The Tax Foundation's annual report is out. As usual, California is among the worst state climates for business - although we're only 40th in the nation, as opposed to 45th and 46th the last 2 years. The Foundation makes a very simple point that seems to escape the folks up in Sacramento:
The modern market is characterized by mobile capital and labor. Therefore, companies will locate where they have the greatest competitive advantage. States with the best tax systems will be most competitive in attracting new businesses and be the most effective at generating economic and employment growth.
To be sure, globalization is an issue. But the powers that be in California ought to be more worried about the fact that right next door in Nevada is the 5th best business tax climate in the country. Yet, despite all this, Rob Reiner wants to increase income taxes for the "wealthy" - which directly impacts small businesses, whose owners pay ordinary income taxes on their earnings - by $2.4 billion. (See the aptlynamed StopReiner.org)
Friday, March 24, 2006
Tuesday, March 21, 2006
Another email from Phil in Iraq
A week has passed since I got back off leave, so I figured it was time for another update.
It probably sounds boring, but I spend about 75 percent of my time here doing staff work. I try to get out on missions every few days, but only if I’m current on my paperwork. The reality is that my job is about planning, coordinating, and managing operations much more than actually doing them. So from the time I wake up (around 7) to the time I go to bed (around 10 or 11), I spend the majority of the time in meetings or in front of my laptop, hooked up to the classified intranet, doing staff work. Today went just like that. I woke up, brewed a pot of Peet’s coffee, and checked my classified e-mail for stuff that came in last night. Then I started updating a 40-slide PowerPoint briefing that we use to capture all of the Iraqi police and emergency call center data for the province. That meant gathering a bunch of information from our station assessments, figuring out the right way to graphically depict the data, and then cross-checking it against some other assessments that we’ve done. After finishing that, I hammered out some small tasks like scheduling a couple of guys for a helo flight. And then I spent the afternoon working on an operations order tasking our subordinate military police platoons with a couple of upcoming missions. Small wonder my ops sergeant (a burly cop from the NYPD) gave me a hug when I came back off leave; he was glad to have someone to shoulder all this paperwork so he could do the fun stuff again. I try to get out on missions at least once or twice a week to break the monotony, and also to get a feel for how operations are going out in the field. 3-4 missions a week would be better. But at this point, one week back from leave, it doesn’t look like I’ll get nearly as much field time as I’d like. Oh well.
A couple of new faces have shown up in the last few weeks. My favorite is this new interpreter that everyone calls “Doc”. Everyone calls him that because he has a doctorate in law and was a law professor under the old regime. He speaks English very well and is a very interesting guy. He’s shared a bunch of war stories about his time as a criminal defense attorney under the old regime, and he’s always trying to engage me in some deep theoretical, academic discussion about “the law”. I think he’s more of an intellectual than just about anyone I’ve met in Iraq.
Even though I usually don’t have time for his discussions, I really like them so I usually blow off whatever I’m working on to talk with Doc for a few minutes. He studied and taught comparative law, so he has a really unique perspective on the old and new Iraqi legal systems. Technically, he works for a U.S. government contractor as an interpreter, but we’ve already made him our informal legal adviser because he’s so knowledgeable and personable. And, if all goes well, I’m going to co-opt him into teaching law classes for Iraqi police so that we can leverage his expertise to train them on the basics of law enforcement and criminal procedure.We’ve had a fair number of visitors pass through here recently. General George Casey, the top commander in Iraq, stopped by for an hour or so. Not to meet with us, of course. He was here to meet with the provincial governor and a number of the other Iraqi leaders who work on this compound. Still, it’s always high adventure when you have a 4-star general officer coming through. He travels with a large enough entourage where we were worried that we’d have enough parking on our postage stamp of a compound for all the trucks (we did), and we had no idea what sort of welcome he’d want from us (none, as it turned out). A few hours beforehand, we thought we might have to wave the whole thing off because one of our sentries spotted a bag with what he thought were protruding wires just outside the entrance to the compound. We called out the Iraqi police bomb disposal team – who sometimes have more guts than brains – to check it out. Their preferred technique is to walk up to a suspected bomb and kick it. That’s exactly what one of them did, finding that it was just a bag of trash. As he walked back, the Iraqi cop casually said “boom finished” in English to one of our guys watching the scene. Then he drove off. Gotta love those guys. “Boom finished” – what a great line. We’re all using it now.
Occasionally, these visits result in very good things happening. Another general (not Casey) came through the other day asking a lot of questions about our operations. He got an earful about the new police assessment report – you remember, the really long one that precipitated that Iraqi colonel sticking his radio antenna up his nose. Anyway, our colonel was pretty candid with him about how long, cumbersome and impractical this thing was. (The new boss is great about that stuff… he’s got no compunction whatsoever about giving the unvarnished truth to headquarters, and he’s really great to work for too.) And so, we now have a tasker to develop a shorter, better version that captures the stuff that really matters out at the police stations. We’re pretty stoked about this small victory over headquarters.
The violence around here seems to have abated over the last few days. We’ve had a few IEDs go off near our compound (one as I was writing the paragraph before this, in fact), but nothing too close. No direct attacks on our compound in downtown, nor any attacks on any of our U.S. convoys. I think we’ve gotten a little numb to it all though. If the explosion isn’t close enough to feel the overpressure from the blast in your ears, it’s not close enough to worry about; I rarely get up from my desk, or get out of bed, unless it’s big or close enough to shake the concrete buildings we live and work in. (Truth be told, I usually just sleep through the explosions at night, since I’m a pretty heavy sleeper.) Or close enough that you can hear shrapnel and debris raining down. The same is true for gunfire. There’s enough sporadic gunfire around here that you’d go crazy if you jumped at every shot. So long as it stays a couple hundred meters away, we don’t worry about it much. It’s smarter to just let the situation develop, get the reports of what’s going on, and then react if necessary. Otherwise you’d go crazy here.
Division released the first draft of its redeployment order this week. Which is kind of crazy, because we still have 6 months to go. But there is just so much crap that goes into moving the 101st Airborne Division around the world – lining up schedules, planning for the shipment of trucks, helicopters, and shipping containers; scheduling Air Force plane flights and charter plane flights, etc., that it all has to be planned months in advance. I like having the planning process underway though. It gives us a bunch of milestones to look forward to, i.e. the date that the incoming unit sends its recon party, the date that we pack up our shipping container, the date we redeploy back up to Tikrit, etc. Time seems to pass more quickly when you break it into smaller chunks, I guess.
I learned last week that I was awarded the Combat Action Badge by division for a raid I went on in December when my patrol hit an IED. It feels strange to receive an award like this, because I don’t really think of what we do here as “combat,” despite the risks and hazards around us. Vietnam was combat; what the Marines did in Fallujah was combat; my war is something different. Still, I’m proud to receive the award, which the Army created to recognize non-infantry soldiers who see action over here. It’s just a piece of metal; it doesn’t help me do my job better or come home faster. But to warriors, these little pieces of metal and cloth mean something that’s hard to describe.
Attached are a couple of pictures so you can visualize what life is like over here. The first (pps-hq.jpg) is the view from our old headquarters into the neighborhood of Tahrir in Baqubah. The second (gc.roof.jpg) is the view from our new building’s roof into the slightly nicer neighborhood of Old Baqubah. (It seems that social stratification and gentrification aren’t just an L.A. thing after all.) The third (gc.bldg.jpg) is the side view of my barracks building; we occupy a corner of the state capitol building for the Diyala province. And the fourth (gc.room.jpg) is my room. It feels a lot like a college dorm room and has about as much space, so I really can’t complain.
That’s all for now. I hope all’s well back in the states. Talk to you soon.
--Phil
Sunday, March 19, 2006
Should those who option their shares be able to vote them?
The main “problem,” with encumbered shares having the same voting rights as standard shares held in an unencumbered fashion, is that an investor may have a substantial investment in a corporation through stock ownership, but actually be able to vote those shares to harm the company but profit massively using options and derivatives. A shareholder maintaining only shares has a long position in the company and would vote those shares to increase the value of those shares, while a derivatives only holder could not influence the corporation through voting (although could through manipulation of the share price through temporary bets). I am convinced that there is a disconnect that shareholders (such as I) with a long position could be threatened by those voting with a short position. Now, how can we fix it?
The rise of financially engineered instruments has obsoleted the one-share/one-vote standard in aligning control with risk is persuasive. However, I find that the practical implementation of any alternative is not only burdensome, expensive, and complicated, but also not likely to solve the problem of voter control. States would very likely not be interested in changing such alignments from the present system because they wish to attract the best corporations to incorporate in their states. Thus, it would probably require a federalization of corporate law in order to implement. Besides the costs to implement (with the resulting upheaval in the financial markets as the markets attempt to "understand" what to do), it is likely that the benefits, if any, would be short-lived as newly engineered instruments took over to again disconnect the risk from the share.
Perhaps the easiest change would be to forbid those who “borrow” shares from exercising the vote upon them, or those who “loan” shares from being able to vote. When street individual investors, mostly apathetic themselves, place their shares into an account, they should have to indicate whether they intend to maintain voting rights on those shares in the event that they were loaned. Of course, since shares are fungible, how would the market know which loaned shares to those borrowing them still have their attached rights? Would the shorter receive some discount on those shares because they are “less” valuable than other shares with attached rights? Thus, maybe the only real possible solution would be to prevent those who borrow shares from being able to vote on them, limiting the one-share/one-vote franchise to those with real ownership. The loophole remains, however, as one may own shares but still create massive options- or futures- based risk management or financial gain positions. It is quite impossible, thus, that any change to the present system could ever “correct” the current “problem.”
I would suggest leaving the market alone. Has there been a situation in which a company actually has suffered (and the long shareholders as well) from the actions of a shareholder with a short position? Probably. However, at this time, it does not seem to suggest that a new set of regulations and laws should “fix” something that can be balanced on its own. First, for every short investor, long investors exist that can counter. The company just needs to ensure that those long investors are informed and ready to participate. Second, the Board of directors controls the company. Shareholders merely react. Thus, the board can either structure transactions that minimize the role of shareholders (through a triangular transaction instead of a merger of equals, for example), or wage a public relations campaign to enlist shareholder support (such as HP’s acquisition of Compaq). Thus, while I see and believe that the potential for this problem to exist, I do not see it as such a threat that the system needs to be changed.
The rise of financially engineered instruments has obsoleted the one-share/one-vote standard in aligning control with risk is persuasive. However, I find that the practical implementation of any alternative is not only burdensome, expensive, and complicated, but also not likely to solve the problem of voter control. States would very likely not be interested in changing such alignments from the present system because they wish to attract the best corporations to incorporate in their states. Thus, it would probably require a federalization of corporate law in order to implement. Besides the costs to implement (with the resulting upheaval in the financial markets as the markets attempt to "understand" what to do), it is likely that the benefits, if any, would be short-lived as newly engineered instruments took over to again disconnect the risk from the share.
Perhaps the easiest change would be to forbid those who “borrow” shares from exercising the vote upon them, or those who “loan” shares from being able to vote. When street individual investors, mostly apathetic themselves, place their shares into an account, they should have to indicate whether they intend to maintain voting rights on those shares in the event that they were loaned. Of course, since shares are fungible, how would the market know which loaned shares to those borrowing them still have their attached rights? Would the shorter receive some discount on those shares because they are “less” valuable than other shares with attached rights? Thus, maybe the only real possible solution would be to prevent those who borrow shares from being able to vote on them, limiting the one-share/one-vote franchise to those with real ownership. The loophole remains, however, as one may own shares but still create massive options- or futures- based risk management or financial gain positions. It is quite impossible, thus, that any change to the present system could ever “correct” the current “problem.”
I would suggest leaving the market alone. Has there been a situation in which a company actually has suffered (and the long shareholders as well) from the actions of a shareholder with a short position? Probably. However, at this time, it does not seem to suggest that a new set of regulations and laws should “fix” something that can be balanced on its own. First, for every short investor, long investors exist that can counter. The company just needs to ensure that those long investors are informed and ready to participate. Second, the Board of directors controls the company. Shareholders merely react. Thus, the board can either structure transactions that minimize the role of shareholders (through a triangular transaction instead of a merger of equals, for example), or wage a public relations campaign to enlist shareholder support (such as HP’s acquisition of Compaq). Thus, while I see and believe that the potential for this problem to exist, I do not see it as such a threat that the system needs to be changed.
Friday, March 17, 2006
Peggy Noonan has it Right
From this mornings Opinion Journal:
Money is power, more money for the government is more power for the government. More power for the government will allow it to, among many other things, amuse itself by putting its fingers in a million pies, and stop performing its essential functions well, and get dizzily distracted by nonessentials, and muck up everything. Which is more or less where we are.
She goes on to quote the USA Today:
Yesterday USA Today ran a front-page story that seemed almost designed to give every conservative in America a Grand Klong, a fanciful medical condition that has been described as a great onrush of fecal matter to the heart. Not because it was surprising but because it wasn't. The headline: "Federal Aid Programs Expand at Record Rate."
The text:
A USA Today analysis of 25 major government programs found that enrollment increased an average of 17% in the programs from 2000 to 2005. The nation's population grew 5% during that time. It was the largest five year expansion of the federal safety net since the Great Society created programs such as Medicare and Medicaid in the 1960's. Spending on these social programs was $1.3 trillion in 2005, up an inflation-adjusted 22% since 2000 and accounting for more than half of federal spending.
Enrollment growth was responsible for most of the spending increase, with higher benefits accounting for the rest. The paper quoted a liberal think tanker saying the increase in the number of people on programs is due to a rise in the poverty rate. It quoted a conservative congressman countering that entitlement programs should not be growing when unemployment is near record lows.
Thanks, W.
Money is power, more money for the government is more power for the government. More power for the government will allow it to, among many other things, amuse itself by putting its fingers in a million pies, and stop performing its essential functions well, and get dizzily distracted by nonessentials, and muck up everything. Which is more or less where we are.
She goes on to quote the USA Today:
Yesterday USA Today ran a front-page story that seemed almost designed to give every conservative in America a Grand Klong, a fanciful medical condition that has been described as a great onrush of fecal matter to the heart. Not because it was surprising but because it wasn't. The headline: "Federal Aid Programs Expand at Record Rate."
The text:
A USA Today analysis of 25 major government programs found that enrollment increased an average of 17% in the programs from 2000 to 2005. The nation's population grew 5% during that time. It was the largest five year expansion of the federal safety net since the Great Society created programs such as Medicare and Medicaid in the 1960's. Spending on these social programs was $1.3 trillion in 2005, up an inflation-adjusted 22% since 2000 and accounting for more than half of federal spending.
Enrollment growth was responsible for most of the spending increase, with higher benefits accounting for the rest. The paper quoted a liberal think tanker saying the increase in the number of people on programs is due to a rise in the poverty rate. It quoted a conservative congressman countering that entitlement programs should not be growing when unemployment is near record lows.
Thanks, W.
