inFocus Vol. 7 Issue 3 | Fall 2013
Quarterly
Roger Pilon on Constitutional Decline | Eileen O’Connor on a Broken and Burdensome Tax Code | Rep. Robert Bishop on the Potentials of Government Owned Land | Michael Mukasey on Democratic Restraint in the Middle East | Interview with Fmr. Speaker Newt Gingrich | Grace-Marie Turner on Prioritizing Patients in Health Reform | Michael Tanner on the Social Security Time Bomb | Anne Neal and William Gonch on Reforming Higher Education | H. Sterling Burnett on America’s Energy Potential | Skyler Schmanski reviews Top Secret America
inFOCUS examines government reach and overreach
letter from the Publisher
I
Contributors
n the Fall 2013 edition of inFOCUS Quarterly, former Speaker of the House Newt Gingrich defines “American exceptionalism” as the unique freedom the Founders vested in the citizens and the remarkable creative talent that free people generate. Our federal government, however, has become increasingly intrusive and individual choice has given way to “government by experts.” Washington tells us how to learn, how to care for the ill and aged, how to save for retirement, and how much we will pay for the government to make those decisions for us. Is it too late to return “power to the people”? As a strong believer in smaller government, the Jewish Policy Center put the question to our authors: How can we maximize individual control? Their answers are food for thought. Roger Pilon of the Cato Institute looks back in our history to show us how we arrived at this state of affairs. Former Attorney General Michael Mukasey reminds us that not every system that has an election is a democracy. Anne Neal and William Gonch of the American
Council of Trustees and Alumni, Michael Tanner of the Cato Institute, and GraceMarie Turner of the Galen Institute offer concrete steps that would restore more individual control to higher education, Social Security, and healthcare policy respectively. Eileen O’Connor, a former Assistant Attorney General, tackles fairness and accountability in the tax code. Sterling Burnett of the National Center for Policy Analysis and Congressman Rob Bishop make the case that less federal regulation would produce more domestic energy and better land management. Don’t miss the full interview with former Speaker Gingrich, one of the most creative minds in Washington and an optimist about America’s future. If you appreciate our work, please consider making a generous donation to the JPC. As always, you may do so securely at www.jewishpolicycenter.org/ contribute.php. Sincerely,
inFOCUS
Volume 7 | Issue 3
Publisher: Matthew Brooks Editor: Shoshana Bryen Art Director: Andrea Cohen Managing Editor: Shari Hillman Copy Editor: Karen McCormick Contributing Editor: Michael Johnson
inFOCUS is published by the Jewish Policy Center, 50 F Street, N.W., Suite 100, Washington, DC 20001. (202) 638-2411 The opinions expressed in inFOCUS do not necessarily reflect those of the Jewish Policy Center, its board, or its officers. To begin or renew your subscription, please contact the Jewish Policy Center. © 2013 Jewish Policy Center
WRITERS GUIDELINES Essays must be 1,600 to 2,000 words in length. Email submissions to info@ jewishpolicycenter.org. Check our website to ensure your topic works with scheduled themes of future issues before submitting.
www.JewishPolicyCenter.org Matthew Brooks, Executive Director
Roger Pilon is Vice President for Legal Affairs and Director, Center for Constitutional Studies, Cato Institute. (page 3) Eileen J. O’Connor served as Assistant Attorney General for the Tax Division, 2001-2007. (page 6)
Michael Tanner is a senior fellow with the Cato Institute. (page 23) Anne D. Neal is President of the American Council of Trustees and Alumni (ACTA). William Gonch is ACTA Senior Program Officer for Communications. (page 26)
Rep. ROBert Bishop represents Utah’s 1st District. (page H. Sterling Burnett, Ph.D., is a Senior Fellow at the National Center for Policy Analysis. (page 30) 10) Michael Mukasey was the 81st Attorney General of the United States. (page 13) Newt Gingrich is former Speaker of the House. (page 16) Grace-Marie Turner is president of the Galen Institute. (page 19)
Skyler Schmanski interned as a research assistant at The Jewish Policy Center in 2013. (page 33)
Politics, Constitutional Decline and Government Overreach by Roger Pilon, Ph.D.
“W
hat’s the Constitution among friends?” asked Ohio’s John F. Follett in the House in 1884. Still in the offing, constitutional decline was only stirring. In fact, three years later, 100 years after the Constitution was written, President Grover Cleveland would veto a bill appropriating the paltry sum of $10,000 for seeds for Texas farmers suffering from a drought. “I can find no warrant for such an appropriation in the Constitution,” his veto message said. Cleveland was simply echoing a long settled understanding that ours is a Constitution that authorizes only limited government. Not that calls for more government had not been heard from the start. In 1791, for example, Treasury Secretary Alexander Hamilton unveiled his Report on Manufactures—an early industrial policy scheme. Congress promptly shelved it. And in 1794, the Constitution’s principal author, James Madison, finding before him a bill for the relief of French refugees fleeing to Baltimore and Philadelphia from an insurrection in San Domingo, rose on the floor of the House to declare, unremarkably, that he could not “undertake to lay his finger on that article of the Federal Constitution which granted a right to Congress of expending on objects of benevolence the money of their constituents.” How quaint. Is there anything today that is not fit for government’s attention? Large sodas and restaurant menus have lately garnered notice. Retirement, healthcare, day care, wages, rents, prices, charity, even public radio and television—all that and so much more is the
regular business of modern American government because, as President Obama has so often put it, “We’re all in this together.” Indeed, “we sometimes forget,” he told Ohio State graduates last spring, “the larger bonds we share, as one American family.” The family vacation of old springs to mind: Do we go to the mountains or the beach? If we’re all in this together, we can’t go our separate ways. So how did a nation conceived in and dedicated to individual liberty take on the trappings of the collective mind such that so much of life today is lived through the state, as in the Obama campaign’s much parodied “Life of Julia” cartoon? How did we go from limited government to Leviathan, from the dominance of the private to that of the public sphere? Elements of
tirement undertaking when the ratio of Social Security contributors to recipients was 16 to 1. When it’s 3 to 1, as now, and the demographic handwriting is on the wall, those delusions are too dear to endure. Our children are already paying the price, as economists are now documenting. And Social Security is hardly the least solvent of our modern social welfare schemes. Obamacare was sold in part as the answer for our looming Medicare and Medicaid indebtedness, yet its numbers, clearer by the day, are making those programs look positively sound. What can’t go on perforce will not. Not surprisingly, those who designed our political arrangements understood this, and understood it systematically. Unlike so many other nations, we were
… the demographic handwriting is on the wall, those delusions are too dear to endure. Our children are already paying the price… both have been with us from the beginning, of course, but the presumption at the outset and long thereafter was for private, not public, initiative. That’s no longer true. Got a problem? Washington has a solution. Politics today is ubiquitous.
z The Original Design
The tale of that transition to massive government overreach is worth telling because if we don’t understand its roots and how to respond, the implications are stark. We could afford to delude ourselves about the solvency of our collective re-
blessed at the outset not to have a single or dominant religion but several, which meant that if peace were to reign, religion had to be a free private affair. To be sure, religious establishments were found at the state level—the last in Massachusetts until 1836—and religious strife was not unknown even after the Constitution was ratified. But the principle—that religion and government needed to be separated for the benefit of both—was understood and, more important, understood to be perfectly generalizable to most of life, including especially economic life, our
Fall 2013 | inFocus Examines Government Reach and Overreach
3
main daily business. More than once Madison said that the purpose of government was to secure property—defined broadly by John Locke as lives, liberties, and estates—for which we toil most of our waking hours. With the protection of property and contract as its main domestic function, government was to intrude little further into the market—or into other affairs, for that matter—leaving individuals otherwise free to assess and pursue their own interests, their own happiness. The results would never be perfect, of course, but they’d be better by far, the Founders believed, than the alternative—better than public management of the market and more. Nor would this
and there an individual,” wrote Frank Dekker Watson in 1922, then director of the Pennsylvania School for Social Service. Indeed, he commended the ongoing “crowding out” of private by public charity, conducted by “professionals,” for only so would “public funds ever be wholly adequate for the legitimate demands made upon them.” Progressive social engineering took many forms, but its efforts to change the world focused mainly on the political branches. Its aim was to replace judgemade common law, which established the legal framework within which individuals and organizations pursued their interests, with statutory law, enacted by legislatures and, in time, by the adminis-
…except for a court decision here or there, the only restraint on government overreach today, short of no longer being able to borrow, is politics… preference for individual liberty amount to saying “You’re on your own,” as President Obama has claimed. To the contrary, we’re perfectly free to join with others for religious, economic, charitable, artistic, or many other endeavors—provided only that it’s voluntary, not forced, not through force of law. In that sense, that proper sense, we are indeed “all in this together.”
z Progressive Social Engineering
But that wasn’t good enough for late 19th and early 20th century Progressives. They were in a hurry. What’s more, they believed they knew better than the rest of us what our true interests were. Schooled in the elite universities of the Northeast, imbued with British utilitarianism— which had supplanted the natural rights principles of the Founders—and German ideas about good government—Bismarck’s welfare state—Progressives were enamored with social engineering. “No person who is interested in social progress can long be content to raise here
4
trative agencies in the executive branch. Unlike common law, grounded in reason and custom, legislation of the kind Progressives championed reflected the policy preferences of the majority or, more realistically, of those best situated to influence the political system. Thus the shift from law grounded in principle to law as policy, from reason to will, and to the politicization of law—precisely what the Constitution sought to avoid. When all is politics, nothing is law. In the early decades of the 20th century the Progressive zeal for change through political action unfolded in ever-wider areas of life. Much of it focused on economic affairs, of course. Yet for all their efforts in the name of the “little guy,” what Progressives accomplished in the end was “the substitution of statemonopolies and cartels for competitive markets,” as legal theorist Richard Epstein has ably demonstrated, because they “thought they could tell a good monopoly from a bad one.” And why not? After all,
inFocus Examines Government Reach and Overreach | Fall 2013
they undertook their mission through the largest monopoly of all, government. Whereas the founding generation and many that followed saw government, in the classical liberal tradition, as a “necessary evil,” Progressives saw it as an engine of good, an institution able and even authorized to solve all manner of social and economic problems. At times that hubris reached disturbing lengths. One appalling example, inspired by the modern “science” of eugenics, was a push to improve our genetic pool by sterilizing those thought to be of insufficient intelligence—promoted by such luminaries of the day as the presidents of Planned Parenthood and Stanford University. Ruling for Virginia in a 1927 “sweetheart suit” brought against the state statute that authorized the practice, the sainted Justice Oliver Wendell Holmes concluded (in)famously that “Three generations of imbeciles are enough.” There followed across America some 70,000 sterilizations. None of this should have been possible, of course, under the Constitution as written and later amended. The original Constitution limited Congress’s authority to only 18 enumerated powers or ends. The Bill of Rights, added two years later, further limited how the federal government might exercise those powers. And the Civil War Amendments extended those further limits and more against the states. With the rise of Progressivism, however, often manipulating the era’s populism, the shift in the climate of ideas started to take a toll on our understanding of the Constitution. Whereas bills reflecting government overreach had most often never gotten out of Congress, or if they did presidents vetoed them or, ultimately, courts blocked them, those checks started to fail as Progressivism took hold. Such is the power of the Zeitgeist.
z Politicizing the Court— and the Constitution
The ensuing constitutional decline didn’t happen all at once. In fact, during those early decades the courts, the
tions, rules, guidance, and such of modern “administrative law.” “Government overreach” thus stands for more than government reaching into areas in which it is incompetent—
Thus the shift from law grounded in principle to law as policy, from reason to will, and to the politicization of law… states to the federal government. Seizing the opportunity afforded by the Depression, the administration of Franklin Roosevelt pushed massive expansions of federal power through a pliant Congress. But when those programs reached the Supreme Court, the nine old men, as they came to be called, stood athwart them. Shortly thereafter the crisis came when Roosevelt, following the landslide election of 1936, unveiled his notorious Court-packing scheme, his plan to pack the Court with six new members. Responding to the national uproar over the scheme, Congress refused to go along. But the Court got the message. What followed was the famous “switch in time that saved nine.” The switch began with two 1937 decisions. Without benefit of constitutional amendment, the Court eviscerated the main structural restraint on Congress’s power, the doctrine of enumerated powers, thus enabling Congress to bring into being the modern redistributive and regulatory state. To complement those rulings, in 1938 the Court effectively bifurcated the Bill of Rights, crafting in the process a bifurcated theory of judicial review that reduced property rights and economic liberties to a kind of secondclass status. And finally, in 1943 the Court upheld the growing practice in Congress of delegating ever more of its legislative power to the many administrative agencies it was creating—well over 300 such agencies today—thus sanctioning the modern executive state where most “law making” now takes place—the regula-
something we see in spades today. More important, it stands for government reaching into areas in which it has no authority—no authority under a natural reading of the text, structure, original understanding, and history of the Constitution. Thus, it’s not simply a matter of policy but of principle—constitutional principle. Our governments, unlike those in many parts of the world, can claim no “inherent” power. Whatever powers they have have been delegated to them by the people—not through periodic elections, which are meant to fill offices, but through their constitutions. Constitutions have two main functions: to authorize, institute, and empower the governments the people create through them; and then to limit that power. In the Federalist Papers we see how the Framers struck that balance. In particular, in Federalists 41, 42, and 44 Madison explains how the General Welfare, Commerce, and Necessary and Proper Clauses, respectively, were meant to be read—the very clauses the New Deal Court turned on their heads. And in Federalist 45 Madison draws it all together when he writes that the powers of the new government were “few and defined.” Contrast that with today’s federal government. And it isn’t as if the New Dealers weren’t aware of what they were doing. As legal historian William Leuchtenburg has shown, they debated whether to amend the Constitution or to simply pack the Court. The latter faction won out. Perhaps Rexford Tugwell, one of the New Deal’s principal architects, put it best: “To
the extent that these new social virtues [i.e., New Deal policies] developed, they were tortured interpretations of a document [i.e., the Constitution] intended to prevent them.”
z Reversing Course
Thus, today we live with that legacy of constitutional decline—and without the discipline the document was meant to impose on politics. The result was predictable and predicted. As noted above, we are spending as fast as we can borrow while regulating our liberties away. And that will not change until we come to grips with the nature and gravity of the problem. In a nutshell, except for a court decision here or there, the only restraint on government overreach today, short of no longer being able to borrow, is politics—because the New Deal decisions, to put it plainly, stripped the Constitution of most of its structural and substantive restraints on government. That’s what they were meant to do, to clear the way for the New Deal programs. By itself, therefore, the Court cannot reverse this process. At this late date, when so many have grown dependent on countless government programs, the Court can only chip away at the edges of Leviathan or, more important, say “No further,” as it did in several parts of its Obamacare decision. The heavy lifting will have to be done by the political branches—the very branches that propelled us into this situation. That speaks volumes about how difficult it will be to check this spiral, as we see when we look around the country at states, cities, and counties caught up in it, staring bankruptcy in the teeth. But the political branches, of course, are us. In the end, therefore, we have no one to look to but ourselves. Politics gave us the constitutional decline that enabled the government overreach we labor under today. Politics is what we have left to extract ourselves from that course.
