Hoover Digest, 2013, No. 4, Fall

RESEARCH AND OPINION O N P U B L I C P O L I C Y 2013 NO 4 FALL
T H E H O O V E R I N S T I T U T I O N S TA N F O R D U N I V E R S I T Y
Hoover Digest
2013 no. 4 fall
Research and Opinion on Public Policy
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The Hoover Digest offers informative writing on politics, economics, and history by the scholars and researchers of the Hoover Institution, the public policy research center at Stanford University.
HOOVER DIGEST
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On the Cover
Seaside villages like this one in an undated Spanish travel poster suggest not just seasons past but whole ways of life changed. The placid towns and villages along Spains Playas de Levante are now, in many cases, brash and bustling resortsdynamos of one of the worlds biggest tourism industries. Along the way they helped reshape international travel and gave birth to affordable package vacations for the masses. See story, page 168.
denise elson jeffrey m. jones noel s. kolak
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HOOVER INSTITUTION
Contents
T he E conomy
HOOVER DIGEST 2013 NO. 4 FA L L
9 Failure Is an OptionA Very Good One How to let too big to fail banks close up shop, predictably and fairly. By kenneth e. scott and john b. taylor. 14
Debt Is a Millstone
Economists may make their errors, but theres no mistake about the federal debt. Its bad. By michael j. boskin.
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Austerity Versus Stimulus

Either approach might work. The question is how the private sector responds. By charles wolf jr.
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Another Uncertainty Principle

Why cant economists gaze into the future the way physicists gaze into the atom? Because the science of economics is still emerging. By russell roberts.
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Bridges to Nowhere
When stimulus spending roars down the highway disguised as infrastructure spending, its time to hit the brakes. By paul r. gregory.
T a x es
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Many Happier Returns

How to mend the federal tax code. By gary s. becker.
Hoover Digest N 2013 No. 4
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The Inequality Delusion

Why it isnt the governments job to equalize incomeor to try to do so by manipulating taxes. By david davenport.
I nte lligence
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Lives in the Balance

The NSAs data-mining efforts seem, in the end, to be a tradeoff between national security and individual privacy thats worth making. By roger pilon and richard a. epstein.
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Watching the Detectives

Free societies can indeed restrain their intelligence agencies, largely by keeping them honest. By mark harrison.
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October Surprises
The Cuban missile crisis represents an enduring tale of complacency, fragmented data, and the frantic race to pick signal out of noise. By amy b. zegart.
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No Safe Havens?
How Barack Obama learned to stop worrying and love the drone. By kenneth anderson.
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A Beautiful Friendship
Europeans have been claiming, to quote Captain Renault, to be shocked, shocked about American spying. They should know better. By josef joffe.
P o litics
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Another Bad Bounce

Signs that a political delusion may be about to die at last. By thomas sowell.
H ealth C are
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The Coming Rate Shocks

Sleight of hand makes it appear that ObamaCare means cheaper premiums. Look closer. The savings arent there. By daniel p. kessler.
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No, He Cant
The president has no constitutional authority to suspend the employer mandateor, for that matter, any other law. By michael w. mcconnell.
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Medicare on Life Support

How desperate does Medicare have to become before policy makers act? By scott w. atlas.
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Deflate the Disability Bubble

Inflated by broad eligibility and chronic unemployment, this troubled program is due to pop. By michael j. boskin.
S cience
87
Against the Grain

The real mystery behind Oregons patch of mystery wheat is why we let the USDA suppress biotech crops in the first place. By henry i. miller.
E ducation
93
Private Schools Left Behind

Charter schools and online learning are making old-fashioned private schools look...old-fashioned. By chester e. finn jr.
I m m igration
98
The Value of an Immigrant

Until we clear up what we want from immigrants, well never clear up immigration policy. By edward paul lazear.
I ra q
101
Kurdistan Seizes Its Moment

In the bustling, confident north, the pretense of one Iraq grows weaker by the day. By fouad ajami.
E g y pt
106
Pendulum of Power
Instead of a new political system, Egyptians will get only a new Nasser. By samuel tadros.
T he Middl e East
111
Taking on Iran
Between empty ultimatums and threats of overwhelming force lies a diplomatic sweet spot. An interview with abraham d. sofaer.
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Unholy Alliance
Alas for Lebanon. Syria, Iran, and Hezbollah have turned the country into an arena for their unending proxy wars. By marius deeb.
I nterview
124
We Are Going to Stand on Principle

Senator Rand Paul on libertarianism and the GOP; the Senate; and the Constitution. An interview with peter robinson.
V a lues
134
Still the Essential Nation

After a lifetime of service to the nation, a reflection on Americas role in the world. By george p. shultz.
139
Who Speaks for Black Americans?

When jurors rejected the racial narrative surrounding the Zimmerman trial, they also rejected certain present-day civil rights leaders. By shelby steele.
H istory and C ul ture

143
Shermans Way
The Civil War general was a prophet not of total war, as his critics charge, but of conclusive war. By victor davis hanson.
154
Declaration of Dependence
Tocqueville admired the independence of the Americans he met. Their descendants now swaddle themselves in a regulatory state. By niall ferguson.
H oover A rchives
158
Windows into History

In seldom-seen treasures from the Hoover Archives, stories of artists and their times. By nicholas siekierski.
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On the Cover
T H E E CO N O M Y
Failure Is an Option A Very Good One