Monday, March 13, 2006
The Democrat's Favorite Republican
Both the Washington Post and LA Times today ran puff pieces on their favorite Republican - John McCain and Predictably set up social conservatives as the bad guys who may keep McCain from getting the GOP nomination.
There's a lot of reasons why Republicans of all stripes don't like McCain:
There's a lot of reasons why Republicans of all stripes don't like McCain:
- He basically gutted the first amendment in the guise of campaign finance "reform."
- He and his allies consistently smeared former FEC chairman Brad Smith for defending the first amendment.
- He's inconsistent on influence peddling.
- He gave Dick Durbin cover fire when the latter made some incredibly stupid comments about Iraq and our troops.
- And most important of all: He seems to have no notion of what the phrase "limited government" means.
- He's flip-flopped on taxes.
- His membership in the Gang of 14.
Clooney Covers up for the American Communists
In a Huffington Post column, George Clooney defiantly proclaims his liberalism and asserts that:
... for me, one of the things we absolutely need to agree on is the idea that we're all allowed to question authority. We have to agree that it's not unpatriotic to hold our leaders accountable and to speak out.
That's one of the things that drew me to making a film about Murrow. When you hear Murrow say, "We mustn't confuse dissent with disloyalty" and "We can't defend freedom abroad by deserting it at home," it's like he's commenting on today's headlines.
Clooney is the latest Hollywood director to make a film in which the truth about American Communism is deliberately falsified. The fact that McCarthy’s witch hunt, however irresponsible in practice, was at least nominally motivated by the existence of actual witches, goes unremarked in Good Night and Good Luck.
As is now widely acknowledged by scholars of the period—and as American intelligence officials knew at the time—the American Communist party was used by the Soviets as an intelligence apparatus through which, starting in the early 30’s, Soviet spies successfully infiltrated the U.S. government. Yet with the exception of one glancing, carefully unspecific reference to Alger Hiss, the script of Good Night, and Good Luck takes no notice whatsoever of this well-known fact. Rather, we are invited to suppose that the activities of Hiss, Julius Rosenberg, and other Soviet agents were nothing more than a paranoid fantasy on the part of McCarthy and his supporters.
Clooney’s unwillingness even to acknowledge such inconvenient facts, much less engage them, makes it impossible to take Good Night, and Good Luck seriously as a historically informed portrayal of McCarthy and his activities.
Clooney echoes the New Left mantra endlessly regurgitated by aging baby boomers longing to assuage their liberal guilt by keeping faith with the never-to-be-questioned commandments of the 60’s. Presumably it has never occurred to him, or to his fellow Hollywood liberals, to question the authority by which the news media offer themselves up as sole purveyors of the truth. Hence his determination to romanticize Murrow—and, by extension, all reporters who dare to “question authority.”
... for me, one of the things we absolutely need to agree on is the idea that we're all allowed to question authority. We have to agree that it's not unpatriotic to hold our leaders accountable and to speak out.
That's one of the things that drew me to making a film about Murrow. When you hear Murrow say, "We mustn't confuse dissent with disloyalty" and "We can't defend freedom abroad by deserting it at home," it's like he's commenting on today's headlines.
Clooney is the latest Hollywood director to make a film in which the truth about American Communism is deliberately falsified. The fact that McCarthy’s witch hunt, however irresponsible in practice, was at least nominally motivated by the existence of actual witches, goes unremarked in Good Night and Good Luck.
As is now widely acknowledged by scholars of the period—and as American intelligence officials knew at the time—the American Communist party was used by the Soviets as an intelligence apparatus through which, starting in the early 30’s, Soviet spies successfully infiltrated the U.S. government. Yet with the exception of one glancing, carefully unspecific reference to Alger Hiss, the script of Good Night, and Good Luck takes no notice whatsoever of this well-known fact. Rather, we are invited to suppose that the activities of Hiss, Julius Rosenberg, and other Soviet agents were nothing more than a paranoid fantasy on the part of McCarthy and his supporters.
Clooney’s unwillingness even to acknowledge such inconvenient facts, much less engage them, makes it impossible to take Good Night, and Good Luck seriously as a historically informed portrayal of McCarthy and his activities.
Clooney echoes the New Left mantra endlessly regurgitated by aging baby boomers longing to assuage their liberal guilt by keeping faith with the never-to-be-questioned commandments of the 60’s. Presumably it has never occurred to him, or to his fellow Hollywood liberals, to question the authority by which the news media offer themselves up as sole purveyors of the truth. Hence his determination to romanticize Murrow—and, by extension, all reporters who dare to “question authority.”
Thursday, March 09, 2006
The Truth in Iraq...From someone who's there
I just received this email from a friend who just finished his 2 week leave at home. He's a UCLAW graduate who volunteered with the reserves to go to Iraq for 1 year. Yes, that's right - left his high paying law firm to serve his country.
I admire him greatly. I've left his name off, but if you routinely follow military blogs, you'll see his writings often.
Subject: Back in Baqubah
I made it back to Baqubah on Monday, and spent my first full day at work today. In total, I spent about four weeks away from my team – a week for a division conference and some decompression time at FOB Speicher near Tikrit, then some travel delays, then two weeks of leave, then a couple of days of travel back. Strangely, though, it feels good to be back. I missed my friends in the unit, and was anxious to rejoin them in Baqubah. I think I set a new record coming back from Kuwait; it took me just 26 hours from the time I stepped off the plane in Kuwait City to when I jumped off the Blackhawk in Baqubah. (Most guys take a few days to make their way back after leave, lingering at some of the plusher bases for a day or two in between flights.) As you all know from the news, a lot’s been going on here. I think the press has exaggerated the potential for civil war, but it’s still been a busy time, particularly for my team of police advisers. As much as I enjoyed being home, I really wanted to get back here as quickly as possible to take care of my guys.
Traveling in and out of Iraq was quite an adventure. First we got delayed at the big basecamp near Tikrit for 3 days while we waited for the weather and the Air Force to cooperate (both can be quite intransigent). I spent most of this time corralled in a tent on the FOB Speicher airfield, unable to leave for fear that the C-130 would show up and leave for Kuwait without me. It was incredibly boring. I read two or three books while sitting in the tent, read (and reread) a couple of magazines, and went for a couple of short runs next to the airfield. Fortunately, things moved quicker once we got to Kuwait. The Army put us on a charter ATA flight that stopped in Eastern Europe, Ireland, and Bangor, Maine, before arriving Dallas, where I changed planes to fly to LAX, arriving on the 15th. On the way back from leave, the flight only stopped once, in Shannon, Ireland, and made it to Kuwait in about half the time it took us to fly to the states. But thanks to the Army’s puritanical rules on alcohol, we couldn’t sample the local beer going either direction during our stops in Ireland, which was a total bummer. I understand where the policy comes from. But if we fly through Ireland on our redeployment flight, I might be tempted to look the other way so everyone can drink a pint or two of Guinness.
So… the $64,000 question from everyone has been: “is it really that bad over there?” The answer is, just as to all questions in law school: “it depends.” The bad events are certainly bad; it was bad when the Sunnis blew up the mosque in nearby Samarra, and it was bad when 50 insurgents attacked a refinery in Narwan, an outlying village between here and Baghdad. But while the reports of those incidents have been accurate, I think the reports on just those incidents provide an incomplete picture of life over here. Life goes on in Baqubah for the average Iraqi man or woman. The marketplace still runs; the schools still run; there are still massive queues at the gas stations during the week, and massive traffic jams in the heart of the city. There is not the sense here that the country is on the brink of civil war. Quite the contrary, in fact. Our experiences with violence in the past (which did not boil over into civil war) have taught us that the country can go to the brink and back without devolving into civil war. So that’s where we’re at right now. Iraqi police and army could have done better in responding initially, as could the U.S. military. But things appear to have calmed down. Things are as normal here as they can be given the circumstances.
A lot has changed in the last month for our team. Our commander was removed and sent to a higher headquarters as a staff officer. The colonel who replaced him is really smart, really calm, and there has been a palpable improvement in the command climate as a result of the change. I worry a little that the new colonel is too conventional for our mission, but we’ve got enough unconventional people on the team that I think it’ll work out. Another big change is that we’ve completely moved to a new compound. We now live and work in an annex to the state capital building, about 800m up the street from our old compound at the provincial police headquarters. I moved myself to the new digs before I left, but I had to commute back and forth each day to the old headquarters for work. Living and working in the same place is a lot better, because you don’t have the run the risk of driving on the roads every morning and evening. There’s a small dining facility here, which is nice because we get fresher, more varied food. There’s also a decent gym, so we’ve got a good place to go burn off stress and relax.
It’s still more austere here than the large bases where most Americans live in Iraq, but I prefer to live here, away from the flagpole and all the scrutiny that comes when you’re on a big base. Plus, we’re a lot closer to the Iraqis here, which makes us a lot more effective. Last night, I was able to walk over to meet with some Iraqi colonels who man a planning cell for the security forces in the province. If I lived on a big base, I couldn’t do that; I’d have to mount a combat patrol to drive out to meet them, and it probably wouldn’t happen.
Summer is already starting to come around, which is a real bummer because the winter weather in Iraq is so mild and enjoyable. We get the worst kind of heat here, because Baqubah sits in a river valley, so it’s both unbearably hot (130-140 degrees) and humid. Lovely. The region is also supposed to have a thriving population of mosquitoes and other critters, so we’re all treating our uniforms with pesticide and preparing a stockage of DEET to lather on when the bugs come. My office and barracks room have air conditioning units, but I’ll be surprised if they last through the summer. And there’s just no way around the heat when you’re out on a mission: wearing body armor and doing a mission in the summer heat will absolutely suck. Oh well.
At least the next couple of weeks look pretty interesting. I’m working with the brigade’s JAG officer to advise and improve the local judiciary and its operations. Our work won’t involve much teaching about the law per se; it’d be pretty arrogant for us to teach Iraqi judges about Iraqi law. Instead, we’re going to focus on making the courts run more smoothly and effectively, kind of like consultants might do for an ailing corporation back in the states. I’m also going out to do some more police station assessments, and to supervise some of the law enforcement training that we’re doing. It’s a very dynamic time here. The command has put a much greater emphasis on building the police and other rule of law institutions (courts, attorneys, jails, etc.) than before, even moreso than when I left on leave, based on the recognition that you can’t win a counterinsurgency fight by simply focusing on the military aspects of the problem. I’m cautiously optimistic because this is what I came here to do. Regardless of the ultimate outcome of this war, I think help these Iraqi institutions develop over the next several months while we’re here.
It was really great to see so many of you back in the United States. I’m sorry that I couldn’t see everyone, because I had only 2 weeks in town. With a little luck though, I’ll be able to see you all when I come back in September or October, especially if I’m able to follow through on my post-deployment plan of taking a long road trip with Peet to relax, unwind and see friends. Now that I’m back in Iraq, I’ll try to send more updates from over here (I left my laptop in Iraq so I could travel lightly, which is why I’ve been largely off the net for the past few weeks). I’ll also send a few more pictures so you can see how we’re living and working, and better visualize some of the more colorful moments that I write about. Talk to you soon.
I admire him greatly. I've left his name off, but if you routinely follow military blogs, you'll see his writings often.
Subject: Back in Baqubah
I made it back to Baqubah on Monday, and spent my first full day at work today. In total, I spent about four weeks away from my team – a week for a division conference and some decompression time at FOB Speicher near Tikrit, then some travel delays, then two weeks of leave, then a couple of days of travel back. Strangely, though, it feels good to be back. I missed my friends in the unit, and was anxious to rejoin them in Baqubah. I think I set a new record coming back from Kuwait; it took me just 26 hours from the time I stepped off the plane in Kuwait City to when I jumped off the Blackhawk in Baqubah. (Most guys take a few days to make their way back after leave, lingering at some of the plusher bases for a day or two in between flights.) As you all know from the news, a lot’s been going on here. I think the press has exaggerated the potential for civil war, but it’s still been a busy time, particularly for my team of police advisers. As much as I enjoyed being home, I really wanted to get back here as quickly as possible to take care of my guys.
Traveling in and out of Iraq was quite an adventure. First we got delayed at the big basecamp near Tikrit for 3 days while we waited for the weather and the Air Force to cooperate (both can be quite intransigent). I spent most of this time corralled in a tent on the FOB Speicher airfield, unable to leave for fear that the C-130 would show up and leave for Kuwait without me. It was incredibly boring. I read two or three books while sitting in the tent, read (and reread) a couple of magazines, and went for a couple of short runs next to the airfield. Fortunately, things moved quicker once we got to Kuwait. The Army put us on a charter ATA flight that stopped in Eastern Europe, Ireland, and Bangor, Maine, before arriving Dallas, where I changed planes to fly to LAX, arriving on the 15th. On the way back from leave, the flight only stopped once, in Shannon, Ireland, and made it to Kuwait in about half the time it took us to fly to the states. But thanks to the Army’s puritanical rules on alcohol, we couldn’t sample the local beer going either direction during our stops in Ireland, which was a total bummer. I understand where the policy comes from. But if we fly through Ireland on our redeployment flight, I might be tempted to look the other way so everyone can drink a pint or two of Guinness.
So… the $64,000 question from everyone has been: “is it really that bad over there?” The answer is, just as to all questions in law school: “it depends.” The bad events are certainly bad; it was bad when the Sunnis blew up the mosque in nearby Samarra, and it was bad when 50 insurgents attacked a refinery in Narwan, an outlying village between here and Baghdad. But while the reports of those incidents have been accurate, I think the reports on just those incidents provide an incomplete picture of life over here. Life goes on in Baqubah for the average Iraqi man or woman. The marketplace still runs; the schools still run; there are still massive queues at the gas stations during the week, and massive traffic jams in the heart of the city. There is not the sense here that the country is on the brink of civil war. Quite the contrary, in fact. Our experiences with violence in the past (which did not boil over into civil war) have taught us that the country can go to the brink and back without devolving into civil war. So that’s where we’re at right now. Iraqi police and army could have done better in responding initially, as could the U.S. military. But things appear to have calmed down. Things are as normal here as they can be given the circumstances.
A lot has changed in the last month for our team. Our commander was removed and sent to a higher headquarters as a staff officer. The colonel who replaced him is really smart, really calm, and there has been a palpable improvement in the command climate as a result of the change. I worry a little that the new colonel is too conventional for our mission, but we’ve got enough unconventional people on the team that I think it’ll work out. Another big change is that we’ve completely moved to a new compound. We now live and work in an annex to the state capital building, about 800m up the street from our old compound at the provincial police headquarters. I moved myself to the new digs before I left, but I had to commute back and forth each day to the old headquarters for work. Living and working in the same place is a lot better, because you don’t have the run the risk of driving on the roads every morning and evening. There’s a small dining facility here, which is nice because we get fresher, more varied food. There’s also a decent gym, so we’ve got a good place to go burn off stress and relax.