Roger Pilon: Politics, Constitutional Decline and Government Overreach
last check in that process, resisted the decline to a substantial degree. With the arrival of the New Deal, however, things started coming to a head as Progressives shifted their political activism from the
Roger Pilon, Ph.D., is Vice President for Legal Affairs and Director, Center for Constitutional Studies at the Cato Institute.
Fall 2013 | inFocus Examines Government Reach and Overreach
5
The Federal Tax Code – Irreparably Broken? by Eileen J. O’Connor
C
asting aside the checks and balances our Founding Fathers so brilliantly embedded in the U.S. Constitution, the current Administration has time and again kept its promise to go its own way without regard to the will of the people as expressed by Congress or the rule of law as interpreted by the courts. The boldness of this Administration’s open dismissal of the Constitutional role of Congress to write the laws, and of the Courts to interpret them, has spawned a plethora of elite scholarship as well as accessible blog postings on what is viewed as overreach by this Administration. Perhaps you wondered what in the Constitution authorized the Executive Branch to hand out hard earned and under-penalty-of-law collected taxpayer
favor of its lower ranking—in terms of bankruptcy priorities—campaign-contributing unions. But while the actions of the federal government in recent years—and we need not pretend they are limited to this Administration or to the Executive Branch—have gone so baldly and boldly beyond what most Americans have considered the proper bounds of government, government overreach is nothing new in the tax arena. But for the most part it is not the Executive Branch that is to blame.
z Income Tax Laws in a Nutshell
The income tax provisions of the Internal Revenue Code can be summed up—depending on how much detail you want—in just a few sentences. Everything
Measure Congress’s success by the ways in which they have restored our government to its Constitutionally limited functions and thereby restored our personal and marketplace freedoms.
dollars to get “clunkers” off the roads. Or by what authority the White House strong-armed BP behind closed doors to commit, before any legal process had begun, billions of dollars to cover the costs of remediating the Deepwater Horizon disaster. Or where the bankruptcy laws were when the Administration stiffed Chrysler’s preferred creditors in
6
is taxable and nothing is deductible unless otherwise specified. Everything that is taxable is taxable now, and everything that is deductible is deductible later unless otherwise specified. It’s all those provisions to “otherwise specify” that create the complexity for which tax code is so famous. And reviled. Let’s take a quick look at it. The Inter-
inFocus Examines Government Reach and Overreach | Fall 2013
nal Revenue Code imposes several different types of taxes. It imposes the income tax, a tax on estates and gifts, excise taxes, and, new last year with the opinion of Chief Justice Roberts in NFIB v Sebelius, a tax on failing to buy an insurance policy to cover health situations you may never face. To simplify the discussion, take just the income tax for now. It seems pretty straightforward that an income tax would tax income, and that the person to pay it would be the person who received it. And that the amount of income subject to the tax would be determined after taking into account the expenses associated with producing the income. Income minus the cost of producing the income equals taxable income. Multiply the taxable income by the applicable tax rate, and you have your tax liability. Clear enough. Why then, do we have a tax code with more than 15,000 provisions relating to the income tax? Add the other taxes, and you have a code of nearly 30,000 provisions. Watch Congress for a while, and it’s not at all difficult to see how the tax code got this way. By the time they headed off for their August recess, lawmakers had, in the six months since the beginning of this Congress, introduced in the neighborhood of 400 bills to amend the Internal Revenue Code. Not 400 changes to the Internal Revenue Code, but 400 bills containing who-knows-how-many thousands of changes. People who were involved in the last major reform of the Internal Revenue Code in 1986 lament that, since then, the
Eileen J. O’Connor : The Tax Code – Irreparably Broken?
Code has undergone more than 15,000 changes. Our founding fathers understood the threat of such mutable laws. Under the pseudonym Publius, James Madison wrote on February 27, 1788: It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow. — Federalist Paper No. 62 Who can doubt what Madison’s reaction would be to today’s Internal Revenue Code?
z The deadline
Nothing focuses the mind quite like a deadline. Time is running out for the chairmen of the Senate Finance Committee and the House Ways and Means Committee, so they are joining forces to accomplish tax reform. Max Baucus (D-MT) is chairman of the Senate Finance Committee, but only until the end of this session. He announced in April that he would not run for re-election next year to a seventh term in the Senate. Dave Camp (R-OH) is chairman of the House Ways and Means Committee. His chairmanship is termlimited by the rules Republicans adopted in 1995. So even if he is re-elected next year to a 13th term in Congress, his days as chairman of the House Ways and Means Committee will be over at the end of this session. They are working together to build support for tax reform while they are still in a position to do something about it, putting together a “traveling road show,” and setting up a website to collect ideas from the public. On the home page of their site they write:
We’ve launched this Web site, TaxReform.gov, to give you the opportunity to provide your input, and we are active on Twitter (@simplertaxes) as well. No need to travel to Washington. Through the use of social media, we want all Americans to participate directly… Tax reform can’t be about politics. It has to be about restoring some trust in government, improving the lives of the people we serve, about boosting the economy, about creating jobs in Montana, Michigan and across America. These are laudable goals: improving lives, boosting the economy, creating jobs. But through tax reform? True to their theme, in a statement announcing upcoming visit to San Francisco and Silicon Valley, the tax buddies said, “The focus of the California trip will be how a simpler and fairer tax code can help spur innovation and boost America’s economy.”
So true. Like taking your boot off someone’s neck can help them breathe better. The Camp-Baucus view of the tax code is one of the problems with it. Lawmakers view tax laws as their own personal toolkit, holding the solution to all problems. Want to discourage something? Tax it or deny a deduction for it. Want to encourage behavior? Provide a deduction for the cost of doing it. Want to really encourage it? Provide a credit for the cost of it. Credits have gotten particularly out of hand; more on that in a moment.
z Blank slate
In addition to his efforts with Rep. Camp, Sen. Baucus has also partnered with Sen. Hatch (R-UT), ranking Republican on the Senate Finance Committee. Together, they are pioneering a “blank slate” approach to tax reform. It does not, however, really start from scratch, as its name might suggest, designing a new tax system. It does not reconsider, for example, the double taxation of corporate income, progressive rate brackets versus single rate of tax, the distinction between
Fall 2013 | inFocus Examines Government Reach and Overreach
7
ordinary income and capital gains, or whether, having paid income taxes on all your earnings all your life, your estate should owe taxes at your death on what you managed to save instead of spend, or whether the United States should continue to have the world’s highest rate of tax on the income of corporations, multinational or otherwise. There are, however, separate efforts addressing that last issue. Rather than asking, as do most tax reform projects, what about the current Code ought to be simplified, amended, jettisoned, or replaced, Hatch and Baucus have informed their colleagues that their working hypothesis is that all “special provisions” in the current Code have to go, except those for which there is “clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.” By “special
Congress got even more imaginative. In recent years, they have positively outdone themselves. Early credits were, and still are, a percentage of the amount of the approved expenditure. The investment tax credit, for example, when there was one, was for some years 10 percent of the amount of your investment in capital equipment. The credit for household and dependent care services necessary for gainful employment is 20 to 35 percent of the cost of the services. Dozens of other credits are similarly limited to a percentage of your Congressionally approved outlay. Then, Congress began to provide credits amounting to 100 percent of the approved expenditure. But even oldfashioned credits of 100 percent of the outlay were only useful if you had a tax liability against which to apply them. So lawmakers invented the refundable tax
One hundred eleven billion … and as much as $133 billion … in Earned Income Tax Credit handed out to fraudsters. provisions,” Baucus and Hatch mean, “exclusions, deductions and credits and other preferences that some refer to as ‘tax expenditures.’”
z Tax Expenditures, Especially Credits
If you spend your money on something of which Congress approves, you are permitted to deduct that amount in determining your taxable income. That is, you “get” a deduction. But a deduction only reduces the cost of the thing of which Congress approves. So if you are in, say, the 35 percent tax bracket, and the outlay was $10,000, you are still out of pocket $6,500 even taking into account the “tax benefit” of the outlay. When Congress really wants to encourage or reward something, it provides a credit for it. Credits were already an interesting enough phenomenon, but then
8
credit. For these, if you don’t have a tax liability against which to apply them, the government will send you a check. This is the type of credit Congress has used to enlist employers in—shall we say—spreading the wealth around. The Earned Income Tax Credit (EITC) is designed to reduce the tax burden of people who have jobs and are receiving a paycheck. While the income tax can be reduced to zero by withholding exemptions, Social Security withholdings cannot. This is where the EITC comes in. It offsets Social Security taxes, effectively reducing or eliminating them. The mechanics of the credit are this: while the employer withholds income and payroll taxes from some employees, it pads the paychecks of the employees who qualify for the EITC. The employer literally takes from some employees and gives to others every payday on behalf of the federal government. If the credit exceeds the ap-
inFocus Examines Government Reach and Overreach | Fall 2013
plicable taxes, the employee gets a check from the Treasury after filing his or her tax return. The EITC, while hailed by some as one of the most effective anti-poverty programs, is known to be fraught with fraud. The Treasury Inspector General for Tax Administration reported earlier this year that at least 21 percent and as much as 25 percent of the Earned Income Tax Credits paid—not applied for, paid—in the past two years were fraudulent. GAO disagrees. It says the fraud rate was between 27 percent and 32 percent. One hundred eleven billion (yes, billion) and as much as $133 billion (yes, billion) in EITC was handed out to fraudsters in the ten year period ending last year. Your hard earned tax dollars at work. Supporting criminals. In recent years, even the refundable credit wasn’t quite flexible enough for lawmakers. Voila: the refundable transferrable credit. So not only do you not have to have a tax liability against which to apply the credit, you can ask Uncle Sam to send your check to someone else. This last is useful in the case of IRS-facilitated Obamacare. Having determined, on the basis of the information you provided for that purpose, that you qualify for an Obamacare subsidy, the IRS will send that subsidy—the refundable transferrable credit—to your health insurance provider. But if tax incentives are such an effective way of encouraging people to engage in certain economic or social activities, why then are there so many companies in the business of undertaking studies to identify tax deductions and credits for which you qualify but didn’t claim?
z What Can We Do?
1) Insist that our elected representatives have, or at least appreciate, real world experience. Having signed the back of a private sector paycheck would be good. Having signed the front would be even better. 2) When listening to lawmakers talking about legislative proposals, listen for “make sure.” Once you begin listening for it, you will hear it interminably. “By en-
The Jewish Policy Center Board
Chairman: Richard Fox Honorary Chairman: Sheldon B. Kamins Vice Chairmen: Marshall J. Breger Michael David Epstein General Counsel: Jeffrey P. Altman
options, doctors no in longer looked there is aand lot of readiness Western Euto thetopatients orantheir communities for rope recognize independent Palestinpayment. Rather than remove thisitsdistorian state.” Indeed, the PA next set sights tion from market, though, Congress on the EU,theinterested in building upon instead nationalized one-sixthtoofconvince the naits success in Latin America tional eliminated forever, enougheconomy membersand to also support the UDI. unless it can be repealed, Americans’ ability to select and pay their doctors. z Soft Subversion atown Play 5) taxes are concerned, aim TheWhere vote for Palestinian statehood at the belongs. and Sure,designed the IRS the blame UN is where largelyitsymbolic has done aanlotinternational lately that deserves to create impetus critifor a cism and even condemnation. That is a boycott and divestment campaign to pressubject for toanother time. Forborders now, let sure Israel accept untenable in us the laws itBut is called upon to anyfocus finalon agreement. the passage of enforce, too many the UDI and will acknowledge upend decadesthat of diplomatic people blame IRS States when they should work by the the United and Europe be aiming derision to forge an their agreement that atfirstCongress. requires More often than not, what berecognition of Israel’s rightthe to IRS exist,is and ing criticized is something might actuallyforstand a chance Congress of creathas of it. Put thedeal. blame where it ing required a sustainable peace The speed belongs: Let’s hold them at which our bothlawmakers. the U.S. and Israel adapt to accountable what they have caused counter theseforsoft subversion tactics will our tax code to become, by adddetermine whether therewhether is any chance for ing to the problem or failing to fix it. peace, or whether misguided diplomacy, once again, will lead to war. Eileen J. O’Connor served as Assistant General the Tax JON Attorney B. PERDUE is thefordirector of DiviLatin sion, 2001-2007. She is the author of the America programs at the Fund for Ameriforthcoming bookis“Stop It Already!” can Studies, and the author of the forthcoming book, The War of All the People.
Jon B. Perdue: Soft :Subversion and– Palestinian Eileen J. O’Connor The Tax Code Irreparably Statehood Broken?
acting this also provision, will make sure Make once it clear elected replomat was quotedwesaying that Lula’s more4)helpful heto leftyour office. that no child goes hungry ” Too resentatives in the House Senate that Middle Eastever freelancing wasagain. “transparLula’s influence with and Argentina’s leftmany lawmakers really do wish- you not measure their successwas by the ent” and only designed to believe gain support wingdo president Cristina Kirchner key ing—or legislating—makes it so. If only. number of bills they have proposed for a spot on the Security Council. to the UDI effort. Argentina is home or to Wake them up. A people free to act in gotten passed, and certainly notcommuby the Latin America’s largest Jewish their own best interests is the best guar- amount of your money that have z Supporting the UDI nity, making it a challenge for they the lobbyBrazil under Lula became the first to ing effort. But a simultaneous diplomatic unilaterally endorse a Palestinian state (in- effort by Walid Muaqqat, a veteran PalesMorepre-1967 often borders) than not, what the IRS is being side Israel’s in Decemtinian diplomat in the criticized region, convinced ber 2010, which at the time undermined the Argentine government for is something Congress has required of it.to announce U.S. negotiations between Israel and the its endorsement of a Palestinian state, also Palestinians. He was also responsible in December 2010. antor of good outcomes. away, either directly or through tax for convincing the presidents of Argen- givenThe Washington Post reported in Febthat to virtually credits be breaks. Youthis measure success by the tina 3) andInsist Uruguay endorseall a Palestinian ruary that “was atheir strategy Palestinian eliminated from theUruguay InternaltoRevenue in which they have restored our govstate, and prompted sponsor ways diplomats repeated across the continent Code except those that represent an acernment to its Constitutionally two summits in support of the proposal. last year, taking advantage of the limited region’s tual payment of taxes. quiet You should have in a functions and thereby ourworld perThe Palestinians’ campaign growing economic ties restored to the Arab credit against yourcome taxesunder for the tax scrupay- sonal and marketplace freedoms.its indeUruguay has since greater and eagerness to demonstrate ments thatIran’s youcharge have made through withIt wasfrom the employer deduction tiny after d’affaires, Hojjatollah pendence Israel’s powerful ally, for the holding or quarterly payments, with your employer-provided healthcare with no Soltani, denied the Holocaust in a public United States.” The Argentina endorseextension the applicationCultural of last counterbalancing employee reported inspeech at request, the Uruguay-Sweden ment, coupled with that of Brazil, started year’s or your overpayment that elementwith of compensation Centeroverpayment, in Montevideo. “They (the Nazis) come a “mefor too” cascade, countries like of Social Security railroadJews, retirement created theally problems in the killed perhaps a fewor thousand but that that Chile, a strong of the U.S. and healthheaded taxes. Any other outlay that is treated care industry. Interfering with the doctornumber of millions ... is a lie,” Soltani told by a right-wing government, quickly anas though it were payment of federal patient relationship and installing a thirdthose gathered at theaevent. nouncing their endorsement of statehood taxesLula ought to be to the approwas alsosubjected the progenitor of the party as well.payor skewed decision-making priations process administered by an on both of the doctor-patient first Summit of and South American-Arab The sides Washington Post article relaalso agency that knows something about the tionship. Patients no longer considered Countries (ASPA by its Portuguese and quoted Nabil Shaath, the Commissioner of subject relative costs of various healthcare Spanishmatter. initials) in 2005, where he as- the International Relations for Fatah, saying, sured Abbas that he would become even “Our next target is Western Europe. I think
Board of Fellows: Richard Baehr, William J. Bennett, Mona Charen, Midge Decter, David Frum, Rabbi Joshua Haberman, David Horowitz, Rabbi Daniel Lapin, Michael A. Ledeen, Michael Medved, Larry Miller, David Novak, Daniel Pipes, John Podhoretz, Norman Podhoretz, Dennis Prager, Tevi Troy, Ruth Wisse
Board of Trustees: Diana Epstein, Cheryl Halpern, Joel Hoppenstein, Eliot Lauer, Mark L. Lezell, Herman Obermayer, J. Philip Rosen, Walter Stern
Fall 2013 | inFocus Examines Reach and Overreach Fall 2011Government | inFocus: A Palestinian State?