How to let too big to fail banks close up shop, predictably and fairly. By Kenneth E. Scott and John B. Taylor.
It is now three years since the Dodd-Frank Act was enacted to prevent the possibility that taxpayers would have to bail out too big to fail banks. Yet there is serious concern that the legislation has not solved the problem. Many have called for new laws to limit the activities of very large banks or even, as in the bill introduced last spring by Senators Sherrod Brown and David Vitter, to cause them to break up. In our view, a straightforward reform of the bankruptcy code would facilitate the orderly bankruptcy of large failing financial institutions and thereby deal with the bailout problem. The reform should be enacted now, whether or not further actions are taken on big banks. Under bankruptcy, a failing firm can go into either liquidation, in which it goes out of business and is dismantled into pieces that are sold off, or reorganization. In reorganization, assets are assigned a market
Kenneth E. Scott is a senior research fellow at the Hoover Institution, a member of Hoovers Working Group on Economic Policy, and the Ralph M. Parsons Professor of Law and Business (Emeritus) at Stanford University. John B. Taylor is the George P. Shultz Senior Fellow in Economics at the Hoover Institution, the chairman of Hoovers Working Group on Economic Policy and a member of Hoovers Shultz-Stephenson Task Force on Energy Policy, and the Mary and Robert Raymond Professor of Economics at Stanford University. They are co-editors of Bankruptcy Not Bailout: A Special Chapter 14 (Hoover Institution Press, 2012).
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Illustration by Taylor Jones for the Hoover Digest.
value and losses are recognized. The interests of shareholders and creditors are addressed in the order of priority stipulated by law, which often means stockholders are left with little or no ownership interest. Creditors, in order of contractual priority, have their debt claims written off, reduced in amount, or converted into stock. In the end, the firm continues in business, often with new managers. Title II of Dodd-Frank established a very different process, the Orderly Liquidation
Authority. The Federal Deposit Insurance Corporation has the authority to resolve a large financial firm when it fails. Consistent with the original rallying cry for the legislation, it will wipe out shareholders. But the heart of the new resolution process is reorganization, and that is where the problem is. The FDIC will transfer a selected part of the firms assets and liabilities to a new bridge institution, with more discretion and less transparency and judicial oversight than in bankruptcy. Some creditors claims can receive larger payments than under a typical bankruptcyeffectively a bailoutin the name of avoiding systemic consequences. This violates the priority structure that underlies the entire credit market. It also reduces the risk incurred by large creditors expecting to be so favored, and thus the interest rate at which they are willing to lend the bank money. The big banks, able to borrow at a lower cost, are effectively getting a subsidy$83 billion per year,
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according to widely cited Bloomberg estimates based on an International Monetary Fund study. The probability that some creditors will be bailed out has the perverse effect of increasing the likelihood of a banks failure. Normally the risks a financial firm might choose to take are constrained by creditors as they monitor and protect themselves from losses by demanding collateral or cutting their exposure. Bailouts give them less reason for concern and action. Shareholders in a failing bank resolved under Dodd-Frank wont be protected, but creditors said to be systemically important most likely will be. Who and when? Thats up to political discretion. Hence there is uncertainty about how this process would operate, especially for complex international firms. Some believe that fearful policy makers would ignore it in the heat of a crisis, resorting to taxpayer bailouts as in the past. In short, too-big-to-fail and government bailouts remain possible or even likely.
This approach would let a failing financial firm enter bankruptcy without causing disruptive spillovers.
There is a better wayand it involves adding a chapter to the federal bankruptcy code specifically for large financial institutions. A Chapter 14 would apply to all financial groups with assets over $100 billion. A specialized panel of judges and court-appointed special masters with financial expertise would oversee the proceeding, which would include all the parents subsidiaries, including insurance and brokerage. (Under Dodd-Frank, insurance and brokerage services have to be handled separatelywhich adds complexitywhile banks and other subsidiaries are under FDIC jurisdiction.) A bankruptcy petition could be filed by creditors, as now, but also by the primary federal supervisor of the firm or by a management that saw insolvency looming. The procedure to determine asset values, liabilities, sales of some lines of business, write-downs of claims, and recapitalization would take place according to the rule of law. There would be judicial hearings and creditor participation, neither of which is a part of the
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Dodd-Frank resolution process. The strict priority rules of bankruptcy would govern (with some modifications for holders of repurchase agreements and swaps to limit their risks). Chapter 14 would let a failing financial firm enter bankruptcy in a predictable, rules-based manner without causing disruptive spillovers in the economy. It would also permit people to continue to use the firms financial servicesjust as people flew on American or United planes when those firms were in bankruptcy. The provisions also make it possible to create in bankruptcy a newly capitalized entity that would credibly provide most of the financial services the failed firm was providing before it got into trouble. Customers would continue to do business with a financial firm after a Chapter 14 filing if they were confident the firm could meet its current obligations. That confidence would be achieved by giving post-petition creditors a high priority. In all likelihood, this priority would enable the firm to continue obtaining ample private financingso-called debtor-inpossession financingto provide liquidity for normal operations. The managements of the five largest financial firms in the United States control the investment of more than $8 trillion. A credible bankruptcy procedure designed specifically for these and other large financial firms would substantially reduce the occasions to use the Dodd-Frank resolution machinery and thus the concerns about its effects. It would make creditors exposure much better defined and predictable, and thereby reduce the likelihood of bailouts and the perverse, unfair subsidy they create.
Reprinted by permission of the Wall Street Journal. 2013 Dow Jones & Co. All rights reserved.
Available from the Hoover Press is Bankruptcy, Not Bailout: A Special Chapter 14, edited by Kenneth E. Scott and John B. Taylor. To order, call 800.935.2882 or visit www.hooverpress.org.
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T H E EC ONOM Y
Debt Is a Millstone
Economists may make their errors, but theres no mistake about the federal debt. Its bad. By Michael J. Boskin.
The recent controversy over errors in a 2010 paper by the economists Carmen Reinhart and Kenneth Rogoff is a sad commentary on the demands of the 24/7 news cycle and the politically toxic atmosphere surrounding fiscal policy in the United States, Europe, and Japan. In their paper, Growth in a Time of Debt, Reinhart and Rogoff estimated large declines in growth associated with public-debt/GDP ratios above 90 percent. But it contained coding errors discovered by a University of Massachusetts graduate student. When corrected, the effect is substantially smaller, but nonetheless economically consequential. The Reinhart/Rogoff paper is just a small part of a voluminous academic literature that shows high debt levels to be economically risky. A more fundamental question is causality: the state of the economy certainly affects the fiscal position, just as taxation, spending, deficits, and debt may affect economic growth. Research errors in economics are not uncommon, but they are usually caught early, as happened once to me in a prepublication draft. Sometimes errors are not discovered until later, when they are working papers, as with Reinhart and Rogoff, or after publication, as with Nobel laureate Ken
Michael J. Boskin is a senior fellow at the Hoover Institution, a member of Hoovers Shultz-Stephenson Task Force on Energy Policy and Working Group on Economic Policy, and the T. M. Friedman Professor of Economics at Stanford University.
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Arrow, who had to correct a mistake in the proof of his famous impossibility theorem. Economists use different methods to analyze fiscal issues: stylized analytical models; macroeconometric models fitted to aggregate data, such as those used by the Federal Reserve, the European Central Bank, and the U.S. Congressional Budget Office (CBO); empirical estimation of key parameters, such as spending multipliers; vector autoregressions; and historical studies. Each of these approaches has its strengths and weaknesses, and serious economists and policy makers do not rely on a single study; rather, they base their judgments on complementary bodies of evidence. Thus, there is no excuse for the outrage, the exaggerated claims for one papers influence, and the attempt to use the error to discredit legitimate concerns over high levels of debt (let alone to vilify the authors).
T IM IN G IS IMPO R TANT While large deficits are usually undesirable, sometimes they can be benign or even desirable, such as in recession, in wartime, or when used to finance productive public investment. In normal times, deficits crowd out private investment (and perhaps crowd in private saving and/or foreign capital) and hence reduce future growth. By contrast, in a deep, long-lasting recession, with the central banks policy rate at the zero lower bound (ZLB), a well-timed, sensible fiscal response can, in principle, be helpful.
Research errors in economics are not uncommon, but theyre usually caught early.
But the political process may generate poorly timed or ineffective responsesfocused on transfers rather than purchases, infra-marginal tax rebates, and spending that fails cost-benefit teststhat do little good in the short run and cause substantial harm later. Americas 2008 stimulus barely budged consumption upward, and the 2009 fiscal stimulus cost hundreds of thousands of dollars per job, many times higher than median pay. We should adopt policies that benefit the economy in the short run at reasonable long-run cost, and reject those that do not. That sounds
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simple, but it is a much higher hurdle than politicians in Europe and the United States have set for themselves in recent years. I estimated the impact on GDP of Americas recent and projected debt increase (in which the explosive growth of public spending on pensions and health care looms largest) using four alternative estimates of the effect of debt on growth: a smaller Reinhart/Rogoff estimate from a more recent paper; a widely used International Monetary Fund study, which finds a larger impact (and which deals with the potential reverse-causality problem); a related CBO study; and a simple production function with government debt crowding out tangible capital. The results were quite similar: unless entitlement costs are brought under control, the resulting rise in debt will cut U.S. living standards by roughly 20 percent in a generation. Corroborating statistical evidence shows that high deficits and debt increase long-run interest rates. The effect is greater when modest deficit and debt levels are exceeded and current-account deficits are large. The
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increased interest rates are likely to retard private investment, which lowers future growth in employment and wages. Numerous studies show that government spending multipliers, even when large at the ZLB, shrink rapidly, then turn negativeand may even be negative during economic expansions and when households expect higher taxes beyond the ZLB period. Permanent tax cuts and those on marginal rates have proved more likely to increase growth than spending increases or temporary, infra-marginal tax rebates. Successful fiscal consolidations have emphasized spending cuts over tax hikes by a ratio of five or six to one, and spending cuts have been less likely than tax increases to cause recessions in OECD countries.
D E B T IS A L O NG -TE R M D R AG Some argue that fiscal consolidation by gradual permanent reductions in spending would be expansionary for high-debt countries, as occurred
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in some historical episodes. Others maintain that a temporary increase in spending now would boost growth. Both could be expansionaryor not, depending on details and circumstances. Because many countries have been consolidating simultaneously, interest rates are already low; and, for the United States, which accounts for more than 20 percent of the global economy and issues the global reserve currency, caution in generalizing from other fiscal episodes is highly advisable.
Unless entitlement costs are brought under control, rising debt will cut U.S. living standards by roughly 20 percent in a generation.
Nonetheless, the evidence clearly suggests that high debt/GDP ratios eventually impede long-term growth; fiscal consolidation should be phased in gradually as economies recover; and the consolidation needs to be primarily on the spending side of the budget. Finally, the notion that we can wait ten to fifteen years to start dealing with deficits and debt, as economist Paul Krugman has suggested, is beyond irresponsible.
Reprinted by permission of Project Syndicate (www.project-syndicate.org). 2013 Project Syndicate Inc. All rights reserved.
Available from the Hoover Press is Entitlement Spending: Our Coming Fiscal Tsunami, by David Koitz. To order, call 800.935.2882 or visit www.hooverpress.org.
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T H E E CO N O M Y
Austerity Versus Stimulus

Either approach might work. The question is how the private sector responds. By Charles Wolf Jr.
Why is it that in the United States the stimulus solution to the economys ills has performed badly while in Europe the opposite approach, austerity, has performed even worse? The answer is that austerity (defined as substantial reductions in debtfinanced government spending) or stimulus (defined as high levels of debt-financed government spending) will promote growth only in some countries and in some circumstances. Whether either policy will work depends critically on the responses of the private sector. What is missing from consideration today is whether the private sectors reactions will enhance, retard, or reverse a policy of either austerity or stimulus. In both the European Union and the United States, policies would have been more effective if efforts had been made to anticipate and mitigate the reasons for adverse responses of private businesses. Four years since the great recession ended in mid2009, and notwithstanding recent signs of modest improvements, the annual rate of real U.S. GDP growth has averaged less than 2 percentwhich is 4 percentage points, or $600 billion, below the pace of recovery from prior deep recessions, such as in 198182. Recorded unemployment is 7.5
Charles Wolf Jr. is a senior research fellow at the Hoover Institution and a senior economic adviser and corporate fellow in international economics at the Rand Corporation. He is a professor of policy analysis at the Pardee Rand Graduate School.
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percent but is actually twice as high, allowing for involuntary temporary and part-time employment, as well as discouraged workers who have stopped looking for work. The stimulus of 200912 averaged over 6 percent of GDP annually between $1.2 trillion and $1.5 trillion. Yet it has been ineffective. Austerity in the EU has fared even worse. In the euro-currency area, which includes seventeen of the EUs twenty-seven members, government spending has been cut in half, with dire consequences. GDP growth is at a standstill, and recorded unemployment is 12 percent and rising.
Uncertainty is magnified when stimulus is accompanied by profuse, costly, and ambiguous regulations.
Yet true believers in either policy, which include Nobel Prize winners on both sides, discount the results. Stimulus adherents claim that the poor record simply reflects that the recession was so deep that the stimulus should have been even bigger. Austerity adherents claim that its dismal record simply reflects that it was too severe and imposed too quickly. Both groups are overlooking the crucial role of the private sectors reactions to austerity and stimulus. In the United States, these reactions are crucial because the private sector is so largethe majority shareholder, so to speak. Its share of purchased goods and services is approximately quadruple that of government. Several factors are at work. One is what textbooks refer to as Ricardian equivalencethat debt-financed government spending in the present may require higher taxes in the future, thereby motivating companies and households to save rather than invest or spend. An indicator of this is the ballooning of cash reserves on corporate balance sheets to over $2 trillion since 2009, thereby providing a major offset to the stimulus goal of expanding aggregate demand. Other indicators are increased household savings rates (by 3 to 4 percent annually) since 2009 and decreased household debt (by 8 percent), thus further negating the increased aggregate demand sought by stimulus. Another impediment is the quandary created for business plans because of uncertainty about where and how stimulus would affect each firms
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markets and those of its competitorsuncertainty that is magnified when stimulus is accompanied by profuse, costly, and ambiguous regulations. Finally, stimulus in the United States has been undercut by privateinvestment decisions to invest abroad. Between the recessions turnaround in mid2009 and the end of 2012, outward-bound U.S. private direct investment rose steadily to $1.73 trillion annually from $1.05 trillion. This outward-bound investment currently exceeds (by $500 billion) the outward flow preceding the recession in 2007. Private-sector reactions in Europe have also seriously affected austeritys results. The EUs private sector is smaller relative to government than in the United Statesabout three to two versus four to one. Moreover, the direct involvement of government is more pervasive than in the United States. For example, European governments are often part-owners of private corporations and sometimes sit on corporate boards. Austerity in the EU has imposed simultaneous severe spending cuts on both the government and the private economy, thereby reducing opportunities for either one to cushion the adverse impact of austerity on the other. The EUs private businesses also seem less enabling of entrepreneurship and innovation that could facilitate adjustment to austerity. Neither in the United States nor in the EU does the private sector speak with one voice or necessarily react in a uniform way. For example, some venture-capital firms and other wealth-management companies in the United States have reacted less adversely to government policy than others. Still, the experience to date strongly suggests that the reactions and behavior of private investors and consumers to stimulus in the United States and austerity in the EU critically affected each policys tarnished record. Something for policy makers to keep in mind when devising economic remedies.
Available from the Hoover Press is Looking Backward and Forward: Policy Issues in the Twenty-First Century, by Charles Wolf Jr. To order, call 800.935.2882 or visit www.hooverpress.org.
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T H E EC ONOM Y
Another Uncertainty Principle