It’s still more austere here than the large bases where most Americans live in Iraq, but I prefer to live here, away from the flagpole and all the scrutiny that comes when you’re on a big base. Plus, we’re a lot closer to the Iraqis here, which makes us a lot more effective. Last night, I was able to walk over to meet with some Iraqi colonels who man a planning cell for the security forces in the province. If I lived on a big base, I couldn’t do that; I’d have to mount a combat patrol to drive out to meet them, and it probably wouldn’t happen.
Summer is already starting to come around, which is a real bummer because the winter weather in Iraq is so mild and enjoyable. We get the worst kind of heat here, because Baqubah sits in a river valley, so it’s both unbearably hot (130-140 degrees) and humid. Lovely. The region is also supposed to have a thriving population of mosquitoes and other critters, so we’re all treating our uniforms with pesticide and preparing a stockage of DEET to lather on when the bugs come. My office and barracks room have air conditioning units, but I’ll be surprised if they last through the summer. And there’s just no way around the heat when you’re out on a mission: wearing body armor and doing a mission in the summer heat will absolutely suck. Oh well.
At least the next couple of weeks look pretty interesting. I’m working with the brigade’s JAG officer to advise and improve the local judiciary and its operations. Our work won’t involve much teaching about the law per se; it’d be pretty arrogant for us to teach Iraqi judges about Iraqi law. Instead, we’re going to focus on making the courts run more smoothly and effectively, kind of like consultants might do for an ailing corporation back in the states. I’m also going out to do some more police station assessments, and to supervise some of the law enforcement training that we’re doing. It’s a very dynamic time here. The command has put a much greater emphasis on building the police and other rule of law institutions (courts, attorneys, jails, etc.) than before, even moreso than when I left on leave, based on the recognition that you can’t win a counterinsurgency fight by simply focusing on the military aspects of the problem. I’m cautiously optimistic because this is what I came here to do. Regardless of the ultimate outcome of this war, I think help these Iraqi institutions develop over the next several months while we’re here.
It was really great to see so many of you back in the United States. I’m sorry that I couldn’t see everyone, because I had only 2 weeks in town. With a little luck though, I’ll be able to see you all when I come back in September or October, especially if I’m able to follow through on my post-deployment plan of taking a long road trip with Peet to relax, unwind and see friends. Now that I’m back in Iraq, I’ll try to send more updates from over here (I left my laptop in Iraq so I could travel lightly, which is why I’ve been largely off the net for the past few weeks). I’ll also send a few more pictures so you can see how we’re living and working, and better visualize some of the more colorful moments that I write about. Talk to you soon.
Sunday, March 05, 2006
Iraq "Civil War" a Media Myth
I loathe the MSM. I disdain their not so hidden agenda.
Reports that Iraq has descended into a civil war are not only not true - they're being promulgated by anti-war journalists eager to see U.S. efforts to establish a stable democracy in the country fail.
Famous military analyst and author Ralph Peters, who just spent a week touring Baghdad with the 506th Infantry Regiment, 101st Airborne Division, couldn't find any civil war.
"I'm looking for the civil war that The New York Times declared. And I just can't find it," Peters declared in his New York Post column on Sunday.
Instead, he reports, "I saw children and teenagers in a Shia slum jumping up and down and cheering our troops as they drove by - Cheering our troops."
Everywhere the 506th traveled, Peters said, the reception was warm. "No violence. None. Iraqis went out of their way to tell us we were welcome."
Instead, said Peters, the bombing of the Golden Mosque in Samarra - the alleged catalyst for the so-called civil war - has "caused popular support for the U.S. presence to spike upward."
"In place of the civil war that elements in our media declared, I saw full streets, open shops, traffic jams, donkey carts, Muslim holiday flags - and children everywhere, waving as our Humvees passed," he recalled.
"Even the clouds of dust we stirred up didn't deter them. And the presence of children in the streets is the best possible indicator of a low threat level."
Why aren't more writers and journalists like Peters featured? Simple - they don't adhere to the NYT and MSM "truth".
Reports that Iraq has descended into a civil war are not only not true - they're being promulgated by anti-war journalists eager to see U.S. efforts to establish a stable democracy in the country fail.
Famous military analyst and author Ralph Peters, who just spent a week touring Baghdad with the 506th Infantry Regiment, 101st Airborne Division, couldn't find any civil war.
"I'm looking for the civil war that The New York Times declared. And I just can't find it," Peters declared in his New York Post column on Sunday.
Instead, he reports, "I saw children and teenagers in a Shia slum jumping up and down and cheering our troops as they drove by - Cheering our troops."
Everywhere the 506th traveled, Peters said, the reception was warm. "No violence. None. Iraqis went out of their way to tell us we were welcome."
Instead, said Peters, the bombing of the Golden Mosque in Samarra - the alleged catalyst for the so-called civil war - has "caused popular support for the U.S. presence to spike upward."
"In place of the civil war that elements in our media declared, I saw full streets, open shops, traffic jams, donkey carts, Muslim holiday flags - and children everywhere, waving as our Humvees passed," he recalled.
"Even the clouds of dust we stirred up didn't deter them. And the presence of children in the streets is the best possible indicator of a low threat level."
Why aren't more writers and journalists like Peters featured? Simple - they don't adhere to the NYT and MSM "truth".
Is the SEC still Necessary?
First, there are different classes of investors, such as institutional investors, insiders, activists, and the general public individual investor as all forms of investors who have different interests. Perhaps some investors will want the securities exchanges to adopt stringent corporate governance measures, and other will be at best indifferent. Thus, some corporations may choose exchanges with limited governance regimes while others more stringent ones. Thus, my general belief in the free market - the choices that the market offers to investors allows investors to choose not only the companies with which to invest, but to ignore those companies that invest in “poorer” exchanges (from a regulatory standpoint) and the members that list there.
I do not conclude here that the recent (post war) growth of the exchanges as quasi-public regulatory agencies has resulted in SEC obsolescence. That outcome is far too unrealistic as actually to occur. If, however, exchanges fill gaps between state and federal law, and are increasingly being used to effect federal law, then perhaps the exchanges have become sophisticated enough to no longer require the regulatory function of the SEC (allowing for the continuance of the enforcement arm, however). By using governance listing requirements as a means to compete for listings and for the trades that follow those listings, these exchanges can compete with the government agencies at the state or federal level. If the exchanges then can function more effectively (as private agencies usually do), then there is no need for the governmental duplication. Eventually, through mergers and globalization efforts, the American exchanges can then implement their rulemaking functions to create transnational exchanges that cross national boundaries and integrate the capital markets of the global economy more fully than any government agency could.
Of course, the threat remains that instead of achieving these lofty aims, the abolishment of the government’s role in security and corporate governance rulemaking could result in the race to the bottom problem. Thus, a result could be the loss of value in bidding down shares in lax legal regimes. This would confirm the power of the market to make the “correct” choice and reinforce “good” choices as compared to poor corporate governance regimes.
The federal government’s biggest fear over allowing the exchanges to compete freely over governance is their loss of power to harmonize the exchanges. Exchanges will not necessarily begin a race to the bottom, but would freeze in the status quo and not adopt new rules for fear of giving the other exchanges a competitive advantage. Would companies actually move based on new requirements in the exchanges? How would the board and insiders be able to convince shareholders to vote to approve a switch in listing (if that vote is necessary) if the exchanges provide information describing how that change is beneficial to the shareholder? Additionally, allowing exchanges to implement rules on their own and compete for listings through governance rules facilitates the experimental nature of competitive Federalism, as not only states, but companies and exchanges can see which rules work and which do not. Laying a heavy blanket of federal rules on top of this removes the incentive to experiment and develop new, innovative corporate governance regimes.
Regardless of whether the exchanges were ever able to operate without intrusive federal oversight and rulemaking, the present pattern of agency rulemaking seems to be the best that the exchanges could hope. For example, if Congress were to adopt a federal corporate law or provide the SEC with increased power, the exchanges could suffer further regulatory burdens. However, the current limits on SEC power prevent this. The limited (relatively) existing federal statutes and the Business Roundtable decisions limit the agency from overreaching. Of course, the lack of any federal power could always subject the exchanges to fractured state laws, but this is less of a threat as companies are only governed by the laws of their state of incorporation.
Until the time comes that Congress either increases SEC power directly or federalizes corporate law, the use of the exchanges by the SEC will continue. At least the indirect use allows the exchanges to implement the rule in the manner that they see fit, which would (hopefully) limit the impact of additional regulation. Furthermore, the exchanges would be able to implement the rules and regulations through their own expertise and avoid politically based requirements that are overly costly and of limited value, such as the SarbOx implementation.
I do not conclude here that the recent (post war) growth of the exchanges as quasi-public regulatory agencies has resulted in SEC obsolescence. That outcome is far too unrealistic as actually to occur. If, however, exchanges fill gaps between state and federal law, and are increasingly being used to effect federal law, then perhaps the exchanges have become sophisticated enough to no longer require the regulatory function of the SEC (allowing for the continuance of the enforcement arm, however). By using governance listing requirements as a means to compete for listings and for the trades that follow those listings, these exchanges can compete with the government agencies at the state or federal level. If the exchanges then can function more effectively (as private agencies usually do), then there is no need for the governmental duplication. Eventually, through mergers and globalization efforts, the American exchanges can then implement their rulemaking functions to create transnational exchanges that cross national boundaries and integrate the capital markets of the global economy more fully than any government agency could.
Of course, the threat remains that instead of achieving these lofty aims, the abolishment of the government’s role in security and corporate governance rulemaking could result in the race to the bottom problem. Thus, a result could be the loss of value in bidding down shares in lax legal regimes. This would confirm the power of the market to make the “correct” choice and reinforce “good” choices as compared to poor corporate governance regimes.
The federal government’s biggest fear over allowing the exchanges to compete freely over governance is their loss of power to harmonize the exchanges. Exchanges will not necessarily begin a race to the bottom, but would freeze in the status quo and not adopt new rules for fear of giving the other exchanges a competitive advantage. Would companies actually move based on new requirements in the exchanges? How would the board and insiders be able to convince shareholders to vote to approve a switch in listing (if that vote is necessary) if the exchanges provide information describing how that change is beneficial to the shareholder? Additionally, allowing exchanges to implement rules on their own and compete for listings through governance rules facilitates the experimental nature of competitive Federalism, as not only states, but companies and exchanges can see which rules work and which do not. Laying a heavy blanket of federal rules on top of this removes the incentive to experiment and develop new, innovative corporate governance regimes.
Regardless of whether the exchanges were ever able to operate without intrusive federal oversight and rulemaking, the present pattern of agency rulemaking seems to be the best that the exchanges could hope. For example, if Congress were to adopt a federal corporate law or provide the SEC with increased power, the exchanges could suffer further regulatory burdens. However, the current limits on SEC power prevent this. The limited (relatively) existing federal statutes and the Business Roundtable decisions limit the agency from overreaching. Of course, the lack of any federal power could always subject the exchanges to fractured state laws, but this is less of a threat as companies are only governed by the laws of their state of incorporation.
Until the time comes that Congress either increases SEC power directly or federalizes corporate law, the use of the exchanges by the SEC will continue. At least the indirect use allows the exchanges to implement the rule in the manner that they see fit, which would (hopefully) limit the impact of additional regulation. Furthermore, the exchanges would be able to implement the rules and regulations through their own expertise and avoid politically based requirements that are overly costly and of limited value, such as the SarbOx implementation.
Thursday, March 02, 2006
American Enterprise Institute Exposes Iraq War Myths
bOriginal article here. I couldn't have put it any better myself.
By Frederick W. Kagan
Posted: Friday, February 24, 2006
NATIONAL SECURITY OUTLOOK
AEI Online
Publication Date: February 24, 2006
This essay is available here as an Adobe Acrobat PDF.
March 2006
The debate about American policy and strategy in Iraq has veered off course. A number of myths have crept into the discussion over the past two years that distort understanding and confuse discussion. It is possible and appropriate to question the wisdom of any particular strategy proposed for Iraq, including the Bush administration’s strategy, and there is reason to be both concerned and encouraged by recent events there. But constructive dialogue about how to choose the best way forward is hampered by the distortions caused by certain myths. Until these myths recede from discussions about Iraq strategy, progress in those discussions is extremely unlikely.
Myth 1: The Bush administration intends to keep substantial U.S. forces in Iraq for a long time and must be pressured to bring them home quickly.
Those members of Congress like Rep. John Murtha (D-Pa.) and Nancy Pelosi (D-Calif.), who have demanded timetables for the rapid withdrawal of American forces from Iraq, implicitly argue that the administration would otherwise desire to keep U.S. troops in Iraq indefinitely. The idea behind these demands is that only external pressure will force the administration to hand Iraq over to the Iraqis and to withdraw American soldiers. In a recent interview, Murtha claimed that his pressure had changed administration policy in this regard, by driving the Pentagon to announce plans for rapid cuts in troop strength in Iraq.[1]
This assertion is false. The American strategy in Iraq from the very beginning of hostilities in March 2003 has been to remove all U.S. forces from the country as rapidly as possible. That was the basis of the “small footprint” idea under which the military fought the war with too few troops to prevent the rise of the insurgency. As the insurgency began, the military consistently underreacted in the deployment of troops and pursued a series of strategies to avoid increasing the number of troops in the country. Since mid-2004, the administration has stuck to a single determined strategy to train a large Iraqi army to wage the counterinsurgency and to withdraw American forces as that army becomes able to take over responsibilities in Iraq.[2]
The senior leaders in the administration, both civil and military, have made it plain from the beginning of the conflict that they believe that the U.S. presence in Iraq is an irritant, that it should be kept as small as possible, and that it should be withdrawn as quickly as possible. At no time has the administration indicated any goal other than withdrawing U.S. forces from Iraq as rapidly as circumstances permit. The only caveat has been that the administration would not withdraw troops if such withdrawals would jeopardize the establishment of a peaceful and stable regime in Iraq.[3]
The insistence on the establishment of arbitrary timetables diverges from administration policy in one respect only: Murtha, Pelosi, and others who advocate this course must accept the possibility that withdrawals on a given timetable may lead to the collapse of the Iraqi state. If they are unwilling to accept that result--if they would want to suspend the withdrawal if the situation began to collapse, for instance--then there is no material difference between their position and the president’s. This so-called debate over timetables, therefore, is a debate over whether the United States should remain committed to trying to succeed in Iraq or whether America should be willing to lose there in order to retreat rapidly.[4]
Myth 2: The presence of U.S. forces in Iraq is the major source of the conflict there.
Peace will return to Iraq as Americans leave.Ironically, this myth was first expounded by the U.S. military, which used it as the basis for arguing that American forces in Iraq must be as small as possible, interact as little as possible with the population, and leave as quickly as they can, consistent with ensuring success. The underlying assumptions are that Iraqis are a proud people unwilling to tolerate “invaders” and that the American presence has galvanized disparate elements of the population to take up arms to repel the invasion.[5]
There is a certain amount of truth here, of course: a significant portion of the Sunni Arab insurgency is devoted to attacking Americans and driving them from Iraq, and a few elements of the Shiite community have joined in such attacks for their own reasons. The logical leap from that fact to the assertion that if only the Americans would leave, the insurgency would die down and peace would ensue, however, is baseless and indefensible.