9 11
10th Amendment Solutions by Rep. Rob Bishop (R-UT)
H
ow a government deals with property is the window to the soul of that government. Property may be a tangible item and liberty may be an intangible value, but the preservation of both is the historic purpose of American government. The preservation of one is the precondition to the preservation of the other. Sir Henry Maine wrote, “Nobody is at liberty to attack...property and to say at the same time that he values civilization. The history of the two cannot be disentangled.” The proper use of property raises mankind from political slavery. The Constitution allows the federal government to own property specifically for “Forts, Magazines, Arsenals, dockYards, and other needful Buildings...” (Art. I Sec. 8) Today, however, the federal government owns one-third of all the land in the United States. That is one hell of a needful building. The concept of the federal government as an absentee landlord for massive amounts of America was never the intention of those who founded this country. It just sort of happened. While the attitude toward private property never “officially” waivered, implementation of policy did. The policy toward “land” in America was never static. Colonial land was first used to encourage immigration; then the sale of territorial lands was used as a source of federal revenue; later territorial lands were used to promote homesteading. Most of these efforts were futile because the lawmakers in Washington passed laws for use of lands thousands of miles away from their understanding. During the Progressive Era, the paradigm again shifted, and the federal government decided just to keep the land. This was not about preservation of land. There was
10
no evidence of private or state mismanagement of land. There was no well-conceived plan for the land. They just kept it. The apparent concept was the West needed to be protected from itself, and only those in Washington had the proper national vision to make decisions. If a conflict occurred between Washington’s views and local government’s views, obviously Washington’s views were superior. This concept is as fallacious today as it was then. Federal land is currently found disproportionately in the West. Fifty-two percent of the thirteen western states are federally owned; only 4 percent of the other 33 states is part of the federal estate. There are national parks in 49 of the 50
policies for the conservation, recreation, and economic use of federal land. Whether from fear of lawsuits, “analysis paralysis,” or political ideology, federal land managing agencies are so frozen by fear of human use that devastating wildfires, insect infestation, invasive species epidemics and closing of large areas to recreational access and resource utilization are now the norm. State lands, in contrast, are more often successful in providing the full range of benefits our resource rich lands can provide. Our goal should be to expand opportunities for outdoor recreation, economic growth and conservation, but under federal management, these opportunities shrink. Governor Herbert of
… locally determined decisions tend toward the practical, and local stakeholders and elected officials look for commonsense solutions. states, so most people in the East think of federal land as national parks, but only 13 percent of public land is actually national parks. The rest is land few would consider necessary to the functions of federal government. Conflict develops because those closest to the land have significantly less input into the land’s use and preservation. Robert Nelson in Public Lands and Private Rights stated, “The people of the West thus were pawns to the romantic imagination of the East.”
z State Solutions
The Subcommittee on Public Lands and Environmental Regulation, which I chair, held recent hearings where expert witnesses illustrated how federal agencies are unable or unwilling to adopt sound
inFocus Examines Government Reach and Overreach | Fall 2013
Utah addressed the issue in an appearance before the Subcommittee: “No one is more committed to the most effective use of limited resources for the best possible outcome, for both our lands and our citizens, than those who will directly live with the consequences of those decisions.” Western states have demonstrated superior management practices.
z Forest Health
In recent congressional hearings, Natural Resources Committee Chairman Doc Hastings pointed out that in the State of Washington following last year’s wildfires that consumed 68,000 acres of state land, their Department of Natural Resources harvested 10 billion board feet of salvage timber. In contrast, on the
The federal government manages 20.4 million acres in Idaho; Idaho manages and owns just less than 1.3 million acres of forest land. Even though the Forest Service is the largest forest land manager in Idaho, the State and private forests provide over 90 percent of the wood milled in Idaho. Timber harvests on federal lands in Idaho are the lowest they have been since 1952, and less than 1 percent of national forests are logged nationwide each year. In 2012 the Forest Service harvested an estimated 100 mbf of timber in Idaho, while the State of Idaho harvested 356 mbf and private forest owners harvested 634 mbf. Chart 1 illustrates the stark comparison between state and federal management. It’s not just jobs threatened by federal mismanagement. The forests themselves are being harmed. During the fire season we see the consequences of the failure to manage federal forests on a sound, sustainable basis. The lack of appropriate federal management has created unhealthy forests, tinderbox fuel build-up and overcrowded weakened trees that are unnaturally vulnerable to disease, insects and fire. The conditions are different on state lands.
Chart 1 Forest Management: State Success versus Federal Failure Washington
Montana
Idaho
Department of Natural Resources
USFS
Department of Natural Resources and Conservation
USFS
Department of Lands
USFS
Total Forest Acres
2.2 million
9.3 million
559,000
17.1 million
971,678
20.5 million
Average Harvested Volume (million board feet)/Year
567.3
79.9
52.1
82.8
232.7
93.7
Average Harvested Volume(million board feet)/Acre
257.9
8.6
93.2
4.8
239.4
4.6
State volume per acre over 30X more Forest Service volume/acre than USFS
19X more volume/acre than USFS
52X more volume/acre than USFS
Average Revenues/Year
$169 million
$589,926
$8.9 million
$1.6 million
$53.8 million
$1.2 million
Revenues/Acre
$77
$0.06
$16
$0.09
$55
$0.06
State value per acre over Forest Service Average Price Bid for Timber Sale (dollar/thousand board foot)
z Recreation
1283X more revenue/acre than USFS $310
$6
Opportunities for outdoor recreation on federal lands are also often stifled for ideological reasons. Although some activist groups and allied federal officials want to be associated in the public mind with outdoor recreation, in reality “recreation” to them means only the limited activities allowed in designated wilderness areas. The fact is that the non-wilderness component of outdoor recreation enjoys a far greater level of public participation and makes a greater contribution to the local economy. For some federal land managers public enjoyment of even those activities that are not prohibited in wilderness areas are strictly secondary to their vision of a landscape where humans are not allowed. Recently, in both Yellowstone and Grand Teton National Parks, kayakers and canoeists were told that they would not be allowed in large parts of the Snake River headwaters that had been designated as Wild and Scenic. It did not matter that the legislation that designated the river as Wild and Scenic specifically mentioned recreation as a purpose of the designation. A similar hostility to public recreational use of public land was displayed in Washington state where a National For-
178X more revenue/acre than USFS
$172
$19
917X more revenue/acre than USFS $231
Rep. Rob Bishop: 10th Amendment Solutions
300,000 acres of National Forest land that burned in that state there was no salvage operation, no active forest restoration and no timber jobs created. A Washington state forestry expert testified, “In 2011, state trust lands yielded a harvest of 560 million board feet of timber which generated $220,000,000 in revenue from 2.1 million acres of land managed on behalf of the trusts. By contrast, National Forest lands in Washington yielded 129 million board feet generating revenue of only $638,000 on 9.3 million acres or one fifth of what the state produced on a quarter of the land base.” Other public land states tell the same story. Governor Otter of Idaho testified about forestry practices in his state:
$16
est supervisor withdrew a permit that allowed a pack and guide service to operate in a wilderness area. The supervisor said she was not comfortable having a commercial operation in “her” wilderness area. Similar changes are proposed in Yosemite National Park where the managers want to close family-friendly facilities. The most sought after family campsites are along the river; those are the ones to be closed. If one enjoys riding trails on horseback, bring a horse because the rental facility will be closed. In Cape Hatteras National Seashore in North Carolina, the most popular sections are closed to visitors during peak season due to a “sue and settle” arrangement between an environmental group and the Park Service. The restrictions go far beyond what the U.S. Fish and Wildlife Service said was needed to protect wildlife. A couple of years ago a BLM official tried to ban firearms in a remote desert area because he imagined the gunshot sounds of target practice would frighten urban visitors. Small businesses such as outfitters, guide services, and canoe rental concessions, whose services are essential for public enjoyment of our parks, are increasingly subject to unreasonable permit conditions such as extravagant insurance policies that are unaffordable by a small, family busi-
Fall 2013 | inFocus Examines Government Reach and Overreach
11
Utah’s LaSal Mountains from Dead Horse State Park ness. Many will be forced out of business. We don’t see this growing wave of restrictions in state run facilities. In part this is due to the labyrinth of federal laws, regulations and the Washington mindset that drive out creative innovation and adaptation. It is also because locally determined decisions tend toward the practical, and local stakeholders and elected officials look for commonsense solutions. As a contrast, at the Sand Flats Recreation Area in Utah, the federal Bureau of Land Management admitted it had neither the resources, man-power, nor desire to regulate a popular recreation area. After a near riot experience, the federal government finally decided to contract the management of the area to the local county. Since then the area has been a favorite destination site for outdoor recreation in Utah. It has been profitably managed as well. This pattern should be replicated. The advantages of state solutions to conservation problems are apparent in the current efforts to conserve the sage
12
grouse, a species that lives in the vast sagebrush habitat found in eleven states in the West. The states have taken the lead and crafted highly effective, site-specific protections tailored to the bird’s local habitat needs. The states have practical solutions to this problem. It remains to be seen whether the federal government will allow these efforts to succeed or will instead impose a federal takeover of these conservation efforts. After all, Washington’s views are by definition, “superior.”
z Federalism
Federal public lands have almost unlimited space for outdoor recreation while also providing abundant potential for food, fiber, mineral and wildlife habitat, if these lands were managed as wisely as state lands. Applying the principle of federalism to public lands would benefit the lands, our resources, and the American people. Those who live near public lands tend to understand public land issues
inFocus Examines Government Reach and Overreach | Fall 2013
better than those who live in congested urban centers. If public land were distributed evenly around the country perhaps perceptions would be different. Federalism need not be a partisan or ideological issue. Federalism doesn’t necessarily mean the end of programs; it means the end of inefficient government programs that do not meet the needs of people. Federalism means people have options and the right to choose the direction of government services. There are sections in this country where the people may want a robust public sector. Fine! Federalism allows the growth of those local governments without bothering other areas unimpressed with a robust public sector. In other words, people should choose, even if that choice is wrong. The fundamental truth is that Federalism gives more citizens more of what they want more of the time. Congressman Bishop represents the First District of Utah.
Law and Ideology by Michael Mukasey Editor’s Note: The following is adapted from a speech delivered by former Attorney General Michael Mukasey in Washington. It is included in this issue devoted to governmental overreach because the ideological underpinnings of governments determine how both the United States and its adversaries approach the issue rule of law – the sine qua non of democratic restraint on governmental overreach. The spread of religion-based government, specifically Islamic government—poses a serious potential threat to American national security interests.
I
n the spirit of the ancient Chinese curse, “May you live in interesting times,” these are interesting times. It is useful to talk about three places where the times are particularly “interesting”—in the Middle East in general, in Turkey in particular, and in the United States—and how they are connected. I will give it away at the beginning so there is no suspense about where I am going. We live in a dangerous world. Much of the danger comes from Islamist extremism, a force that has been directed at us in the past and will be in the future. But it is a force that in the years ahead will mainly be directed within and among Muslims, just as terrorist acts have killed more Muslims than non-Muslims in the past. But some of it will come our way, just as it has in the past.
z The Middle East
The Egyptian experiment in Islamist government, Muslim Brotherhood government, appears to be over. But much of the so-called “Arab Spring” in Egypt and the tenure of Mohammed Morsi would have been disturbing to Americans, if they had seen it in Western media. It would have clarified for many the dif-
ference between democratic government and Islamist government. As the revolution unfolded, Americans saw fascinating coverage from Tahrir Square of the modern, secular side of Egypt and the influence of Twitter and Facebook; not so much of the public rape of a CBS journalist in Tahrir Square to shouts of “Allahu Akhbar.” Even less has been seen of the unfolding of undemocratic and dangerous trends. During President Morsi’s aborted administration, the Sinai Peninsula, for example, emerged as a refuge for Hamas-trained terrorists who traveled freely from Gaza, importing weapons and launching attacks that killed Israelis and, increasingly, kill Egyptians. Public attention was not focused there. During the Morsi administration as well, Americans saw little coverage of the return to Egypt of Sheikh Yusuf Qaradawi and his triumphant sermon in Tahrir Square. Qaradawi is praised in many quarters in the West as a liberal and reformer who has, among other things, stood up for women’s rights, and so he has—to the point of issuing a fatwa authorizing women to participate in suicide bombings equal to men. President Morsi gave his inaugural speech in Tahrir Square, but where was the coverage of his remark that one of his principal goals was to secure the release of Omar Abdel Rahman, the Blind Sheikh, who sits in a U.S. prison convicted on terrorism-related charges? Mr. Morsi was on Egyptian television in a mosque answering “amen” to a prayer for the dispersion and destruction of the Jews—a sort of a “Reverend Wright” moment for him. It was not seen on American television— only in a YouTube video and thus only by a minority of Americans. He referred to Jews as the descendants of apes and pigs; a statement deplored by presidential
press secretary Jay Carney but with otherwise no penalty. That’s a pity, because Mr. Morsi was not improvising, he was quoting Koranic scripture. Morsi’s departure at the hands of the military, while itself an undemocratic act, removed a most undemocratic regime. Americans have to know that and know that elections do not, all by themselves and without more, make democracies. In Tunisia, where the Arab Spring began, Islamists are in control. Their leader, Rashid Ghannouchi, like Qaradawi, returned from exile to lead his party. Barely five years ago, he called for the public hanging of two Tunisian intellectuals (one a woman) who were too vigorous for his taste in their support of women’s rights. But even a member of The Wall Street Journal editorial staff in a column several months ago assured us that Ghannouchi is a new breed of Islamist—with a sense of irony and of humor. Ghannouchi even assured the Journal editor that he would not seek to ban alcohol in Tunisia because it is well known that alcohol is consumed privately, and he recalled that the United States had an unpleasant experience when it tried that experiment some decades ago with Prohibition. Quite ironic and humorous. And apparently the spiritual successor to the parade of Soviet premiers back in the 1970’s who, as we were told when each took power, must be men of peace because they drank scotch and listened to jazz. Some months ago, the op-ed page of The New York Times, that communal warm bath of bien-pensant liberal thought, carried an article by columnist Roger Cohen assuring Americans that the U.S. government could work with the Muslim Brotherhood, which he portrayed as centrist pragmatists. Pragmatic, perhaps; centrist is another matter. The Muslim Brotherhood motto, which has
Fall 2013 | inFocus Examines Government Reach and Overreach
13
not changed from its founding to today, is, “Allah is our objective; the prophet is our leader; the Quran is our law; jihad is our way; dying in the way of Allah is our highest hope.” The fact that the organization still exists after decades of suppression by governments in Egypt from Nasser to Mubarak, is testimony to its resilience, and to the ability of its members to use tactical deception—there is a word for it: taqiyah—to tack in one direction and then another toward an ultimate goal.