Why cant economists gaze into the future the way physicists gaze into the atom? Because the science of economics is still emerging. By Russell Roberts.
When asked to prove the effectiveness of Keyness prescription of deficit spending to cure an ailing economy, Keynesians usually point to World War IIgovernment ran large deficits, GDP surged, and unemployment disappeared. The economy certainly appeared to be healthy. The military industrial sector grew larger and boosted measured GDP. Conscription forced unemployment close to zero. But did government spending on the military stimulate the economy through the vaunted Keynesian multiplier? Government spending on the military didnt stimulate private consumptionit crowded it out. Consumers suffered. That doesnt disprove Keynesmaybe a smaller increase would have done the trick of fixing the economy without reducing private consumption. World War II doesnt prove Keynes was wrong, but it sure doesnt prove him right either. A better test came at the end of war. Paul Samuelson, a prominent Keynesian who later won one of the first Nobel Prizes, worried that if the war ended suddenly and government spending contracted quickly, we
Russell Roberts is the John and Jean De Nault Research Fellow at the Hoover Institution.
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would face the greatest period of unemployment and industrial dislocation which any economy has ever faced. Federal spending fell by 40 percent in 1946 and ten million service members were suddenly looking for work. Despite the warnings of Samuelson and others, nothing was done to cushion the expected blow to the economy. But there was no recessionunemployment stayed low.
World War II doesnt prove Keynes wrong, but it sure doesnt prove him right either.
A year later, federal spending was 60 percent below the 1945 level. Output grew 7 percent and employment grew 4.8 percent, hitting record levels. That extraordinary natural experiment could have ended the fascination economists had with the work of Keynes. Instead, the Keynesians recalibrated their models and looked to the future.
W HE R E DI D T H E STI MU LU S G O ? The failure of the Obama stimulus package of 2009 to have the predicted effects on the unemployment rate didnt change many minds either. In January 2009, Alan Blinder of Princeton, a highly respected Keynesian, argued that a $650 billion stimulus package would be big enough to fix the economy. Instead we spent $820 billion; in return, we have the worst recovery in modern American economic history. Of course, its possible that large natural experiments like these shouldnt be treated as decisive. The world is a complicated place. Lots of things happen at once. Correlation is not causation. Maybe factors besides government spending account for the lethargy of the U.S. economy today or the vitality of the U.S. economy in 1946.
Some economists argue that the stimulus should have been $2 trillion while others, equally illustrious, argue it should have been zero.
That is why I think it isnt just Keynesianism thats in trouble these days but macroeconomics in general, at least the way journalists and
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politicians expect us to practice it. When Nobel Prize winners argue that the stimulus should have been $2 trillion while other equally illustrious economists argue it should have been zeroand both have studies to back up their claimsone has to wonder how much science there really is in economics. Perhaps our profession should admit that some of the questions people want us to answer simply cannot be answered. One of those questions is whether or not $820 billion in additional federal spending, using borrowed money, is a good idea. I think its a bad idea. But my reasons for thinking so are based on logic and philosophy, not fancy statistical analysis.
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But hasnt the nonpartisan Congressional Budget Office (CBO) found that the stimulus created millions of jobs? Sort of. At one point in 2011, the CBO estimated that the stimulus had created between 400,000 and 2.4 million jobs. Not so precise. Worse, its not even an estimate: its simply the forecast the CBO did before the stimulus passed, recalculated using the actual amount of money that was spent. This is equivalent to sending a space probe to Mars but being unable to verify its location. When asked by the president where it is, the scientists assure him that its on Mars. How do they know? Because their models say so. In modern macroeconomics, we make predictions that
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cannot be confirmed or verified. I dont know what to call that, but it isnt science.
STU BB O R N L Y C OMPLE X Some argue that we havent had enough serious recessions to model them adequately. Give us twenty or thirty more, they say, and well have enough data. Im more inclined to side with F. A. Hayek in his 1974 Nobel Prize address, The Pretense of Knowledge. Hayek argued that the economy was simply too complex to allow predictions of the precision we expect from, say, physics. So while a physicist can tell us where Mars will be on January 1, 2035, and actually verify the prediction when the time arrives, we economists will always struggle to identify the path of the economy six months from now. Economics isnt rocket science; its a lot harder. We should admit as much and when asked to measure things we cannot measure, we should admit our ignorance.
Reprinted by permission from the European (www.theeuropean-magazine.com). All rights reserved.
Available from the Hoover Press is Government Policies and the Delayed Economic Recovery, edited by Lee E. Ohanian, John B. Taylor, and Ian J. Wright. To order, call 800.935.2882 or visit www.hooverpress.org.
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T H E E CO N O M Y
Bridges to Nowhere
When stimulus spending roars down the highway disguised as infrastructure spending, its time to hit the brakes. By Paul R. Gregory.
Big-government advocates seek to substitute infrastructure for the S-word (stimulus). President Obamas State of the Union address called for $40 billion to fix the nations roads and bridges and the establishment of a federal infrastructure bank. A few weeks later, the president called for an additional $4 billion in infrastructure spending. A billion here and a billion there, and soon youre talking real money. To persuade a wary public to spend more with trillion-dollar deficits, big-government advocates must gin up a national infrastructure emergency that threatens safety, jobs, and well-being. Public-spending lobbyists are ready to oblige with D-plus report cards for aging and unreliable roads, bridges, and ports. Big-government advocates substitute scare tactics for the facts that our infrastructure is as good as Europes and that we spend more than the European Union on public investment. If we spend as much or more and have inferior infrastructure, that is a massive political failure for which someone should pay. Gone are grandiose plans for massive stimulus to boost output and employment on Keynesian steroids. Instead the president is repackaging stimulus as infrastructure spending. His Miami speech was timed to the newly released American Society of Civil Engineers 2013 infrastructure
Paul R. Gregory is a research fellow at the Hoover Institution. He is the Cullen Distinguished Professor of Economics at the University of Houston and a research professor at the German Institute for Economic Research in Berlin.
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Now, over the last four years, weve done some good work. Construction crews have built or improved enough roads...to circle the globe fourteen times and upgraded enough [rail] to go coast to coast and back. Weve repaired or replaced more than twenty thousand bridges. Weve helped get tens of thousands of construction workers back on the job.
If our roads circled the globe fifty times, would we get a B-plus? Teachers reserve D-plus for students who make no effort other than to show up. D-plus brings to mind backwater countries of Latin America and Asia.
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report card. Its D-plus rating rang the alarms that our roads, bridges, water and waste treatment, rail, dams, and airports are crumbling and unsafe. At least the president reminded us in Miami that we have had the good fortune of four years of enlightened stimulus spending under him:
D-plus is a national disgrace for a once-great country! How could we have let it get so bad? The American Society of Civil Engineers Failure to Act study offers a price tag for restoring a first-world infrastructure. It would take $1.7 trillion to correct our current infrastructure deficit and an extra $160 billion a yearor $1.1 trillion totalto meet our infrastructure needs through 2020. Our civil engineers do not predict for us the effect of almost $3 trillion in additional spending on the deficit. After all, what is it worth to be able to drive across bridges without fear of plunging to certain death? (By my calculations, our bridge failure rate is one in three hundred and fifty thousand.) Even though we do not have the $1.7 trillion for current needs and the $1.1 trillion for later, we would be penny wise and pound foolish not to borrow and
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spend, say the civil engineers. The $160 billion extra over each of the next seven years would alone raise GDP by $3.1 trillion (a three to one return) and add 3.5 million jobs, they say. What a bonanza! We have not seen such optimistic numbers since the young Obama administration promised huge returns for the first stimulus. Should we again put caution aside? A word of warning: the website of the American Society of Civil Engineers shows it to be a lobbyist for infrastructure spending. Asking the civil engineers how much infrastructure spending we need is akin to asking defense contractors how much we should spend to keep America safe. I doubt the big-government people would like that. The United States fourteenth-place ranking in the World Economic Forums infrastructure index scarcely bespeaks a national scandal. Luxembourg and Canada rank just above the United States, and Austria and Denmark rank just below. None of these countries is exactly a slouch in the infrastructure category. Among the twenty largest countries, the United States ranks second only to Canada. The World Economic Forum index also shows that U.S. infrastructure beats the European Union average by a wide margin. How can that be, with the fast trains and the gleaming autobahns of the European Unionthe envy of our transportation bureaucrats?
If we get less bang for our infrastructure buck than Europe does, the problem would seem to be not too few dollars but too much waste and corruption.
Consider another inconvenient fact. OECD infrastructure experts find that Europe has too great a supply of roads and rail relative to demand. Yes, there are trains departing every few minutes, but they are half empty. And do Germans really need five different autobahns to drive from Munich to Frankfurt? The same OECD experts find that the United States, Canada, and Australia have built about the amount of infrastructure that fits the demand. Still, if all else fails, our big-government spenders at least can show that we spend little on infrastructure relative to countries that have good infrastructure. Get ready for a surprise. According to OECD statistics, the United States spends 3.3 percent of its GDP (200611) on infrastruc30
ture investment, versus the European Unions 3.1 percent. With roughly equal GDP, the United States actually outspends the European Union, our model of infrastructure perfection. If we spend as much as or more than the European Union on infrastructure, we should have better or equal results. In both the United States and Europe, public investment and procurement are political processes characterized by waste, politics, and corruption. If we get less bang for our infrastructure buck than do our European colleagues, our problem would be not too few dollars but too much waste and corruption.
Asking civil engineers how much infrastructure spending we need is like asking defense contractors how much to spend on weapons.
In his Miami pitch for more infrastructure spending, the president stated: Weve got to do it in a way that makes sure taxpayer dollars are spent wisely. Does he know something the people do not? Could it be that taxpayer dollars have not been wisely spent? Could the unions, crony capitalists, and lobbyists have profited at taxpayer expense? That would be as hard to believe as the police chief s surprise that there was gambling in Casablanca.
Special to the Hoover Digest.
Available from the Hoover Press is Failing Liberty 101: How We Are Leaving Young Americans Unprepared for Citizenship in a Free Society, by William Damon. To order, call 800.935.2882 or visit www.hooverpress.org.
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T AX ES
Many Happier Returns