In the first place, a significant goal of the Sunni Arab insurgency has always been to prevent the establishment of a Shiite government in Baghdad with power over the Sunni lands. For this reason, alongside attacks on American troops, there has always been a steady drumbeat of attacks against Shiites and against Sunni Arabs seen as collaborating with the regime either by taking leadership positions or by volunteering to serve in its police and armed forces. In 2005, a number of insurgent groups decided to prioritize attacking collaborators and members of the Iraqi Security Forces over hitting coalition troops. Insurgent literature regularly distinguishes between “civilians,” who are not to be targeted, and “traitors” or “collaborators,” who are legitimate targets. This differentiation and refocusing of target priorities clearly shows that the presence of coalition forces is by no means the only--or even the main--catalyst driving the insurgency.[6]
It is too easy in this regard to emphasize the current focus of insurgent propaganda without reflecting on its deeper roots, aims, and purposes. The Iraqi insurgents are united to a considerable extent in their desire to expel the United States from Iraq. It does not follow that their success in that goal would lead to peace. On the contrary, it is clear from their writings that the main insurgent groups have been intentionally putting off expositions of their ultimate aims in order to pursue a fragile harmony during the occupation. The withdrawal of coalition troops will remove the need for the insurgent groups to hold back.[7]
The results of such a rapid withdrawal will be primarily negative. Insurgent groups may initially begin to struggle with one another, both arguing and fighting over their future visions of the country. All will almost certainly attack the Iraqi government and security forces with renewed vigor. The absence of coalition forces will embolden some to increase sectarian violence in the hope of igniting a civil war. The likely result will be either chaos or the further weeding-out and merging of insurgent groups into larger organizations capable of posing a significant challenge to a very weak central regime. The prospects for the success of that regime in such a scenario are very dim.
There is considerable evidence, furthermore, that the insurgents are already sensing victory in the repeated statements of the American intention to withdraw rapidly and are biding their time in anticipation of a more propitious moment to strike the regime. The establishment of a timetable for withdrawal will only add momentum, swelling the ranks of the rebels and encouraging more and more serious attacks.[8]
Focusing on the “irritating” presence of coalition forces is therefore extremely shortsighted and reveals a real lack of imagination about how events are likely to unfold once those forces have been removed. It is nearly certain that coalition forces are all that is now standing between Iraq and sectarian civil war, and the premature withdrawal of those forces on some fixed timeline will probably open the floodgates of chaos.
Myth 3: The war in Iraq is a distraction from the war on terrorism.
Opponents of the war in Iraq have argued from the beginning that because Saddam Hussein was not directly tied to the 9/11 attacks or al Qaeda, as the administration at times has claimed, the war in Iraq is a distraction from the war on terror. They have argued that the diversion of resources from Afghanistan to Iraq has allowed Osama bin Laden to remain at liberty and has prevented the United States from following up on its successes during Operation Enduring Freedom to finish off al Qaeda.[9]
Claims of Saddam’s prewar involvement with al Qaeda certainly seem to have been exaggerated--although it is known that Abu Musab al-Zarqawi trained soldiers under the aegis of the Taliban alongside al Qaeda fighters and then moved into Iraq before the U.S. attack.[10]
This question, however, is no longer relevant to the problem of determining U.S. strategy in the war on terror. Al Qaeda’s “second-in-command,” Ayman al-Zawahiri, has repeatedly said that he now sees Iraq as the central front in the struggle with the West.[11]
Zarqawi has linked his ideological program with that of Zawahiri and bin Laden to make plain that he has no intention of stopping with success in Iraq, should he attain it. Above all, the key question is: will chaos in Iraq help or hinder al Qaeda and other terrorist organizations in their struggle with the United States and the West? The answer is, of course, that it will help them.
The Bush administration’s strategy in Iraq may or may not succeed. Certainly it has received a great deal of criticism from all sides. But those who argue for an immediate (or rapid) withdrawal of American forces to “refocus” them on the war on terror have the burden of showing that such a withdrawal will not lead to the sort of chaos in which terrorist organizations thrive. There can be no question of the inability now and for some time of the Iraqi government to control its territory fully. Nor is there any question of the resources potentially available to terrorists in Iraq--as they were not readily available in impoverished and war-torn Afghanistan. Those resources include not only money and weapons, but access to military specialists, technology, and scientists who had been working on Saddam’s WMD programs. This is a recipe for catastrophe on a greater scale than September 11, and there is every reason to believe that a premature withdrawal of American forces would precipitate such a catastrophe. Whatever the relevance of Iraq in the war on terror in 2003, it is a critical front in that war today.
Nor is it at all clear how withdrawing from Iraq would help reallocate resources to the sort of struggle most people have in mind when they think of the fight against al Qaeda. The conventional forces in Iraq would certainly be of little use in chasing bin Laden and his colleagues around the Pakistani mountains. More Special Forces troops might help, but even so, the United States can hardly flood the Pakistani tribal areas where most of the al Qaeda leadership seems to be hiding with thousands of Special Forces warriors. Deploying more U.S. soldiers to Afghanistan is a good idea and essential to maintaining that state’s fragile progress toward stability, but, again, the main al Qaeda bases are no longer in Afghanistan. It is simply very hard to see how withdrawing from Iraq would directly support better resourcing of the war on terror, even if success in Iraq were not so vital to success in the larger struggle.
Myth 4: The wisdom of invading Iraq in 2003 should be an important part of the discussion about what to do in Iraq today.
When John Kerry made criticism of Bush’s decision to go to war--rather than of current administration strategy in Iraq--the centerpiece of his campaign, he helped ensure that future debates over policy there would be fruitless. From the standpoint of American policy today, it simply does not matter whether attacking Saddam in 2003 was the right decision or not. The question must be: where do we go from here?
From the standpoint of American domestic politics, criticizing the decision to go to war is, of course, perfectly valid and may even have been essential. The American public was certainly entitled to make up its mind whether or not Bush had made a mistake and to fire him if it felt that he had done so. The electorate chose not to do so, implicitly accepting either the administration’s rationale for invading or the irrelevance of the discussion to the matter at hand. Either way, the wisdom of the invasion is now purely a matter for historians.
In May 1950, Korea was an irrelevant peninsula not many people could locate on a map. Truman administration officials did not find it necessary to include Korea among the list of places in Asia that the United States would have to defend. Yet on June 25, 1950, Korea became a central battlefield in the Cold War. The United States committed hundreds of thousands of troops to its defense, and the war has affected the American military, U.S. national security policy, and U.S. domestic politics ever since. It is impossible to say in advance whether a specific region is or is not going to be vital to a particular struggle. The centrality of a battle in a larger conflict arises from its circumstances and the likely consequences of success or failure. As it was in Korea--and, in a more negative sense, another “irrelevant” struggle fought in a “meaningless” backwater, Vietnam--so it is in Iraq. It does not matter now why we went into Iraq, only what will happen if we do not succeed there.
Myth 5: Most Iraqis “want us out,” and we have lost the battle for “hearts and minds.” Therefore, we cannot succeed.[12]
Human beings are peculiarly constructed so that each believes that he is the center of the universe. It is too easy to allow this belief to invade the realm of practical policy. Success in Iraq does not rest on Iraqi attitudes toward the United States. It rests on attitudes toward the Iraqi government. The Iraqi people can dislike America and resent the invasion, but still support their government and make the transition to democracy and stability. It is easy to imagine circumstances in which hatred of the United States diminishes and democracy perishes. For example, if coalition forces withdraw prematurely, civil war breaks out, and Shia army, police, and militia begin massacring Sunni Arabs, the victims may well come to think that the U.S. presence was really a good thing and that their demands for the coalition’s departure were unwise. Such thoughts may come too late, however, to avoid widespread conflict and killing and the collapse of the Iraqi state.
The real issue about the popularity of American forces is the degree to which their presence fuels the fighting or contains sectarian conflict. As we have already seen, the evidence that the U.S. presence is the key driving force in the insurgency is thin, and the evidence that that presence is an essential precondition for avoiding civil war is strong. Iraqi attitudes about that presence only really matter if they change this calculation in some important way. These attitudes are therefore worth monitoring, but should not be allowed to drive coalition strategy by themselves.
Above all, it is essential to keep in mind that it is not the United States that has the task of winning the “hearts and minds” of the Iraqis, but the Iraqi government. The current Iraqi government has by no means yet succeeded in that task, and it may fail to do so. But we can judge the progress of the counterinsurgency only on the basis of the Iraqi government’s success or failure in this regard, not our own.
Myth 6: Setting a timetable for withdrawal will “incentivize” the Iraqis to take responsibility for their own country.
This is an idea frequently promoted by Murtha and others who advocate an immediate or rapid withdrawal.[13] It rests on two assumptions: that the Iraqis are or shortly will be capable of taking responsibility for their country, and that they are not doing so now because they do not feel the need. If coalition forces withdraw, so the argument goes, then the Iraqis will have to sink or swim and, implicitly, they will probably swim.
Both of these assumptions are contradicted by the facts on the ground. The Iraqi government is demonstrably unable to control its state, and the Iraqi Security Forces and, still more, the Iraqi police are inadequate to fight the insurgency. Recent estimates suggest that as many as 60,000 Iraqi Security Forces troops may be fit to undertake operations entirely on their own.[14]Counter-insurgency operations to date have required between 130,000 and 160,000 American troops in addition to those 60,000 Iraqis to maintain the current unacceptably low level of security and stability in the country. Training soldiers takes time. Gaining experience in combat and in command takes time. However hard we push, the Iraqis can only go so fast. It is unlikely in the extreme that 2006 will see the deployment of enough Iraqi troops to relieve all of the coalition forces and maintain security even at the current level. The Iraqi police are, by all accounts, lagging even further behind.
Telling the Iraqis to “sink or swim” soon, therefore, is tantamount to telling them to drown. Nor have the Iraqis shown any unwillingness to fight for their country. On the contrary, hundreds of thousands of Iraqis have volunteered for the most dangerous duty in their land, fighting insurgents with inadequate training and equipment. Those volunteers have frequently come under attack at recruiting stations and in their barracks, yet their numbers have not flagged. Iraqi units no longer shirk combat or run from battle. They have fought toe-to-toe with insurgents on many occasions, have been badly bloodied, and have returned for duty the next day. Iraqi government officials have persevered despite improvised explosive devices (IEDs), mortar and rocket attacks, kidnappings, and assassination attempts. It is difficult to see how it might be necessary to “incentivize” people fighting bravely in the face of greater danger to themselves and their families than Americans have faced since the Civil War.
Toward a More Reasoned DebateThere is much to criticize in the administration’s strategy in the counterinsurgency struggle in Iraq, and debate over the best course for that strategy is healthy. Honest debate about the value of continuing to try to win in Iraq is also an important part of the American democratic system and should not be shut down or attacked. But this debate can only help the formulation of sound policies if it is based on reality and focuses on the issues at hand.
The deep polarization of American politics, particularly over this issue, has distorted the discussion, however. U.S. policy in Iraq is too important to allow such distortions to persist. It is time to put away the ideological and rhetorical cudgels and begin to reason again about the best course to choose. The reestablishment of such an objective and rational discourse is the only hope of avoiding disaster.
Frederick W. Kagan is a resident scholar at AEI. AEI research assistant Melissa Wisner and AEI editor Scott R. Palmer worked with the author to edit and produce this National Security Outlook.
Notes
1. Representative John Murtha, interview by Diane Rehm, Diane Rehm Show, WAMU Radio, February 13, 2006.
2. See Frederick W. Kagan, “Blueprint for Victory,” The Weekly Standard, October 31, 2005; Frederick W. Kagan, “Fighting to Win: With the Proper Strategy, Victory in Iraq Is Far More Likely Than People Think,” The Weekly Standard, December 19, 2005; Frederick W. Kagan, “Risky Business: The Biggest Danger in Iraq Now Is Drawing Down Too Quickly,” The Weekly Standard, January 23, 2006.
3. The Bush administration’s publicly released strategy for Iraq declares: “Coalition troop levels, for example, will increase where necessary to defeat the enemy or provide additional security for key events like the referendum and elections. But troop levels will decrease over time, as Iraqis continue to take on more of the security and civilian responsibilities themselves”; and “As Iraqis take on more responsibility for security, Coalition forces will increasingly move to supporting roles in most areas. The mission of our forces will change--from conducting operations and keeping the peace, to more specialized operations targeted at the most vicious terrorists and leadership networks. As security conditions improve and as Iraqi Security Forces become increasingly capable of securing their own country, our forces will increasingly move out of the cities, reduce the number of bases from which we operate, and conduct fewer patrols and convoy missions.” President George W. Bush, National Strategy for Victory in Iraq (National Security Council, Washington, D.C., 2005), emphasis added. President Bush has repeatedly declared that “as the Iraqis stand up, we’ll stand down.” See, for example, Office of the White House Press Secretary, “Bush Media Availability with Donald Rumsfeld and Lieutenant General David Petraeus,” news release, October 5, 2005.
4. For example: “The United States will immediately redeploy--immediately redeploy. No schedule which can be changed, nothing that’s controlled by the Iraqis, this is an immediate redeployment of our American forces because they have become the target.” See John Murtha “Murtha Calls for a ‘Change in Direction’,” New York Times, November 17, 2005.
5. See Frederick W. Kagan, “Blueprint for Victory,” and “Fighting to Win,” for discussion and analysis of the military’s attitude toward this issue. Murtha repeated this line of argument in “Murtha Calls for a ‘Change in Direction’.”
6. See the excellent recent report on the nature of the insurgency: “In Their Own Words: Reading the Iraqi Insurgency,” in Middle East Report no. 50 (Washington, D.C.: International Crisis Group, 2006); and Michael Eisenstadt and Jeffrey White, “Assessing Iraq’s Sunni Arab Insurgency,” Policy Focus (Washington, D.C.: Washington Institute for Near East Policy, 2005).
7. “In Their Own Words: Reading the Iraqi Insurgency.”
8. According to “In Their Own Words”: “The insurgents’ perspective has undergone a remarkable evolution. Initially, they perceived and presented the U.S. presence as an enduring one that would be extremely difficult to dislodge; they saw their struggle as a long-term, open-ended jihad, whose success was measured by the very fact that it was taking place. That no longer is the case. Today, the prospect of an outright victory and a swift withdrawal of foreign forces has crystallised, bolstered by the U.S.’s perceived loss of legitimacy and apparent vacillation, its periodic announcements of troop redeployments, the precipitous decline in domestic support for the war and heightened calls by prominent politicians for a rapid withdrawal. When the U.S. leaves, the insurgents do not doubt that Iraq’s security forces and institutions would quickly collapse.”
9. See, for example, Senator Robert C. Byrd, “America the Peacemaker Becomes America the Warmonger,” (remarks, U.S. Senate, Washington, D.C., March 11, 2003
10. Nimrod Raphaeli, “‘The Sheikh of the Slaughterers: Abu Mus’ab Al-Zarqawi and the Al-Qa’ida Connection,” in Inquiry and Analysis Series no. 231 (Washington, D.C.: Middle East Media Research Institute, July 1, 2005).