z Sharia in Governance
It is by no means accepted in this country that there is a need to understand Islamism and take a defensive posture with respect to it, mainly because Islamism claims to be, and in fact is, rooted in a religion. Because respect for diverse religious observance in the United States is written into our founding documents, and because of the limited role that religion plays in our own country’s governance, Americans tend to think of religion as only one aspect of a person’s life, and a private, non-governmental aspect, at that. However, many of the world’s 1.4 billion Muslims adhere to a religion that agrees on the need to impose sharia (Islamic law) on the world, beginning with that parts that at any time were Muslim (referred to as Dar al Islam, the domain of Islam). This includes not only what we would conventionally think of as Muslim countries, but also Spain—referred to by Islamists as al-Andalus and once a part of the Islamic caliphate—as well as any part of the Western world that comes under control of Muslims. The result is that some Muslims-majority suburbs of Paris are “no-go zones” for police and even fire fighters unless they have the consent of local Islamic authorities. The other part of the world, to which there is also an obligation to spread sharia, is called—significantly—Dar al Harb (the domain of war). The war is a religious one to impose sharia, a comprehensive legal framework that has spiritual aspects, to be sure, but regulates behavior Americans would call the domain of secular
14
Egyptians gather in Tahrir Square to protest the government of Mohammed Morsi in June 2013.
government—economic, social, legal, military and political activity. Because it is all-encompassing, and lays claim to being divinely inspired, it regards the Western notions of “the will of the people,” “self-determination,” minority rights and limited government that are enshrined in democratic societies, as anathema. That is to say, sharia is totalitarian and profoundly anti-democratic. And this is not an academic reading of obscure texts. Within the last few months, a Saudi cleric, a former dean of the sharia faculty at Islamic University at al Medina in Saudi Arabia, praised al Qaeda and the killing of Ambassador Christopher Smith during the September 11, 2012 attack on the U.S. facility in Benghazi because he represented an “infidel government” and therefore did not deserve diplomatic protection. In January, Egyptian Salafi leader Muhammad al Zawahiri, brother of al Qaeda leader Ayman al Zawahiri, told the London-based Arabic daily Al Sharq al Awsat that democracy contravenes the precepts of Islam by placing sovereignty outside God’s hands. It is possible to debate how broadly this influence runs, but it is far from a fringe; it is highly influential in the Middle East and it is increasingly influential
inFocus Examines Government Reach and Overreach | Fall 2013
in the West. What is not debatable is whether this ideology exists, and whether those who adhere to it consider themselves to be at war with the United States and the West in general, and whether this ideology motivates a continuing threat to the United States and its interests around the globe. They do and it does.
z American Interests and Strategy
Any realistic counter-terrorism strategy—which is to say any strategy intended to prevent attacks and in general to avoid losing ground to terrorists and their allies, rather than dealing with attacks after they have occurred and people have died and property been destroyed— has to accept the existence of the enemy. There are those who have decried the ouster of President Morsi by the military as a blow to democracy and something to be opposed on those grounds. That depends on your definition of democracy. If it means a system in which a majority at a given moment can impose its views permanently on the rest of society, with no regard for the rights of the minority and no opportunity for the polity as a whole to reconsider what the majority has done, then yes, the removal of Morsi was a blow to democracy.
sia, in Syria, in Turkey, is less a springtime reverie than the melting of what had been the frozen swamp of politics in Muslim countries. It is going to be a long time before the forces unleashed there settle. That is NOT a suggestion that Muslims are somehow incapable of democracy, but it notes the reality that in Western Europe, it took several hundred years—until the Treaty of Westphalia in 1648—before inter-religious violence declined (and ethnic violence continues, albeit in modified form since the 20th Century). It may not take the Middle East as long as it took Europe, as they have a guidebook in the form of the experience of Western civilization that Western civilization did not have when it became Western civilization. But it appears that violence will continue for some time and that it will be principally between and among Muslims as they try to sort things out for themselves. But some of the violence will be
its face, but it does offer an opportunity is to show that America can do better and not generate panic. The Administration and Congress need to show they are serious about our national security; that they are adults. There is no more adult issue— and no more important issue—than protecting the safety of the American people. When people purport to find imaginary rights in the Constitution—or, more accurately, rights in an imaginary Constitution—serious scrutiny should be applied to their thinking. The drafters of the United States Constitution were practical men; they well understood the need for and the uses of secrecy. In fact, the Constitution itself was drafted in secret behind closed doors, even in the sweltering heat of summertime Philadelphia because the Founders understood they could not accomplish their task if people could not exchange views with the expectation that their words would not be
Michael Mukasey: Law and Ideology
But if you believe that democracy involves a system grounded in respect for minority rights and open to the possibility of change in all direction, then perhaps what the Egyptian military has done is, as some have said, simply what the Wehrmacht should have done in 1933. Movement toward and away from democratic norms requires consideration of Turkey under Prime Minister Recep Tayyip Erdogan and his AK Party, which is increasingly open as the Turkish branch of the Muslim Brotherhood. Over the summer, Istanbul residents resisted the government’s efforts to appropriate a park traditionally used as a gathering place to express opinions. The protests were largely peaceful, but the government decided their opinions were not welcome. Riot police with batons and tear gas met protesters with massive arrests and some brutal treatment. That should have been big news— Turkey is a NATO country and the showcase of “moderate” Islamist governance. But it was never made the front page of The New York Times, and barely made the inside. Another bit of news from Turkey, The New York Times apparently did not think “fit to print” concerns the record number of journalists arrested and harassed, and the hundreds of current and former military officers jailed—sometimes for years—under vague charges of conspiracy. These are extraordinarily undemocratic procedures, but Turkey under Erdogan is not about democracy. Turkey was a democracy before Erdogan came to power, but it is increasingly about Islamization. Erdogan himself has confidently announced that he finds the term “moderate Islam” to be “ugly and offensive,” adding, “There is no moderate or immoderate Islam. Islam is Islam; that’s it.” No surprise. This is the same Erdogan who in 1994, as mayor of Istanbul, proclaimed himself a “servant of sharia,” and said that to Islamists, “democracy is just the train we board to reach our destination. When we get there, we get off the train.” What is happening in Egypt, in Tuni-
Americans have to know that elections do not, all by themselves and without more, make democracies. directed outward, at us. The United States cannot control the outcome of intramural disputes in the Muslim world, although we can take modest steps in some cases to help. In the interim, we must defend ourselves. And that brings us to the United States, where President Obama declared to an audience at the National War College that the “war on terrorism” is over. That day, a British soldier was hacked to death on the streets of London, and his attacker cavorted in front of a camera waving his blood-soaked hands and shouting “Allahu Akhbar.” Our principle weapon in this war is intelligence, but the wholesale dissemination of American intelligence information by hackers and leakers—and compromises to our ability to gather information— have been hailed even by some people with authoritative knowledge of matters of national security. That is distressing on
disclosed and distorted and subject to pressure. The Constitution itself provides that although both Houses of Congress are required to publish a journal to record their proceedings, that requirement does not apply when in their judgment secrecy is required. The United States must have as strong a commitment to a robust and intelligent defense as we do to small and honest government. If we do, the country will prevail. If we simply use the intelligence and national security debate as an excuse to run around and holler that the sky is falling, we won’t. And if we don’t, we will have made the path of our adversaries toward our diminution or destruction that much easier. Michael Mukasey was the 81st Attorney General of the United States, serving from November 2007 until January 2009.
Fall 2013 | inFocus Examines Government Reach and Overreach
15
“Great Change Never Starts With Government” An inFOCUS Interview with Speaker Newt Gingrich Newt Gingrich, former Speaker of the House and presidential candidate, author of both fiction and non-fiction, and newly minted television panelist on Crossfire, spent some time with inFOCUS editor Shoshana Bryen to talk about how the United States can grapple with problems that may seem overwhelming in size and scope. Convinced that the solutions will be found largely outside Federal Government programs, Gingrich expressed confidence in the American people and American exceptionalism to carry the country forward.
iF: In his book, The End is Near and it’s Going to be Awesome, Kevin Williamson postulates that the difference between industry and government is that industry continually adapts. Government cannot adapt and isn’t allowed to fail, and people can’t opt out. Are Americans doomed to a government Leviathan that just layers new programs atop old programs? Gingrich: As the hearings on Benghazi, IRS, and other failings indicate more and more clearly, we are trapped in a maze of decaying bureaucracy with systems that simply don’t work and bureaucrats that are amazingly unaccountable. The old order is going to continue to decay and disappoint. That will undermine the prison guards of the past and strengthen the pioneers of the future. At the same time, the current policy ideas, political language, and focus of activities are failing to solve America’s problems. The American people have ex-
16
pressed their unhappiness with this gridlocked failure to solve problems by punishing each [political] party in turn. But this series of negative victories must not be confused with creating a stable governing coalition or creating a mandate for governing. In the absence of positive solutions people can believe in, candidates, consultants and parties are reduced to emphasizing the negative in attack campaigns against the other side, which only works in the narrow sense that it may defeat the other candidate or the other party. This decay of ideas and intellectual coherence into negative campaigns is nothing new. It is a natural byproduct of a period when there do not seem to be any breakouts and there are no big ideas around which to organize a positive campaign.
iF: You once drew ten lessons from successful efforts to design and implement welfare reform. Number 3 is, “Great change never starts with government.” Big ideas probably don’t start there either.
inFocus Examines Government Reach and Overreach | Fall 2013
Gingrich: Change has to start on the outside. Then, if it succeeds, it will build momentum and build supporters and gradually it will be brought to the inside. But it always starts somewhere outside of Washington. If you look around the country—here’s a great example—look at Google’s selfdriving car and the implications that has for traffic fatalities, for those who are sight impaired, etc. Take a look at Udacity, which is a company whose committed goal is to reduce tuition by 90% for higher education. Take a look at regenerative medicine, which is potentially going to replace all of kidney dialysis simply by enabling you to grow, out of your own cells, a new kidney. That would eliminate all of the rejection medicine and eliminate all the need for dialysis. I see breakouts beginning to occur. And they’re beginning to occur at the state level. If you look at what the State of Texas has done on prison reform— they’ve saved $2 billion, closed two prisons and currently have the lowest crime rate in modern Texas history. And so, there are innovations beginning to occur that have already made huge differences.
iF: The bankruptcy of Detroit throws domestic economics into sharp relief. In 2009, the Administration bailed out large corporations and their unions. Should there have been federal help for the people? Gingrich: First of all, Detroit is an extraordinary tragedy. I’ve been writing about it for some 20 years. It is a combination of really bad politics, really bad public employee unions and a local political culture that had gone sour. In the city, for example, you had an industrialist who offered $200 million to build charter schools for one of the worst school systems in America, and he was promptly attacked as a racist. Now, you would think somebody who wanted to bring $200 million into your community would be seen in a positive light. But he was threatening the local power structure. So, I think you have to recognize that if you have politicians who are determined to be destructive, and public employee
unions who are determined to be irresponsible, and they join together to loot the city and in the process create a culture that rejects everything that is healthy or positive, it strikes me that it is going to be a disaster. And that’s what happened in Detroit. It becomes very hard to turn around something that has become so disorganized. In that specific case, Detroit, I think it takes collapse. But in the long run, if you look at a number of reform mayors, it’s different. If you look at Cory Booker in Newark; at Johnson in Sacramento; and at Steve Goldschimidt in Indianapolis, you see you can have mayors who can make dramatic reforms. If you look at the impact of [Mayor Rudy] Giuliani on crime in New York, for example, it is extraordinary the speed at which they turned things around.
iF: In 2010, you called for the creation of “Free Cities”—Hong Kong-style free trade zones, developed from scratch according to agreements reached
Gingrich: If you had a Governor and a President who were willing to be both cooperative and tough and you went to Detroit and said, “Look, here’s how much you’ve got to shrink your bureaucracy, and here’s how much you’ve got to cut your red tape and here’s how much you’ve got to focus on public safety. Now, if you’ll do those things, we’ll create a tax free zone for the whole city to encourage business to move in.” I think under that circumstance you can have an extraordinary impact. We adopted fairly modest tax incentives for Washington, DC when I was Speaker [of the House]. But they had a profound impact on gentrifying the city and encouraging people to move back in. People generally agree—talk to [Democratic political consultant] Donna Brazille—and she’ll tell you I worked as hard as anybody she’d ever seen in the Speaker’s Office trying to help the capital. And I think that’s why—I really believe our national capital should have jobs and employment and safety and we worked at it very hard. That’s what people have to do.
interview with Speaker Newt Gingrich
between the United States and the “receptive governments.” the Competitive Enterprise Institute suggested a 15-year moratorium on Federal taxes and regulation, leaving only State standards. How might that work in Detroit?
iF: Is there a role for government in the “reinvention” of cities as the manufacturing base changes? How can we ensure a match between the students leaving school and the jobs industry will have available? Gingrich: We need a nation-wide adult re-education and adult retraining program. Almost certainly involving online education and almost certainly involving mentoring and apprenticeships. And we need them across the board, because the jobs of the past are disappearing and
Fall 2013 | inFocus Examines Government Reach and Overreach
17
most people who are losing those jobs aren’t prepared for the next cycle of employment. And so, this doesn’t only apply to Detroit, it applies to the whole country. But I also think if you look at the idea that we pay people up to 99 weeks for being unemployed—that’s a mistake. Why don’t we require a learning attachment to those 99 weeks? You know, that’s almost enough time to get an Associates Degree in college. It is really destructive to give people 99 weeks to do nothing while you are taking care of them.
iF: The 1996 Welfare Reform Act returned the share of federal spending on the program to each state in the form of “block grants.” You wrote later, “There was just one problem with the 1996 reforms: they only reformed one federal program.” Gingrich: Virtually everything that involves domestic policy could be managed better at the State and Local level than at the Federal level. I would very much establish a 10th Amendment Project to move decisions out of Washington and move bureaucracies out of Washington.
iF: Is there sentiment to do that? Gingrich: It would take a new majority to do it. But I think you could build a majority that would do it and I think the country would be very much for it.
iF: Can people run on that in 2014? Gingrich: Yes, I think so. If they were to put together a new Contract [referencing the 1994 Contract for America] a 10th Amendment plank could be part of that. If you look at how much disrepute Washington is in right now, moving power out of Washington would be a pretty positive campaign slogan.
iF: The role of the courts in expanding government is crucial. 18
“Legislation from the bench,” circumvented the question of abortion and same sex marriage. Has the judiciary become simply a reflection of popular opinion?