How to mend the federal tax code. By Gary S. Becker.
The federal tax code is a messit is neither efficient, fair, nor clear. A complete set of suggestions to improve the tax system would take hundreds of pages, as did the excellent 2005 Report of the Presidents Advisory Panel on Federal Tax Reform. I will concentrate on a few of the changes needed to stimulate a more efficient, faster-growing American economy. A major priority is to eliminate taxes on savings and investments. One reason is that they involve double taxation: personal and corporate incomes are first taxed, and then the returns on the savings and investment out of these incomes are taxed again later. A second, even more important problem with taxes on savings and investments is that in the long run they are shifted to labor because these taxes lower after-tax returns, thereby discouraging investment. A lower rate of investment slows down capital accumulation, which leads to a lower ratio of capital to labor. Wages are lower and pretax returns to capital are higher when the capital/labor ratio is lower. Moreover, the present system taxes different forms of saving and different types of investment goods at different rates. This distorts the allocation of investments among investment categories. For example, depreciation tax rules allow durable capital to be depreciated more slowly than
Gary S. Becker is the Rose-Marie and Jack R. Anderson Senior Fellow at the Hoover Institution and a member of Hoovers Working Group on Economic Policy and Shultz-Stephenson Task Force on Energy Policy. He is also the University Professor of Economics and Sociology at the University of Chicago. He was awarded the Nobel Memorial Prize in Economic Sciences in 1992.
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EPA/Shawn Thew
Apple CEO Tim Cook testifies before Congress in May about the companys offshore accounting arrangements. We think we should do a comprehensive reform of the tax code, Cook said in defense of Apples removing of billions of dollars from the IRSs oversight. For multinationals the right approach would be simplicity. Just gut the code.
less-durable capital, which lowers the relative tax rate on more-durable capital. Similarly, savings that enter tax-free IRA or Roth accounts are taxed less heavily than other forms of savings. One way to eliminate taxation of investments is to allow all investments to be written off immediately as expenses instead of being depreciated over time. Taxing only earnings would eliminate double taxation of savings. Expensing investments and taxing earnings moves the income tax code a long way in the direction of a tax on consumption rather than on income. The basic efficiency advantage of consumption taxes is that they do not distort the decision to consume now rather than consume later since the returns on savings and investments are not taxed. By contrast,
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income taxes do distort this decision since they tax the incomes earned on savings as well as the incomes that led to the savings. Whether or not one moves to a consumption tax, taxes should be made simpler and flatter because that would reduce the large cost of tax compliance and encourage greater investment and work effort. A reasonable proposal that would maintain progressivity yet have a much flatter tax structure would be to have only two or three tax rates, such as 20 percent, 25 percent, and 30 percent. The tax rate on low labor market earnings would be even less than 20 percent if the earned-income tax credit on low earnings were retained. This credit encourages poorer individuals to enter the labor force rather than staying out to become eligible for various welfare benefits, such as food stamps, unemployment compensation, and housing subsidies.
Personal and corporate incomes are first taxed, and then the returns on the savings and investments are taxed again.
The income tax base should be widened not only because that arrangement would be more efficient but because a wider base would help maintain tax revenue as rates are flattened and taxes on savings and investments removed. As one step, the deductibility of mortgage interest should be eliminated because that artificially encourages investments in home ownership relative to investments in other forms of capital. This deduction also favors higher-income families since they are more likely to itemize deductions and have higher marginal tax rates. If it were too politically difficult to eliminate this deduction, a tax credit could be given to all homeowners equal to a fraction of their mortgage interest payments. There would be an upper bound to the amount of interest payments that could qualify for the tax credit. The exclusion of interest on state and local bonds from income taxes should be abolished because that artificially encourages spending by these governments relative to spending by households and businesses. Since higher-income individuals hold the vast majority of state and local bonds, this tax exemption also favors higher-income people in an undesirable way.
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The tax on business cash flow (net of investment outlays) should be aligned with the proposed flatter personal income tax structure by lowering corporate and partnership tax rates to the proposed maximum tax rate on personal income, say 30 percent. Doing this, and taxing business cash flow net of investment deductions, would integrate the business tax into an overall consumption tax.
Consumption taxes, unlike income taxes, do not distort the decision to consume now rather than later.
These are the most needed reforms, although others are also desirable. Unfortunately, major reforms have little chance of enactment in the present political climate, but they are longer-run goals that should appeal to both Democrats and Republicans.
Reprinted from the Becker-Posner Blog (www.becker-posner-blog.com).
New from the Hoover Press is Constitutional Conservatism: Liberty, Self-Government, and Political Moderation, by Peter Berkowitz. To order, call 800.935.2882 or visit www.hooverpress.org.
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T AX ES
The Inequality Delusion

Why it isnt the governments job to equalize incomeor to try to do so by manipulating taxes. By David Davenport.
In his novel Gravitys Rainbow, Thomas Pynchon wrote: If they can get you asking the wrong questions, they dont have to worry about the answers. This describes to a T what President Obama has done in seeking to make income inequality, as he put it in one of his speeches, the defining issue of our time. If that is the question, then higher taxes on the wealthy, a large increase in the minimum wage, and other redistributionist measures become the answer. But in fact, the president is either mistaken or misleading. Income inequality is not the right question to be asking. When Obama and his supporters refer to income inequality, they are taking a complex set of economic and social issues and boiling them down to a single data point: the size of the difference between the annual incomes of top earners and those on the bottom of the income scale. While that is an interesting issuethough there are problems with it, even as it ishaving it stand alone as the driving force for change is a gross oversimplification that will lead to bad outcomes. It would be as if we decided to judge baseball pitchers by the number of walks they issue, not taking into account the vast array of appropriate measures (wins and losses, earned run average, strikeouts, hits given up, innings pitched, etc.) that combine to give a fuller, more accurate understanding of a pitchers effectiveness.
David Davenport is counselor to the director and a research fellow at the Hoover Institution.
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Asking about the gap between high and low earners is at best an incomplete question. It tells us nothing about why the gap may be growing or shrinking. For example, it may be the case, as is shown in recent studies, that incomes at both the top and bottom have grown, but incomes at the top grew faster. But even that isnt enough to know, because you would want to understand why the top is growing faster. Is it at the expense of those at the bottom? Actually no, since theirs is growing also, but it is due to greater investment income at the top. Do we then want to penalize Bill Gates and Steve Jobs for creating wildly successful companies, along with the people who invested in them?
Pointing out the gap between high and low earners tells us nothing about why the gap may be growing or shrinking.
A further problem is that most of the data collected on this phenomenon focuses on pretax income, so it doesnt take into account the effects of our progressive tax system. But that prompts an even deeper question: is it the role of government, and its system of taxation, to equalize income among citizens? The United States already has one of the most progressive tax systems in the world, so absent this red-herring question about income inequality, taxing the wealthy would be an even tougher case to make. A more relevant question would be whether there is mobility among the various income levels. In an equality-of-opportunity society such as the United States, income inequality should be a problem only if an individuals income is static. A Treasury Department study looked at income mobility from 1996 to 2005 and concluded that during the study period, more than half of taxpayers moved to a different income quintile. Approximately half of taxpayers in the bottom income quintile had moved to a higher income group, and only 25 percent of those in the top quintile had remained there. With people moving up and down the income distribution scale, there would appear to be equality of opportunity, if not equality of outcome. And nearly everyone agrees that the impetus for more mobility is education, not income redistribution. Education is where the policy emphasis should be.
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Legendary football coach John Madden was asked to comment when a team signing a notoriously flaky quarterback announced that he was the answer. Maddens response was, if he is the answer, I guess I dont know what the question is. If income inequality is the answer, the question is not how to have an equality-of-opportunity society. Instead, it is the much more Machiavellian question of how to build a case for income redistribution, which is altogether the wrong question to be asking in a free society.
A more relevant question: is there mobility among the various income levels? It seems there is.
Unfortunately, I conclude that President Obama wants to ask that very questionhow we can redistribute income in a way that he thinks creates greater equalitybut knowing how controversial that would be, he has masked it in the cloak of income inequality. Lets hope Congress and the American people see through his redistributionist cloak.
New from the Hoover Press is The New Deal and Modern American Conservatism: A Defining Rivalry, by Gordon Lloyd and David Davenport. To order, call 800.935.2882 or visit www.hooverpress.org.
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I N T E L L I G E N CE
Lives in the Balance