11. “I want to be the first to congratulate you for what God has blessed you with in terms of fighting battle in the heart of the Islamic world, which was formerly the field for major battles in Islam’s history, and what is now the place for the greatest battle of Islam in this era,” quoted in Office of the Director of National Intelligence, “Letter from Ayman al-Zawahiri to Abu Mus’ab al-Zarqawi,” news release no. 2-05, October 11, 2005.
12. This has been the mainstay of arguments by Murtha, Kerry, Joseph Biden, and others for rapid withdrawal. John Murtha, “Murtha Calls for a ‘Change in Direction’” ; John Kerry, “Senator John Kerry Lays out Path Forward in Iraq: If Administration Acts Responsibly, We Can Stabilize Iraq and Reduce Combat Forces,” (speech, Georgetown University, Washington, D.C., October 26, 2005); Joseph R. Biden, “Time for An Iraq Timetable,” Washington Post, November 26, 2005.
13. John Murtha, “Murtha Calls for a ‘Change in Direction’” and interview on the Diane Rehm Show.14. Kenneth M. Pollack, “A Switch in Time: A New Strategy for America in Iraq,” (analysis paper no. 7, Saban Center for Middle East Policy, Brookings Institution, Washington, D.C., 2006).
By Frederick W. Kagan
Posted: Friday, February 24, 2006
NATIONAL SECURITY OUTLOOK
AEI Online
Publication Date: February 24, 2006
This essay is available here as an Adobe Acrobat PDF.
March 2006
The debate about American policy and strategy in Iraq has veered off course. A number of myths have crept into the discussion over the past two years that distort understanding and confuse discussion. It is possible and appropriate to question the wisdom of any particular strategy proposed for Iraq, including the Bush administration’s strategy, and there is reason to be both concerned and encouraged by recent events there. But constructive dialogue about how to choose the best way forward is hampered by the distortions caused by certain myths. Until these myths recede from discussions about Iraq strategy, progress in those discussions is extremely unlikely.
Myth 1: The Bush administration intends to keep substantial U.S. forces in Iraq for a long time and must be pressured to bring them home quickly.
Those members of Congress like Rep. John Murtha (D-Pa.) and Nancy Pelosi (D-Calif.), who have demanded timetables for the rapid withdrawal of American forces from Iraq, implicitly argue that the administration would otherwise desire to keep U.S. troops in Iraq indefinitely. The idea behind these demands is that only external pressure will force the administration to hand Iraq over to the Iraqis and to withdraw American soldiers. In a recent interview, Murtha claimed that his pressure had changed administration policy in this regard, by driving the Pentagon to announce plans for rapid cuts in troop strength in Iraq.[1]
This assertion is false. The American strategy in Iraq from the very beginning of hostilities in March 2003 has been to remove all U.S. forces from the country as rapidly as possible. That was the basis of the “small footprint” idea under which the military fought the war with too few troops to prevent the rise of the insurgency. As the insurgency began, the military consistently underreacted in the deployment of troops and pursued a series of strategies to avoid increasing the number of troops in the country. Since mid-2004, the administration has stuck to a single determined strategy to train a large Iraqi army to wage the counterinsurgency and to withdraw American forces as that army becomes able to take over responsibilities in Iraq.[2]
The senior leaders in the administration, both civil and military, have made it plain from the beginning of the conflict that they believe that the U.S. presence in Iraq is an irritant, that it should be kept as small as possible, and that it should be withdrawn as quickly as possible. At no time has the administration indicated any goal other than withdrawing U.S. forces from Iraq as rapidly as circumstances permit. The only caveat has been that the administration would not withdraw troops if such withdrawals would jeopardize the establishment of a peaceful and stable regime in Iraq.[3]
The insistence on the establishment of arbitrary timetables diverges from administration policy in one respect only: Murtha, Pelosi, and others who advocate this course must accept the possibility that withdrawals on a given timetable may lead to the collapse of the Iraqi state. If they are unwilling to accept that result--if they would want to suspend the withdrawal if the situation began to collapse, for instance--then there is no material difference between their position and the president’s. This so-called debate over timetables, therefore, is a debate over whether the United States should remain committed to trying to succeed in Iraq or whether America should be willing to lose there in order to retreat rapidly.[4]
Myth 2: The presence of U.S. forces in Iraq is the major source of the conflict there.
Peace will return to Iraq as Americans leave.Ironically, this myth was first expounded by the U.S. military, which used it as the basis for arguing that American forces in Iraq must be as small as possible, interact as little as possible with the population, and leave as quickly as they can, consistent with ensuring success. The underlying assumptions are that Iraqis are a proud people unwilling to tolerate “invaders” and that the American presence has galvanized disparate elements of the population to take up arms to repel the invasion.[5]
There is a certain amount of truth here, of course: a significant portion of the Sunni Arab insurgency is devoted to attacking Americans and driving them from Iraq, and a few elements of the Shiite community have joined in such attacks for their own reasons. The logical leap from that fact to the assertion that if only the Americans would leave, the insurgency would die down and peace would ensue, however, is baseless and indefensible.
In the first place, a significant goal of the Sunni Arab insurgency has always been to prevent the establishment of a Shiite government in Baghdad with power over the Sunni lands. For this reason, alongside attacks on American troops, there has always been a steady drumbeat of attacks against Shiites and against Sunni Arabs seen as collaborating with the regime either by taking leadership positions or by volunteering to serve in its police and armed forces. In 2005, a number of insurgent groups decided to prioritize attacking collaborators and members of the Iraqi Security Forces over hitting coalition troops. Insurgent literature regularly distinguishes between “civilians,” who are not to be targeted, and “traitors” or “collaborators,” who are legitimate targets. This differentiation and refocusing of target priorities clearly shows that the presence of coalition forces is by no means the only--or even the main--catalyst driving the insurgency.[6]
It is too easy in this regard to emphasize the current focus of insurgent propaganda without reflecting on its deeper roots, aims, and purposes. The Iraqi insurgents are united to a considerable extent in their desire to expel the United States from Iraq. It does not follow that their success in that goal would lead to peace. On the contrary, it is clear from their writings that the main insurgent groups have been intentionally putting off expositions of their ultimate aims in order to pursue a fragile harmony during the occupation. The withdrawal of coalition troops will remove the need for the insurgent groups to hold back.[7]
The results of such a rapid withdrawal will be primarily negative. Insurgent groups may initially begin to struggle with one another, both arguing and fighting over their future visions of the country. All will almost certainly attack the Iraqi government and security forces with renewed vigor. The absence of coalition forces will embolden some to increase sectarian violence in the hope of igniting a civil war. The likely result will be either chaos or the further weeding-out and merging of insurgent groups into larger organizations capable of posing a significant challenge to a very weak central regime. The prospects for the success of that regime in such a scenario are very dim.
There is considerable evidence, furthermore, that the insurgents are already sensing victory in the repeated statements of the American intention to withdraw rapidly and are biding their time in anticipation of a more propitious moment to strike the regime. The establishment of a timetable for withdrawal will only add momentum, swelling the ranks of the rebels and encouraging more and more serious attacks.[8]
Focusing on the “irritating” presence of coalition forces is therefore extremely shortsighted and reveals a real lack of imagination about how events are likely to unfold once those forces have been removed. It is nearly certain that coalition forces are all that is now standing between Iraq and sectarian civil war, and the premature withdrawal of those forces on some fixed timeline will probably open the floodgates of chaos.
Myth 3: The war in Iraq is a distraction from the war on terrorism.
Opponents of the war in Iraq have argued from the beginning that because Saddam Hussein was not directly tied to the 9/11 attacks or al Qaeda, as the administration at times has claimed, the war in Iraq is a distraction from the war on terror. They have argued that the diversion of resources from Afghanistan to Iraq has allowed Osama bin Laden to remain at liberty and has prevented the United States from following up on its successes during Operation Enduring Freedom to finish off al Qaeda.[9]
Claims of Saddam’s prewar involvement with al Qaeda certainly seem to have been exaggerated--although it is known that Abu Musab al-Zarqawi trained soldiers under the aegis of the Taliban alongside al Qaeda fighters and then moved into Iraq before the U.S. attack.[10]
This question, however, is no longer relevant to the problem of determining U.S. strategy in the war on terror. Al Qaeda’s “second-in-command,” Ayman al-Zawahiri, has repeatedly said that he now sees Iraq as the central front in the struggle with the West.[11]
Zarqawi has linked his ideological program with that of Zawahiri and bin Laden to make plain that he has no intention of stopping with success in Iraq, should he attain it. Above all, the key question is: will chaos in Iraq help or hinder al Qaeda and other terrorist organizations in their struggle with the United States and the West? The answer is, of course, that it will help them.
The Bush administration’s strategy in Iraq may or may not succeed. Certainly it has received a great deal of criticism from all sides. But those who argue for an immediate (or rapid) withdrawal of American forces to “refocus” them on the war on terror have the burden of showing that such a withdrawal will not lead to the sort of chaos in which terrorist organizations thrive. There can be no question of the inability now and for some time of the Iraqi government to control its territory fully. Nor is there any question of the resources potentially available to terrorists in Iraq--as they were not readily available in impoverished and war-torn Afghanistan. Those resources include not only money and weapons, but access to military specialists, technology, and scientists who had been working on Saddam’s WMD programs. This is a recipe for catastrophe on a greater scale than September 11, and there is every reason to believe that a premature withdrawal of American forces would precipitate such a catastrophe. Whatever the relevance of Iraq in the war on terror in 2003, it is a critical front in that war today.
Nor is it at all clear how withdrawing from Iraq would help reallocate resources to the sort of struggle most people have in mind when they think of the fight against al Qaeda. The conventional forces in Iraq would certainly be of little use in chasing bin Laden and his colleagues around the Pakistani mountains. More Special Forces troops might help, but even so, the United States can hardly flood the Pakistani tribal areas where most of the al Qaeda leadership seems to be hiding with thousands of Special Forces warriors. Deploying more U.S. soldiers to Afghanistan is a good idea and essential to maintaining that state’s fragile progress toward stability, but, again, the main al Qaeda bases are no longer in Afghanistan. It is simply very hard to see how withdrawing from Iraq would directly support better resourcing of the war on terror, even if success in Iraq were not so vital to success in the larger struggle.
Myth 4: The wisdom of invading Iraq in 2003 should be an important part of the discussion about what to do in Iraq today.
When John Kerry made criticism of Bush’s decision to go to war--rather than of current administration strategy in Iraq--the centerpiece of his campaign, he helped ensure that future debates over policy there would be fruitless. From the standpoint of American policy today, it simply does not matter whether attacking Saddam in 2003 was the right decision or not. The question must be: where do we go from here?
From the standpoint of American domestic politics, criticizing the decision to go to war is, of course, perfectly valid and may even have been essential. The American public was certainly entitled to make up its mind whether or not Bush had made a mistake and to fire him if it felt that he had done so. The electorate chose not to do so, implicitly accepting either the administration’s rationale for invading or the irrelevance of the discussion to the matter at hand. Either way, the wisdom of the invasion is now purely a matter for historians.
In May 1950, Korea was an irrelevant peninsula not many people could locate on a map. Truman administration officials did not find it necessary to include Korea among the list of places in Asia that the United States would have to defend. Yet on June 25, 1950, Korea became a central battlefield in the Cold War. The United States committed hundreds of thousands of troops to its defense, and the war has affected the American military, U.S. national security policy, and U.S. domestic politics ever since. It is impossible to say in advance whether a specific region is or is not going to be vital to a particular struggle. The centrality of a battle in a larger conflict arises from its circumstances and the likely consequences of success or failure. As it was in Korea--and, in a more negative sense, another “irrelevant” struggle fought in a “meaningless” backwater, Vietnam--so it is in Iraq. It does not matter now why we went into Iraq, only what will happen if we do not succeed there.
Myth 5: Most Iraqis “want us out,” and we have lost the battle for “hearts and minds.” Therefore, we cannot succeed.[12]
Human beings are peculiarly constructed so that each believes that he is the center of the universe. It is too easy to allow this belief to invade the realm of practical policy. Success in Iraq does not rest on Iraqi attitudes toward the United States. It rests on attitudes toward the Iraqi government. The Iraqi people can dislike America and resent the invasion, but still support their government and make the transition to democracy and stability. It is easy to imagine circumstances in which hatred of the United States diminishes and democracy perishes. For example, if coalition forces withdraw prematurely, civil war breaks out, and Shia army, police, and militia begin massacring Sunni Arabs, the victims may well come to think that the U.S. presence was really a good thing and that their demands for the coalition’s departure were unwise. Such thoughts may come too late, however, to avoid widespread conflict and killing and the collapse of the Iraqi state.
The real issue about the popularity of American forces is the degree to which their presence fuels the fighting or contains sectarian conflict. As we have already seen, the evidence that the U.S. presence is the key driving force in the insurgency is thin, and the evidence that that presence is an essential precondition for avoiding civil war is strong. Iraqi attitudes about that presence only really matter if they change this calculation in some important way. These attitudes are therefore worth monitoring, but should not be allowed to drive coalition strategy by themselves.
Above all, it is essential to keep in mind that it is not the United States that has the task of winning the “hearts and minds” of the Iraqis, but the Iraqi government. The current Iraqi government has by no means yet succeeded in that task, and it may fail to do so. But we can judge the progress of the counterinsurgency only on the basis of the Iraqi government’s success or failure in this regard, not our own.
Myth 6: Setting a timetable for withdrawal will “incentivize” the Iraqis to take responsibility for their own country.
This is an idea frequently promoted by Murtha and others who advocate an immediate or rapid withdrawal.[13] It rests on two assumptions: that the Iraqis are or shortly will be capable of taking responsibility for their country, and that they are not doing so now because they do not feel the need. If coalition forces withdraw, so the argument goes, then the Iraqis will have to sink or swim and, implicitly, they will probably swim.
Both of these assumptions are contradicted by the facts on the ground. The Iraqi government is demonstrably unable to control its state, and the Iraqi Security Forces and, still more, the Iraqi police are inadequate to fight the insurgency. Recent estimates suggest that as many as 60,000 Iraqi Security Forces troops may be fit to undertake operations entirely on their own.[14]Counter-insurgency operations to date have required between 130,000 and 160,000 American troops in addition to those 60,000 Iraqis to maintain the current unacceptably low level of security and stability in the country. Training soldiers takes time. Gaining experience in combat and in command takes time. However hard we push, the Iraqis can only go so fast. It is unlikely in the extreme that 2006 will see the deployment of enough Iraqi troops to relieve all of the coalition forces and maintain security even at the current level. The Iraqi police are, by all accounts, lagging even further behind.
