Mr. Ryan is a securities lawyer and was an assistant director of the Securities and Exchange Commission’s division of enforcement from 2000-2004.

Jindal: How to Make Health-Care Reform Bipartisan

How to Make Health-Care Reform Bipartisan. By BOBBY JINDAL
WSJ, Jul 22, 2009

In Washington, it seems history always repeats itself. That’s what’s happening now with health-care reform. This is an unfortunate turn of events for Americans who are legitimately concerned about the skyrocketing cost of a basic human need.

In 1993 and 1994, Hillary Clinton’s health-care reform proposal failed because it was concocted in secret without the guiding hand of public consensus-building, and because it was a philosophical over-reach. Today President Barack Obama is repeating these mistakes.

The reason is plain: The left in Washington has concluded that honesty will not yield its desired policy result. So it resorts to a fundamentally dishonest approach to reform. I say this because the marketing of the Democrats’ plans as presented in the House of Representatives and endorsed heartily by President Obama rests on three falsehoods.

First, Mr. Obama doggedly promises that if you like your (private) health-care coverage now, you can keep it. That promise is hollow, because the Democrats’ reforms are designed to push an ever-increasing number of Americans into a government-run health-care plan.

If a so-called public option is part of health-care reform, the Lewin Group study estimates over 100 million Americans may leave private plans for government-run health care. Any government plan will benefit from taxpayer subsidies and be able to operate at a financial loss—competing unfairly in the marketplace until private plans are driven out of business. The government plan will become so large that it will set, rather than negotiate, prices. This will inevitably lead to monopoly, with a resulting threat to the quality of our health care.

Second, the Democrats disingenuously argue their reforms will not diminish the quality of our health care even as government involvement in the delivery of that health care increases massively. For all of us who have seen the Federal Emergency Management Agency’s response to hurricanes, this contention is laughable on its face. When government bureaucracies drive the delivery of services—in this case inserting themselves between health-care providers and their patients—quality degradation will surely come. House Democrats seem willing to accept that problem to achieve their philosophical aim—the long-term removal of for-profit entities from the health-care landscape.

Third, Mr. Obama’s rhetoric paints a picture of a massive new benefit that will actually cost average Americans less than what they pay today. The Democrats want middle-class taxpayers to believe they won’t feel the pinch of this initiative, even as their employers are assessed massive new taxes. They might as well try to argue that up is down. The analysis of the Democrats’ proposal by the Congressional Budget Office shows that it will not reduce government spending on health care, and that it will substantially increase the federal deficit—and this despite all the tax increases.

I served in the U.S. House with a majority of the current 435 representatives, and I am confident that if given the proper amount of legislative review, they will not accept the flawed Pelosi plan that is currently stuck in committee. Yet there is general agreement among Republicans and Democrats that we need health-care reform to bring costs down. This agreement can be the basis of a genuine, bipartisan reform, once the current over-reach by Mr. Obama and Mrs. Pelosi fails. Leaders of both parties can then come together behind health-care reform that stresses these seven principles:

•Consumer choice guided by transparency. We need a system where individuals choose an integrated plan that adopts the best disease-management practices, as opposed to fragmented care. Pricing and outcomes data for all tests, treatments and procedures should be posted on the Internet. Portable electronic health-care records can reduce paperwork, duplication and errors, while also empowering consumers to seek the provider that best meets their needs.

•Aligned consumer interests. Consumers should be financially invested in better health decisions through health-savings accounts, lower premiums and reduced cost sharing. If they seek care in cost-effective settings, comply with medical regimens, preventative care, and lifestyles that reduce the likelihood of chronic disease, they should share in the savings.

•Medical lawsuit reform. The practice of defensive medicine costs an estimated $100 billion-plus each year, according to the American Academy of Orthopaedic Surgeons, which used a study by economists Daniel P. Kessler and Mark B. McClellan. No health reform is serious about reducing costs unless it reduces the costs of frivolous lawsuits.

•Insurance reform. Congress should establish simple guidelines to make policies more portable, with more coverage for pre-existing conditions. Reinsurance, high-risk pools, and other mechanisms can reduce the dangers of adverse risk selection and the incentive to avoid covering the sick. Individuals should also be able to keep insurance as they change jobs or states.

•Pooling for small businesses, the self-employed, and others. All consumers should have equal opportunity to buy the lowest-cost, highest-quality insurance available. Individuals should benefit from the economies of scale currently available to those working for large employers. They should be free to purchase their health coverage without tax penalty through their employer, church, union, etc.

•Pay for performance, not activity. Roughly 75% of health-care spending is for the care of chronic conditions such as heart disease, cancer and diabetes—and there is little coordination of this care. We can save money and improve outcomes by using integrated networks of care with rigorous, transparent outcome measures emphasizing prevention and disease management.

•Refundable tax credits. Low-income working Americans without health insurance should get help in buying private coverage through a refundable tax credit. This is preferable to building a separate, government-run health-care plan.

These steps would bring down health-care costs. They would not bankrupt our nation or increase taxes in the midst of a recession. They are achievable reforms with bipartisan consensus and public support. All they require is a willingness by the president to slow down and have an honest discussion with Americans about the real downstream consequences of his ideas. Let’s start there.

Mr. Jindal is governor of Louisiana.