The NSAs data-mining efforts seem, in the end, to be a tradeoff between national security and individual privacy thats worth making. By Roger Pilon and Richard A. Epstein.
After the news broke that the National Security Agency had been collecting metadata about Americans phone calls and some foreign online communications, President Obama was attacked for stating the obvious: no amount of government ingenuity will guarantee the American people 100 percent security, 100 percent privacy, and zero inconvenience. Legally, the president remains on secure footing under the Patriot Act, which Congress passed shortly after 9/11 and has since reauthorized by large bipartisan majorities. As he stressed, the program has enjoyed the continued support of all three branches of the federal government. It has been free of political abuse since its inception. And, as he rightly added, this nation has real problems if its people cant trust the combined actions of the executive branch and Congress, backstopped by federal judges sworn to protect our individual liberties secured by the Bill of Rights. In asking for our trust, Obama would have been on stronger ground if the NSA controversy had not followed hard on the heels of the Benghazi, IRS, and AP/Fox News scandalsto say nothing of Attorney General
Roger Pilon is vice president for legal affairs at the Cato Institute and director of Catos Center for Constitutional Studies. Richard A. Epstein is the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution and a member of Hoovers John and Jean De Nault Task Force on Property Rights, Freedom, and Prosperity. He is also the Laurence A. Tisch Professor of Law at New York University Law School and a senior lecturer at the University of Chicago.
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Eric Holders problems. But give the president due credit: we can recall no other instance in which he announced publicly that the responsibilities of his office had changed his mind. And for the betterheres why. In domestic and foreign affairs, the basic function of government is to protect our liberty, without unnecessarily violating that liberty in the process. The text of the Fourth Amendment grasps that essential tradeoff by allowing searches, but not unreasonable ones. That instructive, albeit vague, accommodation has led courts to craft legal rules that first define what a search is and then indicate the circumstances under which one is justified. In the realm of foreign intelligence gathering, recognizing the need for secrecy and their own limitations, judges have shown an acute awareness of the strength of the public interest in national security. They have rightly deferred to Congress and the executive branch, allowing executive agencies to engage in the limited surveillance that lies at the opposite pole from ransacking a single persons sensitive papers for political purposes. That deference is especially appropriate now that Congress, through the Patriot Act, has set a delicate balance that enables the executive branch to carry out its basic duty to protect us from another 9/11 while respecting our privacy as much as possible. Obviously, reasonable people can have reasonable differences over how that balance is struck. But on this question, political deliberation has done its job, because everyone on both sides of the aisle is seeking the right constitutional balance.
This nation has real problems if its people cant trust the combined actions of the executive branch and Congress, backstopped by federal judges sworn to protect our individual liberties.
In 1979, in Smith v. Maryland, the U.S. Supreme Court addressed that balance when it held that using a pen register to track telephone numbers did not count as an invasion of privacy, even in ordinary criminal cases. Thats just what the government has done here on a grand scale. The metadata it examines in its effort to uncover suspicious patterns enables it to learn the numbers called, the locations of the parties, and the lengths
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of the calls. The government does not knowas some have charged whether youve called your psychiatrist, lawyer, or lover. The names linked to the phone numbers are not available to the government before a court grants a warrant on proof of probable cause, just as the Fourth Amendment requires. Indeed, once that warrant is granted to examine content, the content can be used only for national security issues, not even ordinary police work.
Political deliberation has done its job. Everyone on both sides of the aisle is seeking the right constitutional balance.
As the president said, the process involves some necessary loss of privacy. But its trivial, certainly in comparison to the losses that would have arisen if the government had failed to discern the pattern that let it thwart the 2009 New York subway bombing plot by Colorado airport shuttle driver Najibullah Zazi, an Afghan-American, who was prosecuted and ultimately pleaded guilty. The critics miss the forest for the trees. Yes, government officials might conceivably misuse some of the trillions of bits of metadata they examine using sophisticated algorithms. But one abuse is not a pattern of abuses. And even one abuse is not likely to happen given the safeguards in place. The cumulative weight of the evidence attests to the soundness of the program. The critics would be more credible if they could identify a pattern of government abuses. But after twelve years of continuous practice, they cant cite even a single case. We should be thankful that here, at least, government has done its job and done it well.
Reprinted by permission of the Chicago Tribune. 2013 Chicago Tribune. All rights reserved.
Available from the Hoover Press is The Case Against the Employee Free Choice Act, by Richard A. Epstein. To order, call 800.935.2882 or visit www.hooverpress.org.
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I N TELLIGENC E
Watching the Detectives