Telling the Iraqis to “sink or swim” soon, therefore, is tantamount to telling them to drown. Nor have the Iraqis shown any unwillingness to fight for their country. On the contrary, hundreds of thousands of Iraqis have volunteered for the most dangerous duty in their land, fighting insurgents with inadequate training and equipment. Those volunteers have frequently come under attack at recruiting stations and in their barracks, yet their numbers have not flagged. Iraqi units no longer shirk combat or run from battle. They have fought toe-to-toe with insurgents on many occasions, have been badly bloodied, and have returned for duty the next day. Iraqi government officials have persevered despite improvised explosive devices (IEDs), mortar and rocket attacks, kidnappings, and assassination attempts. It is difficult to see how it might be necessary to “incentivize” people fighting bravely in the face of greater danger to themselves and their families than Americans have faced since the Civil War.
Toward a More Reasoned DebateThere is much to criticize in the administration’s strategy in the counterinsurgency struggle in Iraq, and debate over the best course for that strategy is healthy. Honest debate about the value of continuing to try to win in Iraq is also an important part of the American democratic system and should not be shut down or attacked. But this debate can only help the formulation of sound policies if it is based on reality and focuses on the issues at hand.
The deep polarization of American politics, particularly over this issue, has distorted the discussion, however. U.S. policy in Iraq is too important to allow such distortions to persist. It is time to put away the ideological and rhetorical cudgels and begin to reason again about the best course to choose. The reestablishment of such an objective and rational discourse is the only hope of avoiding disaster.
Frederick W. Kagan is a resident scholar at AEI. AEI research assistant Melissa Wisner and AEI editor Scott R. Palmer worked with the author to edit and produce this National Security Outlook.
Notes
1. Representative John Murtha, interview by Diane Rehm, Diane Rehm Show, WAMU Radio, February 13, 2006.
2. See Frederick W. Kagan, “Blueprint for Victory,” The Weekly Standard, October 31, 2005; Frederick W. Kagan, “Fighting to Win: With the Proper Strategy, Victory in Iraq Is Far More Likely Than People Think,” The Weekly Standard, December 19, 2005; Frederick W. Kagan, “Risky Business: The Biggest Danger in Iraq Now Is Drawing Down Too Quickly,” The Weekly Standard, January 23, 2006.
3. The Bush administration’s publicly released strategy for Iraq declares: “Coalition troop levels, for example, will increase where necessary to defeat the enemy or provide additional security for key events like the referendum and elections. But troop levels will decrease over time, as Iraqis continue to take on more of the security and civilian responsibilities themselves”; and “As Iraqis take on more responsibility for security, Coalition forces will increasingly move to supporting roles in most areas. The mission of our forces will change--from conducting operations and keeping the peace, to more specialized operations targeted at the most vicious terrorists and leadership networks. As security conditions improve and as Iraqi Security Forces become increasingly capable of securing their own country, our forces will increasingly move out of the cities, reduce the number of bases from which we operate, and conduct fewer patrols and convoy missions.” President George W. Bush, National Strategy for Victory in Iraq (National Security Council, Washington, D.C., 2005), emphasis added. President Bush has repeatedly declared that “as the Iraqis stand up, we’ll stand down.” See, for example, Office of the White House Press Secretary, “Bush Media Availability with Donald Rumsfeld and Lieutenant General David Petraeus,” news release, October 5, 2005.
4. For example: “The United States will immediately redeploy--immediately redeploy. No schedule which can be changed, nothing that’s controlled by the Iraqis, this is an immediate redeployment of our American forces because they have become the target.” See John Murtha “Murtha Calls for a ‘Change in Direction’,” New York Times, November 17, 2005.
5. See Frederick W. Kagan, “Blueprint for Victory,” and “Fighting to Win,” for discussion and analysis of the military’s attitude toward this issue. Murtha repeated this line of argument in “Murtha Calls for a ‘Change in Direction’.”
6. See the excellent recent report on the nature of the insurgency: “In Their Own Words: Reading the Iraqi Insurgency,” in Middle East Report no. 50 (Washington, D.C.: International Crisis Group, 2006); and Michael Eisenstadt and Jeffrey White, “Assessing Iraq’s Sunni Arab Insurgency,” Policy Focus (Washington, D.C.: Washington Institute for Near East Policy, 2005).
7. “In Their Own Words: Reading the Iraqi Insurgency.”
8. According to “In Their Own Words”: “The insurgents’ perspective has undergone a remarkable evolution. Initially, they perceived and presented the U.S. presence as an enduring one that would be extremely difficult to dislodge; they saw their struggle as a long-term, open-ended jihad, whose success was measured by the very fact that it was taking place. That no longer is the case. Today, the prospect of an outright victory and a swift withdrawal of foreign forces has crystallised, bolstered by the U.S.’s perceived loss of legitimacy and apparent vacillation, its periodic announcements of troop redeployments, the precipitous decline in domestic support for the war and heightened calls by prominent politicians for a rapid withdrawal. When the U.S. leaves, the insurgents do not doubt that Iraq’s security forces and institutions would quickly collapse.”
9. See, for example, Senator Robert C. Byrd, “America the Peacemaker Becomes America the Warmonger,” (remarks, U.S. Senate, Washington, D.C., March 11, 2003
10. Nimrod Raphaeli, “‘The Sheikh of the Slaughterers: Abu Mus’ab Al-Zarqawi and the Al-Qa’ida Connection,” in Inquiry and Analysis Series no. 231 (Washington, D.C.: Middle East Media Research Institute, July 1, 2005).
11. “I want to be the first to congratulate you for what God has blessed you with in terms of fighting battle in the heart of the Islamic world, which was formerly the field for major battles in Islam’s history, and what is now the place for the greatest battle of Islam in this era,” quoted in Office of the Director of National Intelligence, “Letter from Ayman al-Zawahiri to Abu Mus’ab al-Zarqawi,” news release no. 2-05, October 11, 2005.
12. This has been the mainstay of arguments by Murtha, Kerry, Joseph Biden, and others for rapid withdrawal. John Murtha, “Murtha Calls for a ‘Change in Direction’” ; John Kerry, “Senator John Kerry Lays out Path Forward in Iraq: If Administration Acts Responsibly, We Can Stabilize Iraq and Reduce Combat Forces,” (speech, Georgetown University, Washington, D.C., October 26, 2005); Joseph R. Biden, “Time for An Iraq Timetable,” Washington Post, November 26, 2005.
13. John Murtha, “Murtha Calls for a ‘Change in Direction’” and interview on the Diane Rehm Show.14. Kenneth M. Pollack, “A Switch in Time: A New Strategy for America in Iraq,” (analysis paper no. 7, Saban Center for Middle East Policy, Brookings Institution, Washington, D.C., 2006).
Wednesday, March 01, 2006
Thoughts on the big oil gougers....
Thinking back to the high oil prices (like they are low now) of the fall, post-Katrina, there were two gas stations gazing at each other across the parkway. One charged something like $3.41 a gallon for regular, while the other was charging $3.29. And there, in a nutshell, was proof that gas price "gouging" does not exist.
Basic economic lesson on supply and demand in situations of scarcity. Price is not an arbitrary figure because it contains a vast amount of information from the viewpoints of both the supplier and the customer. In normal circumstances it represents a balance between the effort and risk undertaken by the supplier to provide the product and the preferences and needs of the potential consumer taken in aggregate. Each individual consumer will have different preferences and needs, so that one may balk at a price another finds perfectly reasonable and another considers a bargain, but as a whole the price represents a signal about the balance of considerations among consumers in the market for the product.
When the product becomes scarce, however, additional information is added in the form of increased price that represents notice from the producer to the consumer that he may not be able to supply every customer with the full amount of the product desired. The customer is then more able to balance his wants with his needs and, again taken in aggregate, the market will respond to the scarcity by reducing its demand to meet the expected supply.
Rather than "gouging" members of the public, gas station owners are actually helping them by raising prices. This may seem counter-intuitive, but we have to consider how supply, demand and price interact. Normally, supply and demand dictate price, as is the case when gas prices spike. When price, however, is fixed, as would be the case if an "anti-gouging" law was in effect, then demand will outstrip the supply available. Shortage is the inevitable result. Gas would be rationed in some way, whether it is by some arbitrary legal fiat or by long lines at the pump. A black market is also more likely.
Moreover, as experience with rent control has shown, capping prices in times of scarcity also has the perverse effect of reducing the quantity of the good or service supplied. In other words, capping gas prices would actually lead to less gas being sold, as suppliers reduce the amount they are willing to sell in order to avoid loss. Shortages are therefore exacerbated. By contrast, anyone who tries "gouging" will find themselves with unsold supply and will be forced to lower their prices to offload it.
Nor is it gouging to raise your prices sharply in expectation that the next delivery is going to cost a lot more or not arrive at all. Lots of gas stations don't have supply contracts with suppliers, but have to pay cash to get the next delivery. So if the next tank truck is going to cost twice as much as the last one, the gas station owner has to put up his prices now in order to pay for the next delivery. If the next delivery is going to be delayed for a week or two or three, then the owner needs as a matter of the common good to raise his prices sharply immediately in order to signal to consumers that they need to cut back their consumption immediately.
Gouging in the gas market makes no sense. The owner of the station that was charging $3.41 as I drove by was presumably reacting to his own supply constraints. Yet because the other station took a lot of his business, those constraints eased. By the third time I drove past the station, he had reduced his price to $3.29 also.
Ah, but what of the hotel owner who has a captive market? Surely they are gouging people when they increase their rates when evacuees show up? Again, the higher price actually helps people. The evacuee is generally willing to pay more for overnight accommodation than the casual traveler because the evacuee has fewer options. Therefore, a higher price actually deters those who don't really need the rooms in favor of those who do. The result is more rooms available for those who really need them. (Hotel rooms, of course, are not the answer to a medium-to-long term crisis in shelter availability, from either the evacuee's or the hotel owner's point of view).
So, economics tells us that "gouging" simply doesn't exist in a rational market. Responsible higher prices actually ensure that as much of the good or service as possible is available for use. In an emergency, that is an important consideration.
Yet there is an unfortunate tendency in the free-market community to buy into the alarmist rhetoric that suggests "gouging" does go on. When the President declared on September 1st that he would take a zero-tolerance approach to price-gouging, he unwittingly perpetuated a myth. Buying into the rhetoric of gouging validates what Prof. David Henderson calls "do-it-yourself economics." Worse than that, however, it victimizes responsible suppliers who are doing their best to ensure the maximization of supply.
Price gouging is one of the great myths of our time. Because it doesn't exist, one should be wary of the motives of anyone who claims it does.
Basic economic lesson on supply and demand in situations of scarcity. Price is not an arbitrary figure because it contains a vast amount of information from the viewpoints of both the supplier and the customer. In normal circumstances it represents a balance between the effort and risk undertaken by the supplier to provide the product and the preferences and needs of the potential consumer taken in aggregate. Each individual consumer will have different preferences and needs, so that one may balk at a price another finds perfectly reasonable and another considers a bargain, but as a whole the price represents a signal about the balance of considerations among consumers in the market for the product.
When the product becomes scarce, however, additional information is added in the form of increased price that represents notice from the producer to the consumer that he may not be able to supply every customer with the full amount of the product desired. The customer is then more able to balance his wants with his needs and, again taken in aggregate, the market will respond to the scarcity by reducing its demand to meet the expected supply.
Rather than "gouging" members of the public, gas station owners are actually helping them by raising prices. This may seem counter-intuitive, but we have to consider how supply, demand and price interact. Normally, supply and demand dictate price, as is the case when gas prices spike. When price, however, is fixed, as would be the case if an "anti-gouging" law was in effect, then demand will outstrip the supply available. Shortage is the inevitable result. Gas would be rationed in some way, whether it is by some arbitrary legal fiat or by long lines at the pump. A black market is also more likely.
Moreover, as experience with rent control has shown, capping prices in times of scarcity also has the perverse effect of reducing the quantity of the good or service supplied. In other words, capping gas prices would actually lead to less gas being sold, as suppliers reduce the amount they are willing to sell in order to avoid loss. Shortages are therefore exacerbated. By contrast, anyone who tries "gouging" will find themselves with unsold supply and will be forced to lower their prices to offload it.
Nor is it gouging to raise your prices sharply in expectation that the next delivery is going to cost a lot more or not arrive at all. Lots of gas stations don't have supply contracts with suppliers, but have to pay cash to get the next delivery. So if the next tank truck is going to cost twice as much as the last one, the gas station owner has to put up his prices now in order to pay for the next delivery. If the next delivery is going to be delayed for a week or two or three, then the owner needs as a matter of the common good to raise his prices sharply immediately in order to signal to consumers that they need to cut back their consumption immediately.
Gouging in the gas market makes no sense. The owner of the station that was charging $3.41 as I drove by was presumably reacting to his own supply constraints. Yet because the other station took a lot of his business, those constraints eased. By the third time I drove past the station, he had reduced his price to $3.29 also.
Ah, but what of the hotel owner who has a captive market? Surely they are gouging people when they increase their rates when evacuees show up? Again, the higher price actually helps people. The evacuee is generally willing to pay more for overnight accommodation than the casual traveler because the evacuee has fewer options. Therefore, a higher price actually deters those who don't really need the rooms in favor of those who do. The result is more rooms available for those who really need them. (Hotel rooms, of course, are not the answer to a medium-to-long term crisis in shelter availability, from either the evacuee's or the hotel owner's point of view).
So, economics tells us that "gouging" simply doesn't exist in a rational market. Responsible higher prices actually ensure that as much of the good or service as possible is available for use. In an emergency, that is an important consideration.
Yet there is an unfortunate tendency in the free-market community to buy into the alarmist rhetoric that suggests "gouging" does go on. When the President declared on September 1st that he would take a zero-tolerance approach to price-gouging, he unwittingly perpetuated a myth. Buying into the rhetoric of gouging validates what Prof. David Henderson calls "do-it-yourself economics." Worse than that, however, it victimizes responsible suppliers who are doing their best to ensure the maximization of supply.
Price gouging is one of the great myths of our time. Because it doesn't exist, one should be wary of the motives of anyone who claims it does.
Why the F/A-22 is needed
The Boeing F-15C Eagle is the most capable and lethal air-to-air fighter currently in service worldwide. The F-15C has an air combat victory ratio of 95-0 making it one of the most effective air superiority aircraft ever developed. The US Air Force claims the F-15C is in several respects inferior to, or at best equal to, the MiG-29, Su-27, Su-35/37, Rafale, and EF-2000, which are variously superior in acceleration, maneuverability, engine thrust, rate of climb, avionics, firepower, radar signature, or range.
Although the F-15C and Su-27P series are similar in many categories, the Su-27 can outperform the F-15C at both long and short ranges. In long-range encounters, with its superior radar, the Su-27 can launch a missile before the F-15C does, so from a purely kinematic standpoint, the Russian fighters outperform the F-15C in the beyond-visual-range fight. The Su-35 phased array radar is superior to the APG-63 Doppler radar in both detection range and tracking capabilities. A few F-15Cs are equipped with the APG-63(V2) Active Electronic Scanned Array (AESA) radar and Fighter Data Link (FDL). Additionally, the Su-35 propulsion system increases the aircraft's maneuverability with thrust vectoring nozzles.