Gingrich: We are very much in a period of “legislating from the bench.” But there are lots of things that can be done, from holding hearings on that topic, to passing laws to restrict access to the courts for some topics, to directly repudiating the courts’ decisions. There is a lot of literature on the degree to which the country has the ability to bring the courts back under control—if they want to.
ested in that.
iF: Finally, you have called America “A Nation Like No Other.” Would you talk to inFOCUS readers about what makes our country exceptional and why it’s not simply bragging or hubris to say so? Gingrich: What is exceptional about the United States is the unique liberty we give to people. That’s a key part of the whole process of recognizing ourselves as exceptional. It is that fact of 300 million people being given a chance to pursue happiness
Strategically, people who bet against the American people have consistently lost. But I think there’s a general pattern by which the elites frankly are happy to have the courts do a lot of things they may believe in but not be able to do on their own. So again, elections are the key. These are all legitimately political challenges that require a commitment to winning elections. And to win the election, you need to win the arguments. And I think you will hear more about these things. If you go back and look at what people like Rick Perry were saying during the last campaign, I think the arguments are there and I think there is interest in the subject. We need a national conversation on a great many things, including foreign policy. Look at the recent prison breaks [freeing al Qaeda members in Iraq, Libya and Pakistan] and look at the U.S. being so worried that in 19 countries we closed our Embassies. Those are not signs of victory. Those are signs that our strategies are in real trouble and need to be rethought.
iF: I’m almost sorry this issue of inFOCUS is on domestic policy—I’d love to pursue that line of conversation further. Gingrich: Call back when you’re inter-
inFocus Examines Government Reach and Overreach | Fall 2013
and to be creative in a way that is really remarkable. I do think we’re in grave danger both culturally and bureaucratically of losing that uniqueness.
iF: Can we still turn it around? Gingrich: Sure. If you have a big enough turnaround in society. The classic case is Margaret Thatcher in 1979. Great Britain was collapsing, the welfare state was destroying it, and socialism was eliminating the entrepreneurial spirit. She not only won an election, but she won an argument. In the ensuing decades, she fundamentally changed the scene. She did it even more than Ronald Reagan did—because she did it on a bigger scale.
iF: So you’re an optimist? Gingrich: Absolutely. Strategically, people who bet against the American people have consistently lost.
The Right Health Reform: Putting Patients First by Grace-Marie Turner
T
here is no question that there were—and are—serious problems in our health sector that need reform. But after a year-long battle to enact the Affordable Care Act and more than three years of efforts to implement it, it is becoming ever more clear that its top-down, government-centric approach does not work. The law is no more popular today than the day it passed, and many of those who originally supported passage are finding that it is doing much more harm than good, with ripple effects throughout the economy. The cost of insurance that will be offered to the uninsured and others applying for coverage under the law is higher than in the private marketplace before it passed; businesses have put workers on part-time status to avoid huge fines under the employer mandate, and patients across the country are finding it more and more difficult to find a doctor to see them. It is clear we need to begin planning a step-by-step approach to sensible, sustainable, and responsible reform. The key to health reform is to empower patients, not the government. We need to move to a truly market-driven healthcare economy that puts consumers in charge of choices. “ObamaCare,” a term President Obama has approved, is governed by hundreds of new boards and commissions, thousands of regulators, and tens of thousands of pages of regulation. The central pillar of free-market reform is a vigorously competitive health insurance market. Many of the problems the country is facing involving health costs could be addressed by encouraging
much more competition and empowering consumers to have greater control over decisions involving their care and coverage. Price transparency and a larger choice of options would drive out insurers who price their products too high, rather than having government officials throw rhetorical stones at them in the public square. Why on earth would we want a system, especially with something as personal as healthcare, where all of these market signals are lost, and insurers are responding to regulators, not to us? While healthcare is different from other sectors of our economy and requires special consideration, there are many areas where consumers can and
Medicare, Medicaid, and private health insurance. This shift to defined contribution is beginning, but federal tax policy is a barrier. The current tax treatment of health insurance has largely put consumers to sleep because it robs them of choices and price visibility. Here’s how it works: If you work for a company that provides health insurance, you get a generous tax break if your employer writes the check for your health insurance. The value of those health insurance premiums are a form of non-cash income to you, but they are taken off the top, or “excluded,” from your income before your employer calculates the taxes
... a new vision, one aligned with a 21st-century economy in which consumers, rather than government bureaucracies, have control over resources. want to have more control over healthcare choices – especially around the kind of health insurance policy they want and how much they are willing to pay. Competition could work if we truly engage consumers as partners in getting better value for their healthcare dollars. This starts with a new vision, one aligned with a 21st-century economy in which consumers, rather than government bureaucracies, have control over resources. The idea is to build on a process that switches existing health benefit to “defined contribution” programs, a concept that can be applied to taxpayer financing for all three major insurance coverage platforms in the United States—
you owe. No matter how big the check your employer writes for your health insurance, you don’t pay taxes on that part of your income. (The insurance is not a gift from your employer; it is part of your pay package. The more it costs, the less you have in take-home pay.) Incentives to economize, among employers as well as workers and consumers, are muted because the spending—and tax breaks—are invisible and without limit. Today, if you earn a salary of $75,000, and your employer also enrolls you in a $13,000 family health insurance policy, your actual income is $88,000. And you get a tax break worth about $5,200 by not having that $13,000 counted as part of
Fall 2013 | inFocus Examines Government Reach and Overreach
19
your taxable salary. But people pay a high price for this generous health insurance. Take-home pay has risen modestly over the last decade—just 38 percent on average—because so much of your compensation has been gobbled up by expensive health insurance, which has gone up 131 percent over the same period. Your employer isn’t paying for the bulk of your policy; you
tax “exclusion” that workers get today, described above, and it would be available to millions more people who don’t get health insurance at work. Further, the credit would be portable so people would not be forced to get their insurance at work or through the government-run health insurance exchanges under ObamaCare. Employer who choose to do so could still provide
Take-home pay has risen modestly over the last decade—just 38 percent on average—because so much of your compensation has been gobbled up by expensive health insurance, which has gone up 131 percent over the same period. are. Your employer has been taking the money out of your overall compensation package to pay your health insurance premiums. Many people believe they could get a better deal for health insurance if they received that health insurance stipend as a defined contribution and if there were a more vibrant market for them to purchase insurance that better meets the needs and resources of their family.
z How It Could Work
Moving toward a fixed dollar tax credit would represent a different, but real, alternative to the new health law that could actually get health insurance to everyone. (ObamaCare will leave 30 million uninsured, even under best estimates.) From a public policy perspective, a key pillar is reform of the tax treatment of health insurance. Every American household would get a health credit. The credit could only be used to purchase health insurance and healthcare services. Any household that didn’t buy coverage would lose the entire value of the credit. The number choosing to do so would likely be very small. The credit would replace the employer
20
a “defined contribution” toward the cost of health insurance to supplement the tax credit their employees would receive. If people choose a more expensive plan than that, they would be free to do so but would be paying the extra costs on their own.
z This Works For Medicare And Medicaid, As Well
A similar policy could and should be done in Medicare. In fact, it’s already been done in a part of Medicare—the prescription drug benefit, Part D, which was added to the program starting in 2006. Under Part D, Medicare beneficiaries decide for themselves what kind of drug insurance they want to purchase each year. The government’s contribution is based on the average price charged by participating insurance plans in a region, and it remains the same regardless of which plan the beneficiary selects. Seniors selecting more expensive plans than the average bid pay the additional premium out of their own pockets. Those selecting less expensive plans get to keep the savings. Scores of insurers compete aggressively with each other every year. The result is that costs have been far
inFocus Examines Government Reach and Overreach | Fall 2013
below expectations, and federal spending is some 30 to 40 percent below initial projections. As new retirees turn age 65 and enter Medicare, they should be given the same control they now have over drug coverage for their entire Medicare benefit. The resulting competition among insurers and those providing services to the beneficiaries would work far better than government regulation to hold down costs and premiums. It would also make insurers much more attentive to the needs of their patients, as seniors who were dissatisfied with how they were treated could take their business elsewhere at the next available opportunity (which would be occur at least annually). Medicaid—the health insurance program for low-income Americans—locks participants into a system of insurance that is largely separate from everyone else. Medicaid’s payments to doctors and hospitals are so low that many physicians can afford to see only a few patients with Medicaid coverage. Medicaid is also not coordinated with employer insurance, so when a low-income person gets a higher paying job, they often lose Medicaid without the guarantee of getting coverage at their job. All of this could be fixed by giving able-bodied Medicaid recipients the same tax credit given to all other working age Americans. That would serve as their base of insurance to help them get private coverage. What is now spent on them in Medicaid could be then be used to provide additional help with premium expenses as well as out-of-pocket costs when they need healthcare. This would allow Medicaid participants to get the same kind of insurance—and thus access to the same doctors and hospitals—as everyone else. It would also mean that they could keep the same insurance even when they move up to higher paying jobs with new employers. Building an effective marketplace for healthcare requires some additional steps beyond reforming how employers, Medicare, and Medicaid pay for insurance. We
z Ensuring Sick Americans Aren’t Left Out
Even if American healthcare can be improved by putting consumers in charge, there will still be a problem with making sure those who are especially sick can get good insurance too. Today, there are an estimated 4 million Americans who have a “pre-existing condition.” This makes it hard for them to get affordable insurance because insurers must take the added risk—and cost—of those ailments into account when setting premiums. ObamaCare included a poorly conceived version of what is needed to actually ensure sick Americans can get affordable insurance. ObamaCare created a $5 billion “high risk pool” program that is poorly-designed, hastily-constructed, and severely-underfunded. Because the benefits that must be offered are so expensive, the premiums are very high. Even at that, the program ran out of money early and closed its doors to new applicants. The lessons to be learned from ObamaCare early experience is not that “high risk pools” don’t work. It’s that they won’t work if they are built to fail. They should provide assistance to people who find themselves, through no fault of their own, looking for insurance as an individual even though they have a history of high medical costs. And they should be run by the states which are closer to the needs of their citizens. The pools need to be coupled with stronger protections for those maintaining continuous insurance coverage so that they don’t find themselves needing high risk assistance at all. In short, we can do more by doing less and the solution can be transparent,
A Checklist for Health Reform
PRIVATE INSURANCE
» Give people a tax credit to purchase coverage, on their own or through an employer » Allow greater flexibility in health benefits: Consumers, not regulators, should decide what their health plans cover and not be forced into government-set benefit standards » Provide portability of health insurance and greater competition by allowing cross-state purchase of health insurance » Allow states to develop market mechanism to help consumers find and enroll in the insurance that best meets their needs » Allow more secure renewal of health insurance that is guaranteed so people who have health insurance can keep it » Provide financial assistance to the states to create
targeted, and adequately funded. Adequately-funded, state-run, highrisk pools that deliver what they can promise will require an investment of taxpayer dollars. But compared to the sweeping burdens of ObamaCare, they will cost much less and do less damage to the rest
more functional high-risk pools or state risk-transfer pools that allow people with pre-existing conditions to purchase health insurance » Reform the medical malpractice litigation process at the state level.
PUBLIC PROGRAMS
» Put savings from Medicare reform into saving Medicare » Allow people to escape Medicaid by giving them the same tax credits for private coverage given to all other workers
Grace-Marie Turner: The Right Health Reform: Putting Patients First
need more transparent information about prices and quality, better state regulation of insurance markets, and further assistance for beneficiaries making choices about what will be best for them. Nevertheless, it’s clear that the key reform that is needed is one that puts individuals in charge of their own money. That’s the way to slow rising costs while also improving, not compromising, quality.
Provide more flexibility to » the states in running Medicaid programs so they can get the best value for taxpayers’ dollars » Provide more options for Medicaid recipients, Medicare beneficiaries, and other on public programs to escape the restrictions that inevitably come from price controls
of the private healthcare market that many Americans prefer and from which they still benefit greatly. They can represent the foundation for what it means to “replace,” and not just “repeal,” its flawed prescription for health policy change.