Free societies can indeed restrain their intelligence agencies, largely by keeping them honest. By Mark Harrison.
Natural questions arise from news reports about mass surveillance in Western societies. Are our liberties at risk, along with our privacy? Are we moving in the wrong direction along the spectrum that runs from a free and democratic society to a totalitarian police state? To help answer such questions, it would seem only sensible to ask how surveillance works in real totalitarian police states. The answer might give us a reality check. Here I will point out some important similarities between what the U.S. National Security Agency (and others) are up to and the functions of the secret police under communist rule. I also will show some differences. My conclusion? We are a long, long way from mass surveillance in the style of the Soviet KGB or Chinas Public Security Bureau. But that should not be completely reassuring. Here are the similarities that seem important: Mass surveillance. American counterintelligence is in the business of mass surveillance. Theyre looking at everyone. Jeremy Bash, chief of staff to former CIA director and defense secretary Leon Panetta, is quoted in the New York Times as saying:
Mark Harrison is a research fellow at the Hoover Institution, a professor of economics at the University of Warwick, and an associate of Warwicks Centre for Competitive Advantage in the Global Economy.
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If youre looking for a needle in the haystack, you need a haystack.
That haystack is the millions and billions of bits of our data that are being gathered. Mass surveillance was also the business of the KGB, as it is the business of the secret police under any dictator. In fact, counterintelligence everywhere has an unquenchable thirst for personal facts. Every secret policeman knows that the most dangerous enemy is the one you dont have on file. You can keep tabs on the ones already in the Rolodexbut what about the sleepers, the new recruits, the ones that are out there and completely invisible to you? Its what you dont know that can kill you. So, in the interests of staying alive, you can never know enough. Detection relies on big data. How do you find the enemy you dont know? By using data and looking for patterns in the data. This is what the KGB did. It looked for several kinds of patterns. KGB agents were pioneers of profiling, for example. They figured that many disloyal people had markers in common, although exactly what mattered changed from one period to another. In one period it was your social origins: upper class (which meant the regime had taken your property) or poor. In other periods it was whether you had family members who had fled abroad, or you spoke a foreign language, or you had stayed behind when the war came and tried to live quietly under German occupation. So the agency looked for people with those markers. Another thing the KGB looked for was who knew whom or was related to whom. When agents put a person under surveillance, they obsessively tracked friends and family members, telephone callers, letter writers, and so on. A third thing was just to look for unusual patterns of activity in the street and at work. To know what was unusual, agents had first to know what was usual, and this in itself required data collection on a massive scale. The abnormal would stand out only against the normal. Qualitatively, this isnt different from what the FBI or the NSA are doing. They too are mainly just looking for anomalies, or patterns of interest in the data. The goal is prevention. The ultimate goal of surveillance is prevention. Exactly what is being prevented may vary. Most Western intelligence agencies today are trying to prevent another 9/11 or its London equiva-
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lent, another 7/7. They are also trying to prevent the public from finding out exactly how they are doing this, because that knowledge might help their targets pass under the radar. Chinas Public Security Bureau has a wider set of goals: to prevent public disorder, to prevent open criticism of Chinas leaders and political order, and to prevent everyone from getting the idea that open opposition could ever be normal and go unpunished. The KGBs goals were pretty similar. To do any of these things you have to be ready to react instantly to signals that something is up. Sometimes you receive a signal, and you can wait and see how it develops. Sometimes you have to react and nip it in the bud even before you know what it might be. To prevent the bad stuff you have to review all situations that look as if they have a potential for going bad, and consider all people who look as if they have a potential to become enemies. Identifying potential enemies is always and everywhere a judgment call. Risk of type I errors. So much of this work consists of judgment calls, in fact, that errors are inevitable. Some are what statisticians would call type I errors and some are the opposite: type II. You make a type I error when you see a pattern in randomness: for example, a person has a random resemblance to a terrorist by having the wrong appearance and being in the wrong place at the wrong time, and suddenly you have him on a plane to Guantnamo Bay. To explain this another way, when youre looking for a needle in a haystack, and its important to avoid missing it, its inevitable that you will turn up lots of things that might be needles because they look quite like needles and in fact you might have even stuck one in the pincushion before you realized that its just a shiny thorn...and now you cant be bothered to retrieve it. Yes, and that means that where there is scope for error there is also scope for abuse, because secret policemen are not all dedicated professionals; among them will be those that are too lazy, or too ambitious, or too much in love with power to correct a mistake. A type II error is when you miss a pattern or overlook a real spy or terrorist. In most situations, Western societies show a preference for type II errors: wed rather leave a criminal at liberty than imprison an innocent person. Thats not so hard when were talking about shoplifting; its harder
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by orders of magnitude when the criminal at liberty has the potential to behead a bystander or fly a passenger jet into a shopping mall. Those are the ways in which Western counterintelligence looks very much the same as counterintelligence under totalitarian rule. But there are also some key differences. Here they are: Governed by law, and openly contested. Most obvious is the existence of a legal framework. It was not always like this but in both Britain and America the intelligence services operate within the law, subject to both legislative and judicial oversight. The law permits some things and not others. The NSA can find out that X sent e-mail to Y, but it cant read your e-mail without a court order that names you and convinces a judge of probable cause. This framework may well look unsatisfactory, and may indeed be unsatisfactory; Im not a lawyer and dont pretend to know. At the same time, we also have a free press and intrepid journalists who have strong incentives to find scoops and dig out scandals. As a result, the scope of secrecy and surveillance is law-governed (although imperfectly), open to free discussion (to the extent that we know of it), and contested (vigorously and continually). If you dont like the law you can take the contest to the polls and toss out the lawmakers. Or you can take a personal stand, break the law, and answer for it in the courts. The contrast with the situation in countries under communist rule could not be more stark. There the KGB responded only to the instructions of the ruling party (and the same no doubt holds in China, Cuba, North Korea, and Vietnam); there was and is no answerability to the parliament, the courts, or the press. What is more, the merest mention of secrecy and surveillance was completely suppressed; the existence of secrets was a well-policed secret. A much bigger haystack. Americas haystack is of unimaginably vast dimensions. Its so big that, according to Edward Luce in the Financial Times, it employs a data-intelligence complex with a staff of nearly a million and a budget of $80 billion. The KGBs haystack was pretty large in its time. It was put together from many individual straws: agent reports of gossip from canteen queues and stu45
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dent dormitories, surveillance reports, information gathered from microphones, phone taps, opening the mail, and so forth. In forty years the archive of KGB counterintelligence in Soviet Lithuania (a country of around 3 million people) accumulated at
least a million pages of documents. On that basis, the total paperwork of the entire Soviet KGB archive (for seventy years and a country of 200 million people and more) ought to exceed that of Soviet Lithuania by at least two orders of magnitude. And this was in a society with one landline system and one mail service, without networked computers or mobile phones, where no one even had free access to a photocopier. When even intercity phone calls had to be booked through an operator in a city exchange, it was relatively easy for the KGB to monitor anyones personal network. So the size of Americas haystack must be thousands of times larger than this, and probably tens or hundreds of times larger than even Chinas haystack. This observation, at first alarming, is testimony to the fact that we live in a free society in which communication is unfettered and of negligible cost by historical standards. We, the citizens, are the ones who make the haystack so large by our abundant use of the freedom to communicate.
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Many fewer needles. The problem of finding needles in this vast haystack is magnified by the fact that Western societies do not appear systematically to produce needlescertainly not on the scale of more repressive societies. As the sociologists Alex Inkeles and Raymond A. Bauer reported (in The Soviet Citizen, 1959) from the first wave of the Harvard Interview Project, the Soviet system of repression was apparently based on the assumption that everyone had a reason to hold a grudge against the communist rulers somewhere in the past. A parent had lost property, a brother had been arrested, a husband shot, a cousins family resettled in the remote interior. As time passed the salience of such historical events might recede, yet for some reason each new generation of Soviet-educated citizens kept on throwing up new kinds of nonconformity and outright disloyalty that had to be monitored and checked. In contrast, Western societies are not governed by dictators who have systematically expropriated property and penalized wide social classes and ethnic groups; they also provide multiple channels for citizens to express discontent and resentment and organize for social and political change. Despite this, there are still needles: enemies of openness and tolerance. But they are far fewer in number than the hostile forces that repressive regimes cannot help but produce and reproduce continually. More type I errors. Put a much bigger haystack together with far fewer needles and the implication is unmistakable. When the haystack is small and needles are many, the chances of making type I errors are reduced. Under communist rule, if it pricked like a needle and it looked like a needle, there was at least a good chance that it was a needle. Any Western intelligence agency trying to find those few needles in todays mega-haystack has a greatly reduced chance of coming up with real needles compared with its communist counterpart, and a correspondingly heightened chance of false positives. The fact that so many people are looking for the few needles, that the number of big-data analysts must exceed the probable number of real terrorists by a factor of one hundred or even ten thousand, just makes it much, much worse. So you want to make a career as an analyst. How can you distinguish yourself if you never identify a threat? How can you fend
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off boredom if you never reach the point of saying this is someone we should look at more closely? So you do it, and you make a mistake. Well, you say, it was worth looking into. And that is most unfortunate, because as a society we want to live in safety but we also hate type I errors. We intensely dislike the idea that an incidental bystander might get investigated, or even detained, because of an intelligence error. So intelligence errors sow cynicism and mistrust. NSA versus KGB: is there good or bad news in the comparison? To me the news looks mostly good. Compared with the KGB, the NSA appears quite benign. But there is also a warning, which flows from the observation that there is no limit on what our guardians would like to know about us. The more they know, the better informed they are. But the more resources they have, the greater is the scope for overambition, the abuse of power, and the false positives that we rightly fear. How much is enough? The purpose of national security is not to suffocate us with cotton wool. It is to enable us to be the people we would like to be and to protect the rule of law that we would like to have. In a free, open society the limits of security are something we, the citizens, should always debate, contest, and, if necessary, push back.
Special to the Hoover Digest. Adapted from Mark Harrisons blog (https://blogs.warwick.ac.uk/markharrison).
Published by the Yale-Hoover Series on Stalin, Stalinism, and the Cold War is Guns and Rubles: The Defense Industry in the Stalinist State, edited by Mark Harrison. To order, call 800.405.1619 or visit http://yalepress.yale. edu/yupbooks/order.asp.
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I N TELLIGENC E
October Surprises
The Cuban missile crisis represents an enduring tale of complacency, fragmented data, and the frantic race to pick signal out of noise. By Amy B. Zegart.