Simulations conducted by British Aerospace and the British Defense Research Agency compared the effectiveness of the F-15C, Rafale, EF-2000, and F-22 against the Russian Su-35 armed with active radar missiles similar to the AIM-120 Advanced Medium Range Air-to-Air Missile (AMRAAM). The Rafale achieved a 1:1 kill ratio (1 Su-35 destroyed for each Rafale lost). The EF-2000 kill ratio was 4.5:1 while the F-22 achieved a ratio of 10:1. In stark contrast was the F-15C, losing 1.3 Eagles for each Su-35 destroyed.
Howard Stern's Mess
I have refrained from posting other's blogs or articles on my site up until now, but Professor Bainbridge's TCS article on the CBS suit vs. Howard Stern was just too good to pass up.
Original article posted here.
CBS is suing Howard Stern for breach of contract and misappropriation. According to CBS Radio Inc.:
"Howard Stern repeatedly and willfully breached his written contract with CBS Radio over the last 22 months of that contract, misappropriated millions of dollars worth of CBS Radio airtime for his own financial benefit, and fraudulently concealed his interest in hundreds of millions of dollars of Sirius stock while promoting it on the air.
"That on or about January 9, 2006, Sirius paid over 34 million shares of stock, valued at approximately $220 million, to Stern and his agent because Sirius exceeded by the end of 2005 certain subscriber targets that were set in the Sirius-Stern contract. The complaint alleges that the Sirius-Stern contract provided that Stern was to receive this stock payment in 2010, but it had an acceleration provision that allowed Stern to receive the compensation as early as January 2006 if these subscriber targets were met. All of Stern's actions for which he received this expedited compensation occurred during the time that Stern was under exclusive contract with CBS Radio, when the Sirius payment terms to Stern were kept secret.
"This contract thus provided a compelling incentive for Stern to do all that he could to help Sirius reach the subscriber targets by the end of 2005 so that he could receive his Sirius stock payment as soon as possible while Sirius's stock was extremely valuable. Without the accelerated payment, Stern would risk the decline of the Sirius stock value. By taking action on CBS Radio's airtime in 2004 and 2005, Stern assured himself of immediate access to $200 million in assets that could be readily converted to cash.
"By engaging in continuous promotion of Sirius on CBS Radio airtime without any payment by Sirius to CBS for these advertisements and by pocketing over $200 million dollars for his personal benefit, Stern misappropriated millions of dollars worth of CBS Radio airtime for his own financial benefit and the financial benefit of Don Buchwald, his agent, and Sirius in contravention of repeated directives by CBS Radio."
Without having seen Stern's contract, I can't speak to the breach of contract claims. The misappropriation and fraud claims, however, raise basic and generic issues of an agent's fiduciary duties. Under those principles, it looks like CBS has a very strong case.
As the Washington Post reported last fall, Howard Stern's audience had cratered during the last few months of his terrestrial radio broadcast show, which many observers attributed to Stern's incessant on-air "railing against alleged censorship by" CBS radio and his incessant promotion of his upcoming "move to satellite radio" on Sirius. He even held a public event at which he gave away free Sirius radios and promoted satellite radio as the "future."
Analytically, the initial issue is whether Stern is an agent of CBS. According to the American Law Institute's Restatement (Second) of Agency:
"An agency relationship exists if you have a manifestation of consent by one person (the principal) that another person (the agent) act (a) on the principal's behalf; and (b) subject to the principal's control; and (2) the agent's consent to so act."
The employment contract between Stern and CBS for him would suffice to demonstrate the requisite consents.
As an agent, Stern was entitled to begin preparing to compete with CBS. The Restatement (Second) of Agency provides that an agent can make arrangements to compete with his principal even before the termination of the agency, but that he cannot properly use confidential information peculiar to his employer's business and acquired therein.
"Thus, before the end of his employment, he can properly purchase a rival business and upon termination of employment immediately compete. He is not, however, entitled to solicit customers for such rival business before the end of his employment nor can he properly do other similar acts in direct competition with the employer's business." (Emphasis supplied.)
Because promoting Sirius on the air and at his website almost certainly will be deemed an effort to solicit customers, Stern is in a clear breach of fiduciary duty.
In addition, Stern's show includes a number of side-kicks, whom he has solicited to follow him to the new show on Sirius. Again, Restatement (Second) of Agency is relevant:
"The limits of proper conduct with reference to securing the services of fellow employees are not well marked. An employee is subject to liability if, before or after leaving the employment, he causes fellow employees to break their contracts with the employer. On the other hand, it is normally permissible for employees of a firm, or for some of its partners, to agree among themselves while still employed, that they will engage in competition with the firm at the end of the period specified in their employment contracts. However, a court may find that it is a breach of duty for a number of the key officers or employees to agree to leave their employment simultaneously and without giving the employer an opportunity to hire and train replacements."
To the extent Stern induces the sidekicks to break their own employment contracts, there clearly would be a problem. In addition, courts are much less forgiving of employee solicitation when the solicitor has a supervisory role vis-à-vis those who are solicited. On the whole, however, this strikes me as a much less clear cut case than the problem of soliciting customers of terrestrial radio to shift to satellite.
On that latter issue, however, the question may be: why did CBS wait so long? My guess is that they didn't want to offend Stern's fans, but once so many of those fans followed Stern to Sirius and Stern's terrestrial radio replacements bombed, CBS no longer had anything to lose.
Stephen Bainbridge teaches law at UCLA and is a TCS columnist.
Original article posted here.
CBS is suing Howard Stern for breach of contract and misappropriation. According to CBS Radio Inc.:
"Howard Stern repeatedly and willfully breached his written contract with CBS Radio over the last 22 months of that contract, misappropriated millions of dollars worth of CBS Radio airtime for his own financial benefit, and fraudulently concealed his interest in hundreds of millions of dollars of Sirius stock while promoting it on the air.
"That on or about January 9, 2006, Sirius paid over 34 million shares of stock, valued at approximately $220 million, to Stern and his agent because Sirius exceeded by the end of 2005 certain subscriber targets that were set in the Sirius-Stern contract. The complaint alleges that the Sirius-Stern contract provided that Stern was to receive this stock payment in 2010, but it had an acceleration provision that allowed Stern to receive the compensation as early as January 2006 if these subscriber targets were met. All of Stern's actions for which he received this expedited compensation occurred during the time that Stern was under exclusive contract with CBS Radio, when the Sirius payment terms to Stern were kept secret.
"This contract thus provided a compelling incentive for Stern to do all that he could to help Sirius reach the subscriber targets by the end of 2005 so that he could receive his Sirius stock payment as soon as possible while Sirius's stock was extremely valuable. Without the accelerated payment, Stern would risk the decline of the Sirius stock value. By taking action on CBS Radio's airtime in 2004 and 2005, Stern assured himself of immediate access to $200 million in assets that could be readily converted to cash.
"By engaging in continuous promotion of Sirius on CBS Radio airtime without any payment by Sirius to CBS for these advertisements and by pocketing over $200 million dollars for his personal benefit, Stern misappropriated millions of dollars worth of CBS Radio airtime for his own financial benefit and the financial benefit of Don Buchwald, his agent, and Sirius in contravention of repeated directives by CBS Radio."
Without having seen Stern's contract, I can't speak to the breach of contract claims. The misappropriation and fraud claims, however, raise basic and generic issues of an agent's fiduciary duties. Under those principles, it looks like CBS has a very strong case.
As the Washington Post reported last fall, Howard Stern's audience had cratered during the last few months of his terrestrial radio broadcast show, which many observers attributed to Stern's incessant on-air "railing against alleged censorship by" CBS radio and his incessant promotion of his upcoming "move to satellite radio" on Sirius. He even held a public event at which he gave away free Sirius radios and promoted satellite radio as the "future."
Analytically, the initial issue is whether Stern is an agent of CBS. According to the American Law Institute's Restatement (Second) of Agency:
"An agency relationship exists if you have a manifestation of consent by one person (the principal) that another person (the agent) act (a) on the principal's behalf; and (b) subject to the principal's control; and (2) the agent's consent to so act."
The employment contract between Stern and CBS for him would suffice to demonstrate the requisite consents.
As an agent, Stern was entitled to begin preparing to compete with CBS. The Restatement (Second) of Agency provides that an agent can make arrangements to compete with his principal even before the termination of the agency, but that he cannot properly use confidential information peculiar to his employer's business and acquired therein.
"Thus, before the end of his employment, he can properly purchase a rival business and upon termination of employment immediately compete. He is not, however, entitled to solicit customers for such rival business before the end of his employment nor can he properly do other similar acts in direct competition with the employer's business." (Emphasis supplied.)
Because promoting Sirius on the air and at his website almost certainly will be deemed an effort to solicit customers, Stern is in a clear breach of fiduciary duty.
In addition, Stern's show includes a number of side-kicks, whom he has solicited to follow him to the new show on Sirius. Again, Restatement (Second) of Agency is relevant:
"The limits of proper conduct with reference to securing the services of fellow employees are not well marked. An employee is subject to liability if, before or after leaving the employment, he causes fellow employees to break their contracts with the employer. On the other hand, it is normally permissible for employees of a firm, or for some of its partners, to agree among themselves while still employed, that they will engage in competition with the firm at the end of the period specified in their employment contracts. However, a court may find that it is a breach of duty for a number of the key officers or employees to agree to leave their employment simultaneously and without giving the employer an opportunity to hire and train replacements."
To the extent Stern induces the sidekicks to break their own employment contracts, there clearly would be a problem. In addition, courts are much less forgiving of employee solicitation when the solicitor has a supervisory role vis-à-vis those who are solicited. On the whole, however, this strikes me as a much less clear cut case than the problem of soliciting customers of terrestrial radio to shift to satellite.
On that latter issue, however, the question may be: why did CBS wait so long? My guess is that they didn't want to offend Stern's fans, but once so many of those fans followed Stern to Sirius and Stern's terrestrial radio replacements bombed, CBS no longer had anything to lose.
Stephen Bainbridge teaches law at UCLA and is a TCS columnist.
Fair tax vs. Flat Tax...
I'm getting ready to read the Fair tax by Neil Bortz. I've never been a proponent of it, believing that once you eliminate the income tax, it would be all too easy (to quote my favorite dark lord of the sith) to reinstate it a little at a time (anyone remember a certain Senator's proposal for a tiny 1% tax on the richest 1%)....bingo, now we have a double tax system.
Always been a fan of Forbes' flat tax, postcard form system. I'm finally able to be intellectually open enough to consider alternatives.
My father-in-law is sending me the book. He's a convert...maybe I will be too. Once I'm done, I'll post a review with my thoughts.
Always been a fan of Forbes' flat tax, postcard form system. I'm finally able to be intellectually open enough to consider alternatives.
My father-in-law is sending me the book. He's a convert...maybe I will be too. Once I'm done, I'll post a review with my thoughts.
The Social Security Mess
A consensus exists among economists across the ideological spectrum on at least one important issue: America's entitlement spending -- mostly Social Security and Medicare -- is not sustainable. And neither political party is willing to talk about what needs to be done to fix the situation.
Young Peter Pays for Old Paul
The economics of entitlements are fairly straightforward, even if the politics are nearly impossible. We have promised benefits in the future that we won't be able to afford, at least not without some major changes to the system.
Have you seen all the headlines about struggling pension plans and burgeoning health-care costs for retirees? The mother of all pension plans is Social Security, and the biggest health-care program for old people is Medicare. Taxpayers pay for both of them. But the problem is that we're living longer. That changes the finances of any program that promises benefits until you die. Meanwhile, we're having smaller families -- this means fewer younger workers to support every elderly beneficiary.
Unlike private pensions, Medicare and Social Security have no "savings" component. If you're currently working, your payroll taxes are not tucked into some account with your name on it. They go to pay the benefits of current retirees -- young Peter pays for the Medicare and Social Security of old Paul. When my brother's father in law needs open heart surgery or additioanl prescription anti-cholesterol drugs because he ate a bucket of fried chicken, all of you paid for those treatments. My brother thanks you.
Our entitlement programs are basically a pyramid scheme, and, like any good pyramid scheme, it works fine as long as there are enough workers on the bottom to continue paying the retirees at the top. Those days are rapidly coming to an end, however. In 1960, there were five workers for every retiree. Now, there are around three. By 2030, there will be two.
Death Is the Low-Cost Option
Meanwhile, the Baby Boomers will soon be breaking their hips and suffering other expensive infirmities. Demographers like to point out that Bill Clinton (born Aug. 19, 1946) represents the leading edge of the Baby Boomers. You may recall that he just had open-heart surgery.
It's not just heart surgery, of course. Medical technology has given us a whole new set of expensive things that we can do to improve our health in old age. It used to be that when Aunt Bee injured herself playing shuffleboard, she'd have to tough out the pain. Now we can replace her knee.
That's good, but it's not cheap. Indeed, death is the low-cost option. Every time you patch someone up and send them back to the shuffleboard court, you merely ensure that they will return later with some other malady. Everybody dies of something -- and it can be cheaper for the government if you do it sooner rather than later.
In 2000, Philip Morris had the bad taste to make this point explicitly while the Czech Parliament was considering higher cigarette taxes. The tobacco giant commissioned a report pointing out that premature deaths from smoking saved the Czech government millions of dollars a year in pension and old-age housing benefits.
Hapless Politicians
All economists recognize that some combination of four things is necessary to make the entitlement equation balance:
1. Cut benefits for retirees.
2. Raise taxes on workers.
3. Allow more young immigrants into the U.S. who will begin paying taxes into the system.
4. Make workers so much more productive that existing tax rates will generate enough new revenue to fund the extra burden of an aging population. (This option would be great, but we have no idea how to accomplish this.)
The Democrats are dreaming if they think it's possible to make entitlement programs solvent in the long run without cutting benefits. The logical place to start is by moving more aggressively to raise the retirement age to reflect the reality that we're all living longer.
That's politically tough, but it pales compared to the decisions we may have to make on the Medicare side. Someone may have to tell grandma that she doesn't get open heart surgery -- or at least that Medicare won't pay for it. And while we're having that discussion, we may have to broach the subject of grandpa's Viagra.
We may need tax increases, too, which the Republicans will hear none of. The more egregious error on that side of the aisle, however, was in completely confusing the Social Security issue during the debate over privatization. Nothing is inherently wrong with private retirement accounts if the system is designed responsibly. It solves the demographic problem once and for all by having every worker fund his or her own retirement benefits.
But privatization proponents completely papered over the enormous transition problem. If young Peter starts funding his own private retirement account rather than paying payroll taxes, then who pays old Paul's retirement benefits? Remember, it's a pyramid scheme, so someone has to keep paying the people at the top.
Washington seems to be marching in exactly the opposite direction.
The new Medicare prescription-drug plan adds another layer of entitlement spending -- which would be fine if we had figured out a way to pay for the promises we've already made. So far, we haven't.