Fall 2013 | inFocus Examines Government Reach and Overreach
21
z Additional Important Reforms
Putting consumers in charge and protecting those with pre-existing conditions are the crucial steps needed to broaden coverage and slow the pace of rising costs. But some other steps are needed as well. Consumers should be given new opportunities for finding and purchasing the coverage they need. In that regard, states should be given the authority to put in place consumer-friendly market mechanisms which would give consumers accurate and comprehensive information about their options, as well as simplify the process of enrollment. These marketplaces should not emphasize regulation, but consumer assistance. States should also open the sale and purchase of health insurance to consumers in other states. This would help those residents in states with costly and excessive regulation to find affordable coverage elsewhere, and would drive down costs. Finally, and most importantly, states
must reform their medical malpractice laws to remove the distortions associated with arbitrary and unlimited awards from some juries. Today, lawyers shoot for the sky and hope they come up winners. The limited number of cases where they do hit the jackpot is causing doctors to do whatever is necessary to avoid the same fate. The result is billions and billions of dollars in unnecessary medical treatment. Sensible tort reform would allow doctors to practice sound medicine and still protect patients from genuine malpractice.
z The Path Forward
Leaders in Congress must start to work on reform that is compatible with our political culture and values of the genius of our free market economy. The challenges are enormous—even without the upheaval of ObamaCare. Millions of Baby Boomers will soon be signing up for Medicare, putting new pressures on the system. The costs of government entitlement programs threaten
to squeeze out other public services provided by federal and state governments. Millions of people continue to lose their health insurance when they lose or change jobs. And the cost of healthcare and insurance coverage continues to rise. It is not possible for a government bureaucracy to know how to solve all of these problems, or to address the diverse needs of 300 million Americans. What’s needed is reform that puts individuals in charge of their healthcare dollars. That’s the way to ensure your needs are addressed, with better healthcare at less expense for all of us. Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on free-market ideas for health reform. This article is adapted from a chapter in a book she coauthored, Why ObamaCare Is Wrong for America, (HarperCollins, 2011). Co-authors are James Capretta, Thomas Miller, and Robert Moffit.
monitoring events in the gaza strip Visit us online for the latest updates, JewishPolicyCenter.org
GazaWatch 22
inFocus Examines Government Reach and Overreach | Fall 2013
Social Security Reform: Defusing the Ticking Bomb by Michael Tanner
S
ocial Security is the single largest program of the federal government, accounting for more than 20 percent of all federal spending in 2012. Indeed, by some measures, it could be considered the largest government program in the world, providing more than $774 billion in benefits to 58 million recipients last year. It is also a program facing significant financing problems that make it unsustainable over the long term. Last year, Social Security spent $169 billion more on benefits than it took in through taxes. In part, this was the result of the temporary reduction in payroll taxes passed in 2011, and extended for an additional year in 2012, before being allowed to expire on January 1, 2013 as part of the deal to avert the fiscal cliff. However, even though the payroll tax has returned to its full 12.4 percent rate, Social Security is projected to run a shortfall this year of $79 billion. This does not technically constitute a deficit because Social Security also received $109 billion in interest payments on the bonds in the trust fund and $114 billion in general revenue reimbursements as compensation for the temporary payroll tax reduction passed in 2010 and renewed in 2011. However, even considering those payments, Social Security will run a cash-flow deficit by 2022. In theory, of course, Social Security is supposed to continue paying benefits by drawing on the Social Security Trust Fund until 2033, after which the fund will be exhausted. At that point, by law, Social Security benefits will have to be cut by approximately 23 percent.
z The Trust Fund Is Not an Asset
However, in reality, the Social Security Trust Fund is not an asset that can be used to pay benefits. As the Clinton administration’s Fiscal Year 2000 Budget explained it: These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures—but only in a bookkeeping sense. …They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. Even if Congress can find a way to redeem the bonds, the Trust Fund surplus will be completely exhausted by 2033. At that point, Social Security will have to rely solely on revenue from the payroll tax—but that revenue will not be sufficient to pay all promised benefits. Overall, Social Security faces unfunded liabilities of $23.1 trillion ($25.7 trillion if the cost of redeeming the Trust Fund is included). Clearly, Social Security is not sustainable in its current form. That means that Congress will again be forced to resort to raising taxes and/or cutting benefits in order to enable the program
to stumble along. In fact, from 1999 until March of 2011, this benefit estimate was mailed to workers annually. During the Bush administration, the Personal Benefits Statement (PEBS) contained a disclaimer that: Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2040, the payroll taxes collected will be enough to pay only about 74 percent of scheduled benefits.” This warning was discontinued when the Social Security Administration stopped mailing paper copies of the benefit statement, and it is not included in the online calculator. While the SSA website includes discussions of the program’s financial problems elsewhere on the website, someone looking for what his or her benefits will be would not be told that Social Security cannot pay the listed benefit. And, there are very few options for dealing with the problem. As former president Bill Clinton pointed out, the only ways to keep Social Security solvent are to (a) raise taxes, (b) cut benefits, or (c) get a higher rate of return through private capital investment. Or as Henry Aaron of the Brookings Institution told Congress, “Increased funding to raise pension reserves is possible only with some combination of additional tax revenues, reduced benefits, or increased investment returns from investing in higher yield assets.”
z Raise Taxes?
Supporters of the current Social Security system have long advocated the
Fall 2013 | inFocus Examines Government Reach and Overreach
23
first of those options, bringing in additional tax revenue, notably by removing the cap on income subject to the Social Security payroll tax. Currently, workers pay the 12.4 percent payroll tax on just the first $113,700 of annual wage income. The bipartisan Commission on Fiscal responsibility and Reform recommended that this be increased to $190,000 by 2020. The Center for American Progress would remove the cap entirely on the employer’s portion of the Social Security tax. The National Committee for Preserving Social Security and Medicare has called for removing the cap for the entire payroll tax. Eliminating the cap would give the United States the highest marginal tax rates in the world, higher even than countries like Sweden. Studies suggest that it would cost the United States as much as $136 billion in lost economic growth over the next 10 years, and as many as 1.1 million lost jobs. And, it is important to note that the Patient Protection and Affordable Care Act (PPACA) already raised payroll taxes on families earning more than $250,000 per year by 0.9 percent. Eliminating the cap could also lead to the perverse result of actually providing a huge increase in benefits to the wealthiest retirees. That is because the benefit formula is partially based on the level of wages taxed. We could end up sending Bill Gates or Warren Buffet Social Security checks for thousands of dollars each month.
Chart: OASI, DI, and HI Trust Fund Ratios [Asset reserves as a percentage of annual cost]
Source: Social Security Administration OASI: Old-Age and Survivors Insurance; DI: Disability Insurance; HI: Medicare Hospital Insurance curity begins to run a cash-flow shortfall to approximately 2030. Eliminating the cap would, of course, extend the exhaustion date of the Social Security Trust Fund, but as we have seen above, that merely increases intragovernmental debt without actually improving the system’s finances. If the additional revenue was used to pay
Overall, Social Security faces unfunded liabilities of $23.1 trillion ... Yet even this enormous tax increase would do relatively little to increase Social Security’s long-term cash flow solvency. A 2010 CBO report found that eliminating the cap completely while also changing the benefit formula so as not to provide any additional benefits would only extend the date at which Social Se-
24
for what would otherwise be deficitfinanced spending, removing the cap would be indistinguishable from any other tax increase. Thus we could see a marginal improvement to the government’s overall financial picture—not Social Security’s—but at the costs associated with any other tax hike.
inFocus Examines Government Reach and Overreach | Fall 2013
z Cut Benefits?
Cutting Social Security benefits, however, would have a positive impact on both the system’s finances and the government’s general balance sheet. Of course, there are many different ways to reduce future Social Security payments with very different impacts on recipients. The bipartisan Commission on Fiscal Responsibility and Reform, for instance, has recommended a broad array of benefit changes, including raising the retirement age to 69 by 2075, with the early retirement age rising to 64 over the same period, reforming the formula for annual cost of living adjustments (COLA’s), and trimming benefits for high-income recipients. A better approach would be to change the formula used to calculate the accrual of benefits so that they are indexed to price inflation rather than national wage growth. Since wages tend
z Save and Invest
It makes sense, therefore, to combine any reduction in government-provided benefits with an option for younger workers to save and invest a portion of their Social Security taxes through individual accounts. A proposal by scholars from the Cato Institute that combines the wage-price indexing proposal described above with personal accounts equal to 6.2 percent of wages, was scored by actuaries with the Social Security Administration in 2005 as reducing Social Security’s unfunded liabilities by $6.3 trillion, roughly half the system’s predicted shortfall at that time. If the Cato plan had been adopted in 2005, the system would have begun running surpluses by 2046. Indeed, by the end of the 75year actuarial window, the system would have been running surpluses in excess of $1.8 trillion. At the same time, SSA actuaries concluded that average-wage workers who were age 45 or younger could
expect higher benefits under the Cato proposal than Social Security would otherwise be able to pay. While there is no more current scoring available, there is no reason to presume that savings or benefits would be substantially different today. Personal accounts would also solve some of the other problems with the current Social Security system. Under the current system, workers have no ownership of their benefits; they are left totally
ture, although this proposal did not make it into later iterations of the Ryan budget plans. This proposal would allow workers under age 55 the option of privately investing slightly more than one third of their Social Security taxes through personal retirement accounts. The Congressional Budget Office estimates that Ryan’s proposal would gradually reduce Social Security’s budget shortfall and, ultimately, restore the program to cash-flow solvency by 2083.
A better approach would be to change the formula used to calculate the accrual of benefits so that they are indexed to price inflation rather than national wage growth. dependent on the good will of 535 politicians to determine what they will receive in retirement. Moreover, benefits are not inheritable, and the program is a barrier to wealth accumulation. Finally, the current program unfairly penalizes African Americans, working women, and others. In short, it is a program crying out for reform. By giving workers ownership and control over a portion of their retirement funds, personal accounts are the only reform measure that deals with those issues. Of course opponents of personal accounts have pointed to the recent struggles of the stock market to suggest that they are too risky to be relied on for retirement. The reality, however, is that despite recent volatility in the market, longterm investment represents a remarkably safe retirement strategy. The failure of President Bush’s disastrous campaign for personal accounts is widely believed to have taken the idea off the table for the foreseeable future. None of the recent deficit commissions included personal accounts in their recommendations. However Rep. Paul Ryan (R-WI) included a proposal for personal accounts in his Roadmap for America’s Fu-
Several new representatives and senators elected in the 2010 and 2012 appear sympathetic to personal accounts, meaning that a combination of benefit reductions and personal accounts remains not only the best policy option for Social Security reform, but also a viable political option. Social Security is not sustainable without reform. Simply put, it cannot pay promised future benefits with current levels of taxation. Yet, raising taxes or cutting benefits will only make a bad deal worse. At the same time, workers have no ownership of their benefits, and Social Security benefits are not inheritable. This is particularly problematic for low-wage workers and minorities. Perhaps most importantly, the current Social Security system gives workers no choice or control over their financial future. It is long past time for Congress to act.
Michael Tanner: Social Security Reform: Defusing the Ticking Bomb
to grow at a rate roughly one-percentage point faster than prices, such a change would hold future Social Security benefits constant in real terms, but eliminate the benefit escalation that is built into the current formula. Estimates suggest that making this change alone would result in a 35 percent reduction in Social Security’s currently scheduled level of benefits, bringing the system into balance by 2050. Variations on this approach would apply the formula change only to higher income seniors, preserving the current wage-indexed formula for low-income seniors. Other benefit reductions that have been discussed at one time or another include: increasing the number of years included in income averaging as part of the benefit formula from 35 to 38 years, restructuring spousal benefits, and various means/asset-testing schemes. But, Social Security taxes are already so high, relative to benefits, that Social Security has quite simply become a bad deal for younger workers, providing a low, belowmarket rate-of-return.
Michael Tanner is a senior fellow with the Cato Institute, where he directs research on a variety of issues, including healthcare, social welfare policy, and Social Security.
Fall 2013 | inFocus Examines Government Reach and Overreach
25
Four Ways to Improve Higher Education by Anne D. Neal and William Gonch
A
merica’s colleges and universities are in crisis. They cost far too much: America spends thousands more per post-secondary student than any other OECD nation. For all that money, we achieve mediocre outcomes: 42 percent of students who enter a four-year institution fail to leave that school with a degree within six years, and studies find that many students’ improvement in thinking skills is insignificant or nonexistent. Graduates typically leave with mountains of debt and struggle to find work. In a trend that would have been unthinkable ten years ago, Americans are expressing skepticism about higher education—not just with their voices, but also with their pocketbooks and their
in a recent study of 1,700 American colleges and universities, Bain & Company found that one-third of those schools are “on an unsustainable financial path.” These developments threaten the budgets of many schools, and they will only worsen over time. Reform is essential, then, for our colleges and universities. How do we achieve it? Four changes are especially important.
z Require a Core Curriculum
It used to be common for students to begin their college careers with a general education program made up of core courses in the humanities, social sciences, natural sciences, and a few other subjects. Often these courses introduced
42 percent of students who enter a four-year institution fail to leave that school with a degree within six years, and studies find that many students’ improvement in thinking skills is insignificant or nonexistent. time. At all but the most elite schools, application numbers are down, and students are increasingly choosing less-expensive schools, starting at community colleges, or otherwise seeking to control costs. Colleges are feeling the pinch. The average “tuition discount rate” at private colleges, which measures the discount colleges offer through grants and loans out of their own budgets, has reached 45%. An article in The New York Times notes that net tuition revenue is flat or decreasing at 73 percent of schools. And
26
students to great works and ideas; at their best, such courses provided students in disparate fields with a common intellectual experience and turned them into a community of learners. And in any event they leave all students with a common grounding in basic knowledge. Today, however, only a few schools maintain such curricula, and many college graduates lack even basic knowledge of western culture and the world in which they live. American Council of Trustees and Alumni’s (ACTA) “What Will They
inFocus Examines Government Reach and Overreach | Fall 2013
Learn?” project studies the curricula of more than 1,000 colleges and universities. The 2012-2013 study found that fewer than 19% of schools require a foundational course in U.S. history or government. Fewer than 14 percent require intermediate-level foreign language, and more than a third do not even require college-level mathematics. Of the seven subjects studied by “What Will They Learn?” the average school required about three. Instead, students take courses such as “Zombie Nation,” at SUNY—Binghamton, “Tattoos in American Popular Culture” at Pitzer College, or “History of American Television” at Emory. Not only are those all real courses at major American universities, but every single one of them satisfies a core requirement in the school’s general education program. Students’ ignorance reflects their poor curricula. A recent ACTA survey found that large majorities of recent college graduates were unable to answer correctly many questions about American history and government—such as identifying George Washington as the General at Yorktown, or the terms of office for Senators and Members of Congress. Each campus constituency has work to do in changing the culture of ignorance. Faculty can build centers on campus to teach liberal learning in a rigorous way. Emory University provides an excellent example: a small number of faculty have recently put together a top-flight voluntary core curriculum that covers classical literature, moral philosophy, American political thought, and other key subjects.
z Empower Trustees
Reflecting on reforms at the City University of New York (CUNY), Board Chairman Benno Schmidt said, “Change in institutional strategy can only come from trustees.” He would know. Starting in 1998, Schmidt and the rest of the CUNY board oversaw a transformation in the CUNY system. A storied university system that
had been allowed to drift for more than two decades, CUNY suffered from weak academic standards, high dropout rates, poor outcomes (in 1999 only 30 percent of four-year freshman students graduated within six years) and lack of confidence among alumni, which was reflected in
break from the prevailing mindset in university governance. They need to recognize that they are leaders first and fundraisers second. They need to study key measures of educational quality—outcomes, graduation rates, the core curriculum. They need to rein in the grotesque
Trustees have ultimate responsibility for safeguarding their institutions’ academic health and setting strategic direction ... low levels of alumni giving. Thousands of students in remedial courses dragged down the performance and standards of CUNY’s four-year schools. The board hired a reform-minded chancellor and dug in, working hard to turn the school around. Remediation was moved to the junior colleges, and the four-year institutions raised academic and admissions standards. Enrollment soared, especially among under-privileged groups—and so did graduation rates. A new honors college attracted students who turned down offers from NYU and Columbia. The system’s reputation recovered, and alumni giving increased eight-fold. The transformation was led by the trustees—as any transformation so radical must be, because trustees are in an ideal position to stimulate reform. They are fiduciaries, standing to some degree apart from their institutions while they care for its financial and academic well being. And they are ultimately responsible for its success or failure. Yet for every story like CUNY’s there are many stories of boards serving as cheerleaders: trustees who raise money and talk up the school but do not hold the administration and faculty accountable for delivering academic quality. Too many rely exclusively on their institutions’ presidents—whom trustees are supposed to oversee—for information about the school’s plans and performance. Trustees—all trustees—need to
inflation in administrative salaries and the lopsided growth that puts more new money into administration and athletics than student instruction. They need to demand a faculty reward system that encourages more time in the classroom and more focus on student success. And they need to ensure before ground is broken for new buildings that the existing ones are fully used, and that means Friday afternoons, Monday mornings, and summer term. Here the public has a critical role to play. Governors and state legislators appoint the trustees of many public colleges and universities. These trustees are in turn responsible to state officials, and ultimately to the public. It falls to governors and legislators to ensure that their appointees are informed and engaged, and that they govern, not defer to, administrative leaders. If trustees fail to do their job, the governor must be held accountable.