In September 1962, CIA Director John McCone was honeymooning in Europe but couldnt take his eyes off Cuba. Convinced the Soviets were secretly deploying nuclear missiles ninety miles from Florida, McCone repeatedly cabled Washington with his concerns. Nobody believed him. McCone was operating on a hunch, without solid evidence. When the CIA issued a Special National Intelligence Estimate about the Soviet arms buildup in Cuba on September 19, it disregarded the directors views entirely. That estimate, like the previous three, concluded the Soviets would not dare put nuclear missiles in Cuba. A month later, U-2 spy planes snapped photographs that confirmed McCones worst fears and ushered in the most dangerous thirteen days in history. The Cuban missile crisis of fifty-one years ago stands as the most studied event of the nuclear age. Academics have written so much about that eyeball-to-eyeball moment that there are articles about why we should stop writing articles about it. But there is at least one key lesson yet to be learned. Generations of scholars and practitioners have insisted on calling the crisis an intelligence success when there is much more to be learned by calling it a failure.
Amy B. Zegart is a senior fellow at the Hoover Institution and an affiliated faculty member at the Center for International Security and Cooperation at Stanford University.
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The success narrative says the CIA discovered Soviet missiles before they became operational, enabling President Kennedy to seize the initiative and save the day. But the beginning of the story is just as important and more often forgotten: the CIA failed to anticipate the presence of Soviet missiles despite widespread knowledge that Soviet arms shipments were escalating dramatically that summer. All four intelligence estimates on Cuba published in 1962 had a reassuring quality, highlighting evidence that the Soviets sought to defend the island with conventional arms, not deploy nuclear missiles there. Instead of inoculating the Kennedy administration against the horrors of a possible Soviet missile surprise, the intelligence estimates made the surprise even more sudden and shocking.
The bottom line: we got lucky.
It is comforting to think that we avoided nuclear Armageddon through artful diplomacy, steely nerves, and timely intelligence. But the truth is we got lucky. During the height of the crisis, a previously scheduled test simulating a missile attack from Cuba was mistakenly identified as a real incoming strike, giving the North American Air Defense Command just minutes to determine what to do. In a 2002 missile crisis anniversary conference (yes, there are these things), scholars learned for the first time that one Soviet submarine captain actually did order preparations to launch a nuclear-tipped torpedo off the U.S. coast on October 27. Were it not for a man named Vasili Arkhipov, who persuaded the captain to wait for further instructions from Moscow even as they were being bombarded by U.S. Navy depth charges and running out of air, events could easily have taken a tragic turn. Other terrifying examples abound, showing just how close the edge of disaster really was. Calling something a success or failure is not just an exercise in tweedy semantics. It shifts the focus from what went right to what went so wrong. And what went wrong fifty-one years ago is still going wrong today: two lingering questions from 1962 suggest the deadly effects of organizational pathologies in intelligence.
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MOMENT OF CRISIS: Five days after President Kennedy signed the Cuba weapons embargo on October 23, 1962, Soviet leaders agreed to dismantle nuclear missiles there. Before the crisis, however, all four intelligence estimates on Cuba published that year had reassured Washington that the Soviets would defend the island with only conventional arms, not nuclear missiles.
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1. Why did analysts miss the signals of Khrushchevs true intentions? Sherman Kent, who led the CIAs estimating shop during the crisis, argued that intelligence estimates missed the mark mostly because Khrushchev was nutty. There is no blinking the fact that we came down on the wrong side, he admitted in 1964. But Kent added, no estimating process can be expected to divine exactly when the enemy is about to make a dramatically wrong decision. In other words, lets blame Khrushchev and hope for more-predictable adversaries in the future. The more important and overlooked lesson here is that the structure of the U.S. intelligence system made a tough job nearly impossible. Although the CIA was created in 1947 to prevent another Pearl Harbor, the agency has never really been central. Intelligence agencies in the State, War, Navy, and Justice departments hobbled the CIA from its earliest days to protect their own turf. As a result, in 1962 intelligence reporting and analysis about Cuba was handled by half a dozen agencies with different missions, specialties, incentives, security clearance levels, access to information, and no common boss with the power to knock bureaucratic heads together short of the president. In this bureaucratic jungle, signals of Khrushchevs true intentionsand there were severalgot dispersed and isolated instead of consolidated and amplified to sound the alarm. Sound familiar? Before 9/11, this same fragmentation kept U.S. intelligence agencies from seizing twenty-three different opportunities to disrupt the terrorist plot. In each instance, someone in an intelligence agency noticed something important: a string of jihadist flight school students in Arizona, a suspicious extremist at a Minnesota flight school, two suspected Al-Qaeda operatives with U.S. visas in their passports. These and other signals were not drowned out by all the noise. They were found, an incredible feat. And then, just as incredibly, each signal got lost in the bureaucratic sprawl. 2. Why, despite new evidence of a dramatically escalating Soviet buildup, did intelligence analysts continue to draw the same old conclusions? In August and September 1962, intelligence showed a dramatic uptick in Soviet personnel and weapons deployments to Cuba. Nevertheless, the September 19 intelligence estimate concluded nothing had changed. The Soviets were ramping up all right, but to defend Cuba.
White House
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THE DANGER PASSES: A U.S. surveillance aircraft (its shadow visible at lower right) flies over Port Casilda, Cuba, where a Soviet ship prepares to remove missile components on November 6, 1962. The Cuban missile crisis bears a resemblance to the 2002 Iraq weapons fiasco: both favored earlier judgments over current information. In both cases, the past had a firm grip on the present.
Sherman Kent took a lot of heat for that estimate. Nearly all of it centered on mirror imaging, the tendency for analysts to assume an enemy will behave as they would. For psychologists, cognitive limits in the Cuban missile crisis have been the gift that keeps on giving. But I am convinced that organizational pressures were also at work. The thing to know about National Intelligence Estimates is that they are collective products. No single person or agency writes them. Instead, estimates require intense negotiation among many agencies to reach con54
sensus, causing the entire process to tilt toward consistency. Once a judgment is made, changing it becomes more difficult. Why? Because consistency is what policy makers expect. They dont need to be convinced the world looks the same today as it did last month. They do need to be convinced the world looks different. Consistency is a given, but inconsistency needs to be explained, justified, and defended. Changing a judgment means convincing every agency in the process that what it said or assessed or agreed to the last time should be modified or discarded this time. Generating interagency consensus on a new estimate that says we have changed our collective minds is invariably harder than producing a report that says once again, we agree with what we wrote last time. This tilt toward consistency helps explain not only the September 19, 1962, Cuba estimate, but the now-infamous 2002 Iraq WMD estimate. Both estimates reinforced earlier judgments even though the available intelligence had changed significantly over time. In Cuba, intelligence was accumulating fast, while in Iraq intelligence had been drying up for years. Yet in both cases, the past had a firm grip on the present. The Cuba estimate did nothing with more information and the Iraq estimate made more out of nothing, doubling down on prior judgments and evidence that Saddam Hussein had a hidden WMD program before. Both estimates also downplayed internal disagreementsin the Cuba case by not taking the CIA directors hypothesis seriously, and in the Iraq case by relegating State and Energy Department dissents to footnotes. In the end, both estimates were dead wrong. Invisible pressures toward consistency and consensus help explain why. The Cuban missile crisis may be over, but it is not past. Learning lessons from history starts with calling a failure a failure.
Reprinted by permission of Foreign Policy (www.foreignpolicy.com). 2012 Foreign Policy Group LLC. All rights reserved.
Available from the Hoover Press is Eyes on Spies: Congress and the United States Intelligence Community, by Amy B. Zegart. To order, call 800.935.2882 or visit www.hooverpress.org.
Department of Defense
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I N TELLIGENC E
No Safe Havens?
How Barack Obama learned to stop worrying and love the drone. By Kenneth Anderson.
How, exactly, did drone warfare and targeted killing become key elements in Americas counterterrorism strategy? And why should we care about them as essential national-security tools for the future? Barack Obama campaigned for his first presidential term on the platform of ending Americas wars. Obama voters and much of the rest of the world figured this promise referred not only to the conventional conflicts in Iraq and Afghanistan but also to what liberals considered the long and unnecessary national nightmare of the war on terror. It now seems clear he was misunderstoodthough we dont know yet whether the misunderstanding was by Obamas design or due to changes that took place after he assumed office. Obamas policy proved not to be peace breaks out. It was, rather, that America would wind down its two counterinsurgency, boots-on-the-ground wars and undertake a refocused effort against the terrorists who had set this all in motion. He framed it this way during the 2008 race. If Pakistan cannot or will not take out Al-Qaeda leadership when we have actionable intelligence about their whereabouts, he said on the campaign trail, we will act to protect the American people. There can be no safe haven for Al-Qaeda terrorists. No safe havensthat has been Barack Obamas strategic lodestar in the war on terror.
Kenneth Anderson is a member of the Hoover Institutions Jean Perkins Task Force on National Security and Law and a professor of international law at Washington College of Law, American University, Washington, D.C.
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It is this proposition, more than any other, that gets us to drone warfare. Even as Obama publicly disdained the institutions and methodologies of Bushs war on terror, he was issuing a new call to arms in that war. Taking the fight directly to the enemy required a means of combat other than counterinsurgency warfare on the ground, and the United States turned to a technology the Israelis had used effectively in their war against Palestinian terrorists: surveillance drones, now weaponized. This tool had been used during the Bush administration, but sparinglylargely because of geopolitical fears, but also because it was only by the second Bush term that the CIA had established ground-level humanintelligence networks in Afghanistan and Pakistan sufficient for making independent targeting decisions without having to rely on the questionable and self-interested information coming from Pakistans intelligence services. The strategy has worked far better than anyone expected. It is effective, and has rightfully assumed an indispensable place on the list of strategic elements of U.S. counterterrorism-on-offense. But it is not only a strategy of effectiveness, convenience, and necessity. Drone warfare offers ethical advantages as well, allowing for increased discrimination in time, manner, and targeting not available via any other comparable weapon platform. As such, it lends civilians in the path of hostilities vastly greater protection than does any other fighting tool. Drone warfare is an honorable attempt to seek out terrorists and insurgents who hide among civilians.
E T H I C A L A N D E FFE CTI V E The expansion into automated and robotic military equipment owes much to the ethical impulse to create new technologies of discrimination when fighting enemies for whom unwitting civilian shields were their main materiel of war. Moreover, these are weapons that gain much of their discrimination in use from the fact that U.S. forces are not directly at personal risk and are thus able to take time to choose a moment to attack when civilians might be least at risk. Remotenessthe fact that the drone user is nowhere near the target, as the pilot is probably sitting in an airconditioned room in Nevadaactually enables precision. Ethical and effectiveand yet today drone warfare is coming under increasingly strong public attack as being neither. Opponents of drones are seeking
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to raise the political costs of drone warfare to the United States, portraying it as a symbol of an arrogant, reprobate superpower dating back to the days of the ugly American. And though, in a recent Gallup poll, two-thirds of those surveyed said they supported drone strikes, there is no question that the political, legal, and moral legitimacy of drone warfare is increasingly at risk. The delegitimators are the international community, both its U.N. officials and its NGO advocates; a sizable portion of academic international lawyers; much of the elite international media; and Obamas American left. These delegitimators also include a number of conservatives and Republicans, chief among them Kentucky Senator Rand Paul. They claim the core issue is constitutionalthat drones violate due process. This argument focuses specifically on the case of a radical cleric and terrorist operative in Yemen, Anwar al-Awlaki, who inspired a terrorist assault at Fort Hood in 2009, designed an Al-Qaeda effort to detonate a plane over