Young Peter Pays for Old Paul
The economics of entitlements are fairly straightforward, even if the politics are nearly impossible. We have promised benefits in the future that we won't be able to afford, at least not without some major changes to the system.
Have you seen all the headlines about struggling pension plans and burgeoning health-care costs for retirees? The mother of all pension plans is Social Security, and the biggest health-care program for old people is Medicare. Taxpayers pay for both of them. But the problem is that we're living longer. That changes the finances of any program that promises benefits until you die. Meanwhile, we're having smaller families -- this means fewer younger workers to support every elderly beneficiary.
Unlike private pensions, Medicare and Social Security have no "savings" component. If you're currently working, your payroll taxes are not tucked into some account with your name on it. They go to pay the benefits of current retirees -- young Peter pays for the Medicare and Social Security of old Paul. When my brother's father in law needs open heart surgery or additioanl prescription anti-cholesterol drugs because he ate a bucket of fried chicken, all of you paid for those treatments. My brother thanks you.
Our entitlement programs are basically a pyramid scheme, and, like any good pyramid scheme, it works fine as long as there are enough workers on the bottom to continue paying the retirees at the top. Those days are rapidly coming to an end, however. In 1960, there were five workers for every retiree. Now, there are around three. By 2030, there will be two.
Death Is the Low-Cost Option
Meanwhile, the Baby Boomers will soon be breaking their hips and suffering other expensive infirmities. Demographers like to point out that Bill Clinton (born Aug. 19, 1946) represents the leading edge of the Baby Boomers. You may recall that he just had open-heart surgery.
It's not just heart surgery, of course. Medical technology has given us a whole new set of expensive things that we can do to improve our health in old age. It used to be that when Aunt Bee injured herself playing shuffleboard, she'd have to tough out the pain. Now we can replace her knee.
That's good, but it's not cheap. Indeed, death is the low-cost option. Every time you patch someone up and send them back to the shuffleboard court, you merely ensure that they will return later with some other malady. Everybody dies of something -- and it can be cheaper for the government if you do it sooner rather than later.
In 2000, Philip Morris had the bad taste to make this point explicitly while the Czech Parliament was considering higher cigarette taxes. The tobacco giant commissioned a report pointing out that premature deaths from smoking saved the Czech government millions of dollars a year in pension and old-age housing benefits.
Hapless Politicians
All economists recognize that some combination of four things is necessary to make the entitlement equation balance:
1. Cut benefits for retirees.
2. Raise taxes on workers.
3. Allow more young immigrants into the U.S. who will begin paying taxes into the system.
4. Make workers so much more productive that existing tax rates will generate enough new revenue to fund the extra burden of an aging population. (This option would be great, but we have no idea how to accomplish this.)
The Democrats are dreaming if they think it's possible to make entitlement programs solvent in the long run without cutting benefits. The logical place to start is by moving more aggressively to raise the retirement age to reflect the reality that we're all living longer.
That's politically tough, but it pales compared to the decisions we may have to make on the Medicare side. Someone may have to tell grandma that she doesn't get open heart surgery -- or at least that Medicare won't pay for it. And while we're having that discussion, we may have to broach the subject of grandpa's Viagra.
We may need tax increases, too, which the Republicans will hear none of. The more egregious error on that side of the aisle, however, was in completely confusing the Social Security issue during the debate over privatization. Nothing is inherently wrong with private retirement accounts if the system is designed responsibly. It solves the demographic problem once and for all by having every worker fund his or her own retirement benefits.
But privatization proponents completely papered over the enormous transition problem. If young Peter starts funding his own private retirement account rather than paying payroll taxes, then who pays old Paul's retirement benefits? Remember, it's a pyramid scheme, so someone has to keep paying the people at the top.
Washington seems to be marching in exactly the opposite direction.
The new Medicare prescription-drug plan adds another layer of entitlement spending -- which would be fine if we had figured out a way to pay for the promises we've already made. So far, we haven't.
Why is health care so expensive? (Hint: its not Big Pharma's greed)
What's the most intractable public policy problem the U.S. faces? Health care. I don't think any other issue even comes close. Health care has all the ideological fireworks of social issues like abortion or gay marriage (e.g. is health care a right or a privilege?). Yet the system itself -- the process of providing care and allocating those costs -- is also stunningly complex.
Health care is increasingly expensive because of powerful, perhaps inexorable economic forces that make medical care different than all other goods and services in a modern economy. Here are my top 10 reasons for why health care is so expensive -- and likely to get even more expensive in the future, regardless of what patches we put on the system.
1. Nobody shops for value.
When was the last time you heard someone say something like this: "You're having chest pains, Al? Sorry to hear that. You should see Dr. Smith. He's not as fancy as those cardiologists at the Cleveland Clinic, but you can't beat his prices! In fact, I think he's having a Presidents' Day special on angioplasty right now." There's no medical equivalent of Wal-Mart. Everyone wants Neiman Marcus.
2. Medical innovations are usually more expensive, not less.
Economic progress tends to come in two forms: Learning to do old things better and cheaper, or learning to do new things. Medical progress tends to involve the latter. A bone-marrow transplant may provide new hope for many cancer patients, but it's not necessarily cheaper than the old alternative.
In the case of pharmaceuticals, we've explicitly designed the system so that new drugs will be expensive. We grant patent protection -- a legal monopoly -- to pharmaceutical companies for breakthrough medication. The more impressive the drug, the more the company can charge, regardless of the actual cost of producing the pill. Yes, those prices are high, and the profits can be huge -- which is exactly what creates the incentive to discover such drugs in the first place.
3. Health care is a "luxury good".
Wait. Before you start sending me angry e-mails, please let me clarify. I'm not saying that health care is a luxury. I'm saying that health care is a "luxury good," which is a technical term in economics. It refers to any good that wealthy people demand in disproportionately greater amounts than less wealthy people.
The opposite is an "inferior good", which is something that people actually consume less of as they get richer. Ramen noodles, for example, are likely to be an inferior good. Poor college students eat far more of them than would Bill Gates, even though he could buy an infinite supply of top ramen.
Richer societies, and richer people within a society, have higher expectations for health care than less wealthy people. We increasingly demand medical fixes -- and have the technological capacity to provide them -- for problems that our grandparents would have just tolerated. Think hip replacement, stomach stapling, Lasik eye surgery, and so on. Our spending a rising share of our GDP on health care as we grow richer as a nation is not inherently a bad thing.
4. We don't pay for what we consume.
Health care is unique in that neither the service provider nor the patient gets the bill. For most people, the tab gets sent somewhere else. So nobody directly involved in the transaction has any incentive to control costs.
Imagine if you could buy a television that way. You would walk into a retailer and discuss your needs with the salesperson (working on commission), knowing that the bill for your eventual purchase would get sent to Aetna. Would anyone walk out of the store with less than a 60-inch flat screen with surround sound?
The insurance company will try to contain costs, albeit without the benefit of being in the office with the doctor and patient. So that may mean somewhat arbitrary limits on care or time-consuming hurdles for more expensive procedures -- which is why everyone hates their HMO and doctors complain, rightfully I'm sure, about the staggering paperwork and bureaucracy associated with nearly all insurance plans.
Even then, it's easy to game the system. Imagine the expert salesperson at the shop writing a letter to your insurance company explaining that you need a giant, high-definition screen because of your poor eyesight.
5. Baumol's disease.
As societies become richer, labor-intensive endeavors, such as health care, become increasingly expensive relative to goods and services that can be produced using less labor.
Why? Because there are none of the cost savings that usually come from rising productivity. Compare farming to brain surgery, for example. A typical farmer today may grow 20 times as much corn as a farmer could 100 years ago. Thus, it's possible for a farmer to be 20 times as wealthy without any increase in the price of corn. A brain surgeon, on the other hand, cannot see 20 times as many patients. (I don't know if there were brain surgeons 100 years ago, but you get the point). The economist Baumol's famous example was that a string quartet will always require four musicians.
So, for brain surgeons' income to rise at the same pace as the rest of society (a necessity if smart people are to be induced to enter the field), then the price of brain surgery must go up relative to less labor-intensive goods and services (like corn). In short, as long as the doctor-patient relationship remains relatively unchanged, health-care costs will rise faster than prices in general. (Baumol's observation was described as a "disease" because it afflicts certain sectors of the economy, such as health care and higher education.)
6. The old.
Baby boomers, the huge demographic "pig in a python" born just after World War II (This huge cohort of Americans is getting older, and older people have greater health-care needs. So even if nothing else on this list were true, an aging population would drive up the nation's health-care spending.
7. The uninsured.
Quick quiz: Your child has a high fever and a scary cough. Do you (1) call your pediatrician or (2) take your child to the nearest emergency room? If you've got a pediatrician, you do (1). If you don't, you do (2) -- which is a very expensive use of a trauma center's highly trained staff. Or maybe you never do anything at all, in which case five years later society is paying to deal with diabetes or asthma or some other chronic condition that could have been managed far more cheaply with better primary care.
8. The fat and lazy.
Most of us, in other words. We smoke too much, eat too much, and exercise too little. Why? I have no idea. Fining or chargining Americans more for unhealthy lifestyles wouldn't help. If someone is behaving in a way that's going to prematurely end their life, do you think a $200 fine or insurance premium is going to make much difference?
9. Because death is sometimes the low-cost option.
What happens to people who are miraculously treated for heart disease or cancer? They die of something else. Or of the same thing later. Any medical success merely begets some later medical expense, particularly if we continue to spend so much on end-of-life care.
10. Malpractice.
Doctors who practice "defensive medicine." Doctors seeking to avoid lawsuits have an incentive to overtreat all kinds of maladies -- a rational, albeit expensive response to a highly litigious climate.
Health care is increasingly expensive because of powerful, perhaps inexorable economic forces that make medical care different than all other goods and services in a modern economy. Here are my top 10 reasons for why health care is so expensive -- and likely to get even more expensive in the future, regardless of what patches we put on the system.
1. Nobody shops for value.
When was the last time you heard someone say something like this: "You're having chest pains, Al? Sorry to hear that. You should see Dr. Smith. He's not as fancy as those cardiologists at the Cleveland Clinic, but you can't beat his prices! In fact, I think he's having a Presidents' Day special on angioplasty right now." There's no medical equivalent of Wal-Mart. Everyone wants Neiman Marcus.
2. Medical innovations are usually more expensive, not less.
Economic progress tends to come in two forms: Learning to do old things better and cheaper, or learning to do new things. Medical progress tends to involve the latter. A bone-marrow transplant may provide new hope for many cancer patients, but it's not necessarily cheaper than the old alternative.
In the case of pharmaceuticals, we've explicitly designed the system so that new drugs will be expensive. We grant patent protection -- a legal monopoly -- to pharmaceutical companies for breakthrough medication. The more impressive the drug, the more the company can charge, regardless of the actual cost of producing the pill. Yes, those prices are high, and the profits can be huge -- which is exactly what creates the incentive to discover such drugs in the first place.
3. Health care is a "luxury good".
Wait. Before you start sending me angry e-mails, please let me clarify. I'm not saying that health care is a luxury. I'm saying that health care is a "luxury good," which is a technical term in economics. It refers to any good that wealthy people demand in disproportionately greater amounts than less wealthy people.
The opposite is an "inferior good", which is something that people actually consume less of as they get richer. Ramen noodles, for example, are likely to be an inferior good. Poor college students eat far more of them than would Bill Gates, even though he could buy an infinite supply of top ramen.
Richer societies, and richer people within a society, have higher expectations for health care than less wealthy people. We increasingly demand medical fixes -- and have the technological capacity to provide them -- for problems that our grandparents would have just tolerated. Think hip replacement, stomach stapling, Lasik eye surgery, and so on. Our spending a rising share of our GDP on health care as we grow richer as a nation is not inherently a bad thing.
4. We don't pay for what we consume.
Health care is unique in that neither the service provider nor the patient gets the bill. For most people, the tab gets sent somewhere else. So nobody directly involved in the transaction has any incentive to control costs.
Imagine if you could buy a television that way. You would walk into a retailer and discuss your needs with the salesperson (working on commission), knowing that the bill for your eventual purchase would get sent to Aetna. Would anyone walk out of the store with less than a 60-inch flat screen with surround sound?
The insurance company will try to contain costs, albeit without the benefit of being in the office with the doctor and patient. So that may mean somewhat arbitrary limits on care or time-consuming hurdles for more expensive procedures -- which is why everyone hates their HMO and doctors complain, rightfully I'm sure, about the staggering paperwork and bureaucracy associated with nearly all insurance plans.
Even then, it's easy to game the system. Imagine the expert salesperson at the shop writing a letter to your insurance company explaining that you need a giant, high-definition screen because of your poor eyesight.
5. Baumol's disease.
As societies become richer, labor-intensive endeavors, such as health care, become increasingly expensive relative to goods and services that can be produced using less labor.
Why? Because there are none of the cost savings that usually come from rising productivity. Compare farming to brain surgery, for example. A typical farmer today may grow 20 times as much corn as a farmer could 100 years ago. Thus, it's possible for a farmer to be 20 times as wealthy without any increase in the price of corn. A brain surgeon, on the other hand, cannot see 20 times as many patients. (I don't know if there were brain surgeons 100 years ago, but you get the point). The economist Baumol's famous example was that a string quartet will always require four musicians.
So, for brain surgeons' income to rise at the same pace as the rest of society (a necessity if smart people are to be induced to enter the field), then the price of brain surgery must go up relative to less labor-intensive goods and services (like corn). In short, as long as the doctor-patient relationship remains relatively unchanged, health-care costs will rise faster than prices in general. (Baumol's observation was described as a "disease" because it afflicts certain sectors of the economy, such as health care and higher education.)
6. The old.
Baby boomers, the huge demographic "pig in a python" born just after World War II (This huge cohort of Americans is getting older, and older people have greater health-care needs. So even if nothing else on this list were true, an aging population would drive up the nation's health-care spending.
7. The uninsured.
Quick quiz: Your child has a high fever and a scary cough. Do you (1) call your pediatrician or (2) take your child to the nearest emergency room? If you've got a pediatrician, you do (1). If you don't, you do (2) -- which is a very expensive use of a trauma center's highly trained staff. Or maybe you never do anything at all, in which case five years later society is paying to deal with diabetes or asthma or some other chronic condition that could have been managed far more cheaply with better primary care.
8. The fat and lazy.
Most of us, in other words. We smoke too much, eat too much, and exercise too little. Why? I have no idea. Fining or chargining Americans more for unhealthy lifestyles wouldn't help. If someone is behaving in a way that's going to prematurely end their life, do you think a $200 fine or insurance premium is going to make much difference?
9. Because death is sometimes the low-cost option.
What happens to people who are miraculously treated for heart disease or cancer? They die of something else. Or of the same thing later. Any medical success merely begets some later medical expense, particularly if we continue to spend so much on end-of-life care.
10. Malpractice.
Doctors who practice "defensive medicine." Doctors seeking to avoid lawsuits have an incentive to overtreat all kinds of maladies -- a rational, albeit expensive response to a highly litigious climate.
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