Anne D. Neal and William Gonch: Four Ways to Improve Higher Education
Indeed, the most storied core curricula often began as faculty initiatives: Columbia University’s famous Great Book program, for example, was founded by enterprising faculty members. Administrators can provide the leadership necessary to implement a rigorous core: to take just one example, University of Chicago President Robert Hutchins worked with Mortimer Adler to implement one of the most famous cores of the 20th century. Trustees have ultimate responsibility for safeguarding their institutions’ academic health and setting strategic direction; much of the responsibility for graduates’ ignorance rests with them. They should not micromanage faculty choices in the classroom—but they should make sure they know what their institutions require of all students and ensure that such requirements are strong. Some excellent board members do this already. The Tennessee Board of Regents, which oversees six public universities in Tennessee, has put in place an admirable requirement in American history. The Texas Higher Education Coordinating Board has gone even further: it requires a broad-based curriculum that covers writing, mathematics, American history and government, the creative arts, and several other important subjects. These board members are a model for all trustees: they take responsibility, not just for their institution’s finances, but also for its academic excellence. And students? Parents? They can stop bankrolling ignorance immediately by taking care to choose undergraduate programs that require every student to master a core body of liberal knowledge.
z Assess Student Learning and Hold Schools Accountable
In 2011, sociologists Richard Arum and Josipa Roksa rocked the academic world with a simple finding: students are not learning much in college. Arum and Roksa tracked more than 2,300 students longitudinally throughout their college careers at 24 accredited four-year institutions, assessing their learning with a nationally normed instrument, the Collegiate Learning Assessment. Fully forty-five percent of students
Fall 2013 | inFocus Examines Government Reach and Overreach
27
Columbia University commencement did not show any statistically significant learning gains after two years. Thirty-six percent did not show any gains after a full four years of college. These findings have been replicated by subsequent studies. In other words, college has become “intellectually unsafe” for too many students. Responsible colleges should not gamble with students’ futures—or with the hard-earned money of students, their families, and taxpayers. That is why it is important to measure student learning and adopt appropriate strategies, as necessary, to improve teaching and learning on their campuses. States should require their public universities to administer one of the three major assessments (the CLA, the Collegiate Assessment of Academic Proficiency, or the ETS Proficiency Profile) to their students when they enter and
28
[Trustees] need to recognize that they are leaders first and fundraisers second. when they graduate—and to publish the results. This would allow students and parents to make informed choices about which school to attend. Increasingly, states are moving to performance-based funding models that tie the size of a state university’s budget to the university’s success in achieving certain outcomes. And what outcome could be more important than student learning? Longitudinally assessing student outcomes will allow policymakers to reward high-achieving schools and take remedial action to address the problems at struggling institutions. Private colleges and universities should not be coerced by the state, certainly—but publishing student-learning
inFocus Examines Government Reach and Overreach | Fall 2013
data is the right thing to do. Trustees and administrators should put in place their own programs to test student learning, and they should publish the results.
z Reform the College Accreditation System
Consider this: not only did onethird of students in Arum & Roksa’s study demonstrate no learning gains, but every single one of those students attended a fully-accredited institution. The six main regional accrediting agencies have, under federal law, for decades held the task of determining which colleges within their geographical regions are of sufficient quality to make them eligible for federal student aid—a
the board attempted to remove its president—an action that, although the board pursued it hastily and without the proper care, was well within their rights. In December 2011, the Southern Regional ac-
It falls to governors and legislators to ensure that their appointees are informed and engaged, and that they govern, not defer to, administrative leaders. lies depend on accreditors for the same reason: to ensure that their very expensive investment will result in a quality education. Unfortunately, accreditors have utterly failed to ensure quality. Arum and Roksa’s findings are merely the tip of the iceberg: dozens of accredited schools graduate fewer than one in four students; some graduate fewer than one in ten. Increasing evidence points to the conclusion that students waste lots of money and learn little at these schools…yet the schools retain their accreditation. While doing nearly nothing for academic quality, accreditors manage to stifle innovation by erecting barriers to entry into the market. They also regularly interfere in governance responsibilities properly left to the trustees, often obstructing reform efforts. Federal financial aid represents such a large fraction of schools’ budgets that very few schools can survive without access to federal funds—or push back when accreditors overstep their bounds. The accreditation process can take years and cost more than a million dollars. Start-up schools fight through a years-long twilight existence before they are able to compete. In these circumstances it is unsurprising that few new institutions enter the market. In addition, accreditors often impose irrational standards on schools or take arbitrary action that secondguesses university leaders. For example, in late 2012 accreditors placed the University of Virginia “on warning” because
creditor reprimanded the Florida governor for suggesting publicly that the Florida A&M board should suspend its president after the disturbing hazing death of a drum major. Accreditors have impeded the University of California Regents’ attempt to rein in out-of-control administrative costs. They have imposed unhelpful requirements on hiring decisions, often requiring schools to hire a Ph.D. over a non-Ph.D. despite any other skills that the non-Ph.D. candidate might have offered. Accreditors have also pressured schools to decrease faculty teaching loads, and even tried to pressure a school with a rigorous great-books curriculum into becoming more “open.” In these ways and others, accreditors exist to protect the established business model in academia. Accreditors use their control over financial aid to enforce their standards on universities. If policymakers wish to reverse these trends they need to break the link between accreditation and federal financial aid. If new educational institutions were not forced into the accreditors’ straitjacket we would see a proliferation of new educational models and, through the power of the market, real progress on quality and cost. The accreditors could have a new, constructive role if the federal government broke the current system of regional-monopoly accreditation and allowed accreditors to compete with one another to offer the most compelling certifications. Former Boston University presi-
dent Jon Westling summarized how this would play out: Accreditation agencies should be, in effect, accredited by their customers. If they have anything worthwhile to offer colleges and universities, colleges and universities will pay them for it. Generally, colleges and universities will pay to be reviewed by the agency that has the strictest standards that the institution thinks it can pass. A free market in accreditation agencies will quickly stratify, with the toughest agencies attracting the best colleges and universities. The public will benefit from a genuine ranking system. If accreditation agencies started acting like business consultancies and consumer-information agencies, the needed changes to higher education would come swiftly.
z Reform: The Way Forward
Anne D. Neal and William Gonch: Four Ways to Improve Higher Education
life-or-death financial issue for almost every school. The accreditors are supposed to ensure that schools that receive federal money meet basic standards of educational quality. Students and fami-
Ballooning costs, minimal learning and a regulatory system that resists new entrants and new ideas—these problems plague American higher education. The last problem requires the federal government; and congressional action to reform accreditation will also help address issues of quality and cost. Meanwhile, drawing on that great strength of American higher education, which is its decentralization, trustees and administrators at any institution can begin to take action to address issues of quality and cost. Many are doing so now—but far more must join in the effort if we are to provide a quality, affordable education to the next generation of Americans. Anne D. Neal is President of the American Council of Trustees and Alumni (ACTA) and William Gonch is Senior Program Officer, Communications. Some portions of this essay have appeared in other ACTA publications.
Fall 2013 | inFocus Examines Government Reach and Overreach
29
America’s Energy Future: Greater Independence by H. Sterling Burnett, Ph. D.
W
ith prices hovering around $100.00 per barrel, new oil being pumped in the U.S. at a rate not seen since Alaskan oil really began to flow in the 1970’s, and natural gas reserves growing by amounts never before seen, few if any prognosticators are harping about “peak oil” and/or looming oil and gas shortages. Just a few years ago, things were quite different with analysts of all stripes arguing that oil was nearly tapped out and the United States needed to plan for a post-petroleum future. Hydraulic fracturing, or fracking, has revolutionized the production of oil and natural gas. The injection of a mixture of water, sand and a small amount of other additives deep into the ground to fracture rock formations, releases isolated pockets of oil and gas that are otherwise inaccessible. Technological advancements coupled with increasing demand for oil and natural gas has turned this shale drilling into a bright spot for the U.S. economy.
z Fracking’s Results
Fracking is already responsible for more than 30 percent of U.S. domestic oil and natural gas reserves and the National Petroleum Council estimates that 60 to 80 percent of all wells drilled in the U.S. during the next decade will require fracking to remain viable. Natural gas has become the fuel of choice for base load electricity generation, as well as the go-to fuel for peaking power. In addition, a number of commercial truck fleets and municipal bus fleets have been or are being converted to run on natural gas. These choices would not be
30
viable without vast natural gas reserves. Just 15 years ago, analysts were predicting the U.S. had only had 60 years of natural gas supplies at then current rates of use. Now, with much higher use, fracking has increased reserves to the extent that at current use, researchers believe we have enough natural gas reserves for 100 years or more. The Marcellus Shale formation has been called the Saudi Arabia of natural gas. It underlies more than 95,000 square miles stretching from Tennessee under Lake Erie into Ontario, Canada and from Ohio and Kentucky in the West to the
ous. In April 2009, the Department of Energy estimated that the Marcellus reserve could contain upwards of 262 TCF— more than six times Lash’s estimate. This is just one shale formation; there are others, including the Barnett and Eagle Ford formations in Texas; Haynesville and Tuscaloosa in Louisiana; Utica Shale underlying a number of Eastern States and Quebec; the Bakken formation underlying a number of mid-continent states; and California’s Monterey Shale. A number of these are more promising for their oil reserves than natural gas, but in either case the reserves are plentiful.
... fracking has increased reserves to the extent that at current use, researchers believe we have enough natural gas reserves for 100 years or more. Eastern seaboard. By comparison, the portion of the Barnett Shale formation in Texas that is capable of natural gas production underlies approximately 5,000 square miles of land. While it is unlikely that all of it contains natural gas, the portions that do are estimated to contain enormous amounts. State University of New York geology professor Gary Lash calculated that just the portion lying between New York and West Virginia might contain 490 trillion cubic feet (TCF) of natural gas. If just 10 percent of that is recoverable, 49 TCF it would be enough to satisfy approximately two years total U.S. consumption, with a total value of approximately one trillion dollars. Other estimates are more gener-
inFocus Examines Government Reach and Overreach | Fall 2013
Regarding oil, in two short years production from fracking has nearly reversed a 20-year decline. In 1990, the U.S. produced approximately 8.5 million barrels per day of crude oil. By 2009, that had dropped, for a short time, to just 4 million barrels per day. Since 2010, oil production has increased to about 7.5 million barrels a day as higher prices make older capped wells viable again plus fracking. Since the summer of 2011, the U.S. has experienced a 2 million barrel per day increase in crude production. Fracking in the Bakken formation has taken North Dakota past Alaska and California to make it the second largest oil producing state behind Texas. Coinciding with the increase in oil
z Government: Hurting Not Helping
Though energy independence may not be desirable, even if possible, the U.S. would still benefit from less dependence on factors outside of our control. In fact, oil and gas production should and would be increased if the federal government removed various barriers to greater production and would avoid erecting new ones. President Obama bragged, “Oil production has increased to the highest levels in 16 years. Natural gas production is the highest it’s been in decades.” While he is correct, little to none of the credit is due to his policies. Almost all the increase in
oil and gas production has occurred on private or state lands, especially in North Dakota, Montana and Texas. Natural gas production from federal areas has declined while natural gas production overall has increased considerably due to fracking. While new leases and acreage leased on federal lands have declined, oil pro-
any negative environmental consequences—with those few harms found to be the result of bad operators cutting corners, not the process itself—the administration is considering further restrictions on fracking operations on public lands and stricter regulations on ongoing operations on private lands. The EPA has already tried to halt a number of opera-
The quest for “independence” will lead to a waste of human and financial capital that would be far more economically harmful than any supply shock could ever be. duction from existing leases increased 13 percent over the past four years (despite last year’s significant decline). This increase may come to a halt if new oil and gas leasing and production regulations from the Obama administration under development, already proposed, or previously approved and soon to take effect, actually take effect. According to a 2012 Energy Department study, sales of oil from federal areas fell 14 percent between 2010 and 2011 and sales of natural gas production fell 9 percent. The lower oil production was largely the result of a moratorium on offshore drilling imposed by the Obama administration, which a federal court twice found illegal. Natural gas production from federal areas is declining because drillers have found vast reserves of natural gas in formations under several states that are cheaper to access than most federally controlled areas. Current restrictions on offshore oil production and on public lands across the west and in Alaska are preventing the exploration and production of tens of billions of barrels of oil and trillions of cubic feet of natural gas. Any of these would increase supplies, reduce prices and imports and provide high-paying jobs to Americans. The administration is considering making things worse. Despite study after study indicating that fracking has few if
tions, only to have to back down when challenged in the courts. Until fracking can be linked definitively to a problem that is inherent in the process itself, the federal government should take the mountain of evidence that fracking is safe as dispositive and streamline the permitting and leasing process for fracking on public lands—leaving private land regulations to the states—in order to reap the fiscal, economic and energy bounty that fracking produces. If problems arise, regulations can be tailored as narrowly as possible to fix problem identified as opposed a blunderbuss approach that treats the entire process or its results as suspect.
H. Sterling Burnett: America’s Energy Future: Greater Independence
production has been a substantial decrease in consumption. Ongoing economic struggles and drivers shifting to more fuel efficient vehicles led to an 8 percent decline in transportation fuels since 2007. As a result, U.S. oil imports have declined to the lowest levels since the early 1980’s. Should new coal terminals be allowed and existing liquefied natural gas terminals be converted to export and new terminals be built, the U.S. could become a substantial energy exporter. These projects, however, have been slow developing due to recalcitrance on the part of federal and state authorities to approve them. This is not the same as “energy independence,” a concept that is not useful. While demand has moderated in many Western countries, it is increasing in the developing world led by China and India. At the same time, production is down substantially in Libya, Iraq and Venezuela among others. These factors have combined, despite increased production in the U.S., to keep oil prices high. Because oil is traded in a world market, and the U.S., like other countries will seek the cheapest supply, domestic oil and gas prices will continue to be driven by factors largely outside our country’s control. The quest for independence will lead to a waste of human and financial capital that would be far more economically harmful than any supply shock could ever be.
z What About Electricity?
The biggest energy challenge facing America is the need to expand, upgrade, modernize and better protect America’s electric grid. The grid consists of more than 6 million miles of transmission and distribution lines owned by more than 3,000 highly diverse, investor-owned, government-owned, and cooperative enterprises Several challenges face the companies and public agencies that own, operate and or oversee the grid. First, it is woefully outdated. Much of the electric power delivery infrastructure, the towers, the transfer stations, and the wires are over forty years old; over 75 percent
Fall 2013 | inFocus Examines Government Reach and Overreach
31
is 25 years or older. For years, investment in new wires and towers has lagged behind the expansion of power generating sources and demand for power. This, combined with recent storms, has contributed to ever increasing outages in
by localized or in some instance even regional events. However, it would make the entire electric system more vulnerable to cyber terrorism and calculated multiple power grid strike events. Recognizing this threat, the government and
The federal government should ... streamline the permitting and leasing process for fracking on public lands—leaving private land regulations to the states—in order to reap the fiscal, economic and energy bounty that fracking produces. recent years. Power outages cost $18-33 billion per year, according to a report issued in August 2013 by the Obama administration and that figure has risen steadily over the past 20 years. Every new notebook, smart phone, electric car, HDTV and entertainment center draws and more and more energy, and the grid has just not kept pace. Recently, grid owners and operators have been investing more in expansion and upgrades. Between 1994 and 2003, 200 utilities nationwide spent an average $7,185/year on devices and station equipment per mile of transmission. Between 2003 and 2012 that amount had grown to an average of $21,514/year per mile of line. The Edison Electric Institute notes that its members spent $ 11.1 billion on transmission infrastructure in 2011 alone, and project to spend an additional $54.6 billion through 2015. This is significant, but pales in comparison the more than $800 billion investment in grid growth and modernization estimated to be needed by 2030. Simultaneous with the expansion of the grid, the federal and various state governments have been working to “nationalize” it, which means not to put it under government ownership but to have it interconnected with multiple pathways and redundancies from region to region across the nation. A nationwide grid should reduce routine outages caused
32
the private sector are devoting increasing resources to hardening the grid with the goal of making it less likely that if a cyberattack occurs, it will have a large scale effect.
z “Green” Technology
Operators must also contend with the complicating factors of new smart grid technologies and an increasing amount of variable, intermittent power introduced into the system from both distributed and centralized “green energy” sources such as wind and solar power. Smart grid technologies hold the promise of more efficient grid operation, improved, smoother power flows, quicker responses to demand, fluctuations, and prices, but integrating the first generation of them into the grid is fraught with all the difficulties of any new technology. There is a learning curve for the operators and end-users and there are bugs, which, along with a natural resistance to change, sometimes breeds suspicion and slow adoption of the new technologies. Perhaps the most vexing issue is “green power.” Government policies in this regard are undermining grid reliability and increasing outages because the intermittent nature of green sources of electricity decreases the stability the system needs. Traditional power plants produce a relatively consistent, constant flow of electricity. Wind and solar power are
inFocus Examines Government Reach and Overreach | Fall 2013
inconsistent: wind speeds and sunlight intensity vary sometimes by the moment; and the duration of consistent winds or sunlight is also variable in the extreme. This makes keeping a consistent power flow through the grid very difficult. Yet, federal and state incentives and subsidies to produce wind and solar power or—even worse—mandates for the use of green power provide that the power must be generated and fed into the wires regardless of the costs or the havoc it plays with the reliability of the system. Furthermore, unlike traditional power plants that can be built in the region or area where demand for increased power is required, solar and wind farms must be built where the wind blows fairly constantly or where the sun shines with regularity—and these are often hundreds of miles from where the power is needed. Wind and solar farms thus require more transmission construction than traditional power sources, and a greater portion of the power is lost during transmission. While new technologies can reduce the amount of power lost to transmission, they are expensive and not commonly installed. In addition, much of the power will continue to be carried, for the near and mid-term at least, through older less efficient power lines and transformers. Rather than making the grid less stable, federal and state legislatures should end green energy subsidies and mandates and allow the grid time for its muchneeded renewal. Then, if green energy has something to truly contribute, it will be added back into the system by market forces. The U.S. has abundant power supplies that could be developed to a greater extent and used more effectively if only the government would reduce barriers to development and end mandates and market distorting subsidies. H. Sterling Burnett, Ph.D. is a Senior Fellow at the National Center for Policy Analysis, where he is an authority on energy and environmental issues.
Fear of Terrorism Versus the Loss of Freedom review by Skyler Schmanski
“Every two days now we create as much information as we did from the dawn of civilization up until 2003.” – Eric Schmidt, former CEO of Google
E
Top Secret America: The Rise of the New American Security State by Dana Priest and William M. Arkin Back Bay Books 2011
xploding expenditures. Indefinite expansion of the Department of Defense. An unprecedented fear of an enemy that could strike anywhere, anytime without warning. These are no longer the results of two embattled superpowers waging a Cold War. This is the rise of the new American security state. This is modern America. The National Security Agency (NSA) stands at the forefront of the blossoming surveillance programs brought about by the failures of U.S. intelligence operations before the 9/11 terrorist attacks. With a budget that has doubled since 2001 to an estimated $25 billion annually, the largest U.S. intelligence organization now processes 1.7 billion pieces of intercepted communications every day. Ten billion dollars per year is spent on keeping secrets secret. Such intelligence operations have extended far beyond the targeted analysis of al-Qaeda to include every American citizen, a policy that has marked a significant divide in public opinion over how to balance the constitutional guarantees of civil liberties with the uncertain prospects of future acts of terrorism. Washington Post investigative journalist Dana Priest and military expert
and author William M. Arkin compiled a detailed breakdown of the scope of ongoing federal efforts to combat these threats with Top Secret America: The Rise of the New American Security State. Just slightly ahead of the storm, Priest and Arkin provide the essential skeleton for understanding today’s almost-daily revelations of governmental intrusion. PRISM, XKeyscore, Tempora, and telephone metadata collection intelligence programs by NSA leaker Edward Snowden are the result of an extraordinary and convoluted system.
z The Aftermath of 9/11
John Rizzo, a key U.S. official involved in covert and clandestine missions launched against al-Qaeda went on the record saying, “‘the cumulative number’ of covert operations during the Cold War ‘pales in comparison to the number of programs, number of activities the CIA was asked to carry out in the aftermath of 9/11 in the counterterrorism area.’” Such an extraordinary divergence from previous U.S. domestic and foreign policy precedents necessarily deserves a thorough discussion of not only its intent, but also its implications. Confronting such a
Fall 2013 | inFocus Examines Government Reach and Overreach
33
topic head-on is a daunting task and Top Secret America is the product of years of extensive research in the authors’ quest to promote a public dialogue, due to their assertion that “the government has still not engaged the American people in an honest conversation about terrorism and the appropriate U.S. response to it.” True to journalistic ethics, the reporting remains considerably objective and is backed by an overwhelming amount of sheer data, figures, and firsthand accounts. There is no room for partisanship here, as the roles of both the Bush and Obama administrations in creating and expanding the national security machine are highlighted without skewing blame or responsibility toward one in particular. Furthermore, it is important to note that the authors do not personally and overtly attack the surveillance state, instead reserving their private opinions from the book’s 11 chapters. That said, the work itself is a cautionary analysis— not because of biased or exaggerated assertions, rather because the information presented is intended to reveal facts the government would rather not discuss. Indeed, Priest recounts the CIA’s vehement efforts to persuade her to desist in her line of questioning; she persisted.
ment produces more harm than security, they believe. These barriers do not simply separate knowledge of operations between the agencies and the American public; they establish distrust and hypercompartmentalization among the agencies themselves, a case in point being the inability to disclose information to each other to verify the presence of weapons of mass destruction in the lead-up to the Iraq War. Additionally, it is noted that as the threat Osama bin Laden posed to the United States grew, the number of officials aware of the terrorist leader’s activities continued to shrink. Such a counterintuitive tactic blocked coordination between the various chapters of government to quell al-Qaeda’s plots. Priest and Arkin’s encouragement to reevaluate this degree of secrecy forms the foundation of the book.
z A Vast Spying Apparatus
The subsequent 300-plus pages explore the vast spying apparatus through Arkin’s decryption of hidden governmental workings and Priest’s investigative interviews with numerous high profile and often-anonymous governmental and private sector contacts working closely with the programs themselves. There is some-
At the heart of the situation lies the private contractor-military relationship, entities so interlocked the programs have become, to a large extent, profit-driven initiatives with personnel from each cycling from one to the other. Credit is given where it is due, and the authors attribute the diminishment of al-Qaeda operatives worldwide to the sweeping intelligence efforts. However, given that the U.S. government has, for the most part, accomplished the mission for which such programs were constructed, “The dragnet approach no longer makes much sense” to the authors. Leaving America completely in the dark as to its secret fourth branch of govern-
34
thing decidedly ironic about the most expansive spying program in history being revealed so thoroughly by two individuals; the fact alone brings the question to mind: how does the government intend to prevent significantly more sophisticated attempts by the enemy to uncover the classified information about not only its programs, but its citizens? The authors make a critical point: “The security of secrets ultimately depends upon human
inFocus Examines Government Reach and Overreach | Fall 2013
beings.” Whether for selfish reasons “or to explain away something that sounds evil, or to save the agency from itself, or to stop wrongdoing,” insiders talk. To whom is crucial, and more secrets entail more opportunities for the system to break down under its own weight. Reform of intelligence and surveillance was voiced as a tenet of the 2008 presidential campaign, though reform never came. Although having been elected on the promise of a radical departure from the security policies of his predecessor President George W. Bush, Barack Obama’s “idealism quickly faded once he took office.” The man who had condemned in 2007 the “false choice between the liberties we cherish and the security we provide” put forward by the outgoing administration, embraced a similar approach. His inheritance of the surveillance machine was more than he and his administration had bargained for, finding it nearly impossible to rein in the everexpanding apparatus.
z Contractor-Military Relations
At the heart of the situation lies the private contractor-military relationship, entities so interlocked the programs have become, to a large extent, profit-driven initiatives with personnel from each cycling from one to the other. A former Secretary of Defense admitted with frustration, “The Department of Defense is no longer a war fighting organization, it’s a business enterprise.” Of the 854,000 individuals with top-secret clearances, 256,000 are private, a testament to the fusion of two sectors collectively referred to as the terrorism-industrial complex. Furthermore, the very top CIA officials who were unable to prevent 9/11 have become the heads of many of these defense corporations. This pervasive element is but a single component of a system so bloated with divisions, a contact in charge of the Controlled Access Program Coordination Office (CAPCO) resorted to the analogy of 212 dressers (top-level programs), each with their own drawers
z A Secret Army
Co-Author Dana Priest (compartments), further containing their own sock drawers (subcompartments), rendering a structure “so dense that even the people who supervise the system don’t understand the terminology or use it correctly.” The redirection of surveillance efforts to encompass the entirety of the American public accounts for much of the increased complexity of the system. The military’s battlefield is turning inward, for in the words of Sen. Lindsey Graham (R-SC), “The homeland is the battlefield.” Priest’s efforts to uncover the hidden realities of this mindset led her to the basement of a Northern Command outpost in Colorado, the first modern establishment of its kind to target America as opposed to a foreign a territory. The structure itself is a product of the “alternative geography” spreading across the country that has seen a multitude of deliberately camouflaged intelligence facilities shrouded among numerous unassuming American communities and businesses. Housed inside this particular one is the Homeland Security Infrastructure Program, a revolutionary national mapping effort begun in 2005 to create a “common operating picture” of the entire country via a mind-bending digital network of wired surveillance. “One Nation, One Map” is a fitting motto for the ambitious project.
Secretary of Homeland Security Janet Napolitano’s efforts to combat the alleged rising threat of homegrown terrorists facilitated much of this transformation of America into the battlefield. The authors draw a connection between her statements on the need for preemptive civil defense and the Cold War McCarthyist mentality. Her “See Something, Say Something” campaign is one such tangible implementation of this ideology. Local authorities and police are becoming an increasingly reliable arm of the government in enforcing its counterterrorism policies, as well, causing the line between the federal and state levels to become more and more blurred. Drone warfare, too, has been brought into the mainstream consciousness, particularly with the filibuster by Sen. Rand Paul (R-KY) on its application to citizens on American soil this past March. In attempting to explore the legality of weaponized drone usage, the authors ran into conflicting reports and standards, once again due to a lack of cooperation and trust between the Central Intelligence Agency (CIA) and the military’s Joint Special Operations Command (JSOC), both of which hold jurisdiction over the program. The latter was tasked with addressing the influx of al-Qaeda into Iraq post-U.S. invasion under the Bush administration and, coupled with the drone
A secret army operating as a subcomponent of JSOC since 1980 dominates control over the program, flying ten times as many drones and killing ten times as many al-Qaeda as the CIA. Known by many names used to conceal its true identity, this army is summarized by a U.S. Navy SEAL who said, “We’re the dark matter. We’re the force that orders the universe but can’t be seen.” Equipped with an internal kill list, this entity was responsible for the assassination of bin Laden on May 2, 2011. Operating outside the existing legal framework, it is “the president’s personal weapon” and is capable of bypassing oversight and the checks of the other branches. More importantly, it represents a major facet of the surveillance state it serves. This state of America, brought about by the Global War on Terrorism, has left the nation at a crossroads. Its direction moving forward depends upon its answer to the question: does it fear the threat of terrorism or the loss of freedom of more? An even more complex notion to consider is whether the orchestrator of 9/11 is accomplishing his goal of fragmenting the world’s greatest power post-mortem. It is, indeed, a debate that will rage for years to come. Priest and Arkin’s goal was to initiate that very discussion, and Top Secret America succeeds in this regard. “Secrets aren’t just hard to keep,” the authors write, “they can also become toxic to the system they try to protect.” It is left to America to determine whether such a system has merged intent with impact.
Review by Skyler Schmanski: Top Secret America: The Rise of the New American Security State
operations, al-Qaeda membership has dwindled significantly. Nevertheless, the lack of cohesive oversight led then-Ambassador to Pakistan, Anne Patterson, to warn that “stronger actions against the U.S.” may be taken in the near future if greater discretion and regulations are not employed.
Skyler Schmanski interned as a research assistant at The Jewish Policy Center in 2013.
Fall 2013 | inFocus Examines Government Reach and Overreach
35
Non-profit U.S. Postage PAID Permit #382 Dulles, VA
Jewish Policy Center 50 F Street, NW, Suite 100 Washington, DC 20001
Obama Administration Postpones Employer Healthcare Mandate Forbes and Politico
In early July, the Obama administration announced it would delay one of the most important provisions in the Patient Protection and Affordable Care Act. Under the law, companies that employ 50 or more people would pay a fine of up to $3,000 per employee if they did not provide their workers with health insurance in 2014. After business groups called the law’s reporting requirements “burdensome,” the administration announced a delay that allows companies until 2015 to report details about how they support their employees with insurance coverage. Business leaders are not the only ones worried about Obamacare. A new battle emerged over an amendment proposed by Sen. David Vitter (RLA) that would ensure that Members of Congress and their staffs would have to abide by Obamacare regulations like everyone else. Nearly 11,000 people who work on Capitol Hill will be required
to purchase their health insurance from exchanges, but earn too much to qualify for government subsidies. In August, the administration decided that Members and their staffs could keep their subsidies, amounting to nearly $5,000 for individuals and $11,000 for families. Sen. Vitter believes that Hill staff should lose their subsidy the same way Americans above the income threshold will lose theirs in private industry. His amendment would therefore cut take home pay, even to Members of Congress, eliminating a benefit of the subsidy. The Senator added amendments requiring White House officials and political appointees to participate in the exchanges. Some Republicans on Capitol Hill have reportedly contacted their Democratic counterparts in order to kill Sen. Vitter’s proposal, while others appeared to be supportive.