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Detroit on Christmas Day in the same year, and was deeply involved in a plot to load printer ink cartridges with explosives for detonation on a plane. Awlaki was killed in a targeted drone strike in Yemen in 2011and he was an American citizen. His citizenship, some argue (most vigorously on the libertarian right), should have prevented the Obama administration from performing the targeted killing. But as an enemy combatant in the war on terror authorized by Congress in 2001, Awlaki could not be granted some special get-out-of-a-drone-strike-free card. Given the inherently unsympathetic nature of the Awlaki example, the due-process arguments of those on the right who stand in opposition to drone strikes took a markedly populist and antigovernment turn. When Rand Paul decided to stage a thirteen-hour filibuster on the question of the legality of drone strikes, he and others spent a great deal of time talking not about the violated rights of a terrorist in Yemen but about the theoretical use of drones on American soil against a suspected domestic terrorist sitting in a cafe.
Drone warfare is an honorable attempt to seek out terrorists and insurgents who hide among civilians.
Pauls critique delighted many conservatives and libertarians. They loved seeing him and others engage the Obama administration in a direct and seemingly high-minded manner, denouncing the imperial presidency. But they confused and conflated the Obama administrations arguably imperial domestic policies with policies on national security, war, and foreign affairsspheres in which the president has many and capacious constitutional powers. Moreover, those who were thrilled did not give much thought to whether they might see a need for a president they liked better to have access to those same policiesand whether, in making common cause with those who have opposed the war on terror since it began, they are working to destroy one of its most effective tools not only for Obama, but for future residents of the White House.
S T RA T EG I C A L LY V ALU AB LE Are drone technology and targeted killing really so strategically valuable? The answer depends in great part not on drone technology but on the
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quality of the intelligence that leads to a particular target in the first place. The drone strike is the final act in a process of intelligence-gathering and analysis. The successand it is remarkable successof the CIA in disrupting Al-Qaeda in Pakistan has come about not because of drones alone, but because the CIA managed to establish, over years of effort, its own ground-level, human-intelligence networks that have allowed it to identify targets independent of information fed to it by Pakistans intelligence services. The quality of drone-targeted killing depends fundamentally on that intelligence, for a drone is not much use unless pointed toward surveillance of a particular village, area, or person.
The CIAs success in disrupting Al-Qaeda in Pakistan has come about not because of drones alone, but because the agency succeeded in establishing human-intelligence networks.
It can be used for a different kind of targeting altogether: against groups of fighters with their weapons on trucks headed toward the Afghan border. But these so-called signature strikes are not, as sometimes represented, a relaxed form of targeted killing in which groups are crudely blown up because nothing is known about individual members. Intelligence assessments are made, including behavioral signatures such as organized groups of men carrying weapons, suggesting strongly that they are hostile forces (in the legal meaning of that term in the U.S. militarys Standing Rules of Engagement). That is the norm in conventional war. Targeted killing of high-value terrorist targets, by contrast, is the end result of a long, independent intelligence process. What the drone adds to that intelligence might be considerable, through its surveillance capabilitiesbut much of the drones contribution will be tactical, providing intelligence that assists in the planning and execution of the strike itself, in order to pick the moment when there might be the fewest civilian casualties. Nonetheless, in conjunction with high-quality intelligence, drone warfare offers an unparalleled means to strike directly at terrorist organizations without needing a conventional or counterinsurgency approach to
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reach terrorist groups in their safe havens. It offers an offensive capability, rather than simply defensive measures, such as homeland security alone. Drone warfare offers a raiding strategy directly against the terrorists and their leadership. If one believes, as many of the critics of drone warfare do, that the proper strategies of counterterrorism are essentially defensiveincluding those that eschew the paradigm of armed conflict in favor of law enforcement and criminal lawthen the strategic virtue of an offensive capability against the terrorists themselves will seem small. But that has not been American policy since 9/11, not under the Bush administration, not under the Obama administrationand not by the Congress of the United States, which has authorized hundreds of billions of dollars to fight the war on terror aggressively. The United States has used many offensive methods in the past dozen years: regime change of states offering safe havens, counterinsurgency war, special operations, and military and intelligence assistance to regimes battling our common enemies are examples of the methods that are just of military nature. Drone warfare today is integrated with a much larger strategic counterterrorism targetone in which, as in Afghanistan in the late 1990s, radical Islamist groups seize governance of whole populations and territories and provide not only safe haven but also an honored central role to transnational terrorist groups. This is what current conflicts in Yemen and Mali threaten, in counterterrorism terms, and why the United States, along with France and even the United Nations, has moved to intervene militarily. Drone warfare is just one element of overall strategy, but it has a clear utility in disrupting terrorist leadership. It makes the planning and execution of complex plots difficult if only because it is hard to plan for years down the road if you have some reason to think you will be struck down by a drone but have no idea when. The unpredictability and terrifying anticipation of sudden attack, which terrorists have acknowledged in communications, have a significant impact on planning and organizational effectiveness.
T HE F UT U R E O F D R O NE WAR FAR E Though critics are wrong to claim that drone warfare is neither effective nor ethical, they are not wrong to inquire about process and policy
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concerns. Drone warfare and the development of tools for using force in discrete and focused ways are inviting novel questions of law, ethics, and policy. The list of matters that need legislative and administrative reform in order to put drone warfare and targeted killing on an institutionally stable footing is a long one. As associated forces of Al-Qaeda evolve and fragment into groups only notionally connected to the Al-Qaeda of 9/11, the 2001 Authorization for Use of Military Force (AUMF) looks increasingly threadbare. At some point, whether by the increasingly tenuous connection of new groups to the AUMF or by the appearance of some wholly new terrorist threat unrelated in any way to 9/11 or Al-Qaeda or jihadis, the president will have to either act under his own constitutional authority or obtain a new congressional authorization. It is also the case that the definition of covert action itself needs to be revised to take into account operations that now span a range from truly secret to unacknowledged to plausibly deniable to only preposterously deniable. Congress and the president must address the fundamental question of which policies, processes, means, methods, and operations must remain secret and which ought to be revealed for public discussion. There is little indication that either Congress or the president has any appetite for addressing many, if any, of the serious questions. Instead there is grandstanding by Republicans and Democrats alike, grandiloquent speeches on the Constitution, and precious little attention paid to how citizens who have taken up armed conflict and terrorism against the United States should actually be uncovered and dealt with. Thats apart from the propensity of Congress to go AWOL on its oversight responsibilities and punt to a bunch of judges so it doesnt have to take any blame for killing an innocent American or allowing an American terrorist in Yemen to direct the killing of innocent Americans. Without a hardheaded effort on the part of Congress and the executive branch to make drone policy, the efforts to discredit drones will continue. The current wide public support in the United States today should not mask the ways in which public perception and sentiment can be shifted, here and abroad. The campaign of delegitimation is modeled on the one against Guantnamo Bay during the George W. Bush administration; the
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British campaigning organization Reprieve tweets that it will make drones the Obama administrations Guantnamo. Then as now, administration officials did not, or were unforgivably slow to, believe that a mere civilsociety campaign could force a reset of their policies. They miscalculated then and, as former Bush administration officials John Bellinger and Jack Goldsmith have repeatedly warned, they might well be miscalculating now. U.S. counterterrorism policy overall needs to be embedded in policies, processes, and laws that get beyond mere executive-branch discretion and bear the stamp of the two political branches coming together in tools available in a stable way across presidential administrations of both parties. We are not there now. While the critics are not wrong to call for reform of drone-warfare processes, many of them see these merely as the first step to ending drone warfare altogether. They are advocating procedural reforms not to give it a permanent and steady framework for the long run, but effectively to outlaw the practice. Republicans should not be enablers in this effort. They should not mimic the disgraceful behavior of Democrats during the Bush-era war on terror. They should be movingespecially in Congressto offer firm institutional and political support to drone warfare as a legitimate, effective, legal, ethical, and necessary tool of counterterrorism. Republicans in Congress should stand with the president on the main issue of drone warfare, to shore up the foundations of its legitimacy. They should do this not only because it is the right thing to do but as a practical matterto preserve this key element of twenty-first-century defense for future presidents, among whom there will surely be a Republican or two.
Excerpted by permission from The Case for Drones in Commentary (www.commentarymagazine.com). 2013 Commentary Magazine. All rights reserved.
New from the Hoover Press is Speaking the Law: The Obama Administrations Addresses on National Security Law, by Kenneth Anderson and Benjamin Wittes. To read this special online publication, go to www.hoover.org/ taskforces/national-security/speaking-the-law.
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I N TELLIGENC E
A Beautiful Friendship
Europeans have been claiming, to quote Captain Renault, to be shocked, shocked about American spying. They should know better. By Josef Joffe.
The saga of former National Security Agency contractor Edward Snowden should make for a nice sequel to The Terminal. In that Steven Spielberg movie, Tom Hankssuddenly a man without a countryis marooned at JFK Airport. He cant go home, nor will the authorities deport him. So it was, for a while, with Snowden at Moscows Sheremetyevo Airport, until the drama concluded and the exiled analyst left the airport. Hollywoods screenwriters must be at work already. The title could echo Jane Austen: Hype and Hypocrisy. The co-star is the NSA, also known as No Such Agency, with Barack Obama in a supporting role along with French President Franois Hollande and German Chancellor Angela Merkel. The movie could steal a scene from Casablanca, where the police chief explains to Humphrey Bogart why he had to close down his Caf Amricain: I am shocked, shocked to find out there is gambling going on in here. At which point the croupier sidles up to the captain: Your winnings, sir. Merkels spokesman, Steffen Seibert, recently mimicked this scene, insisting that listening in on friends is unacceptable, an absolute no-no.
Josef Joffe is the Marc and Anita Abramowitz Fellow in International Relations at the Hoover Institution, a senior fellow at Stanford Universitys Freeman Spogli Institute of International Studies, and publisher-editor of the German weekly Die Zeit. His latest book is The Myth of Americas Decline (W.W. Norton, 2013).
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B E T T E R T O K NO W But while it may be uncouth, the habit is as old as the worlds second-oldest professionrecall Moses dispatching his spies to the Promised Land. Everybody spies on everybody, and for good reason. States, guided by interest rather than love, like to know what others are up tofriends or foes. The rule, though, is: dont get caught. Jonathan Pollard, having spied for Israel, is still serving a life sentence. Intelligence lore has it that France spies more heavily on the United States than any other European ally. The land of raison dtat also fields the DGSE, a middle-power NSA, which according to Le Monde, sweeps through millions of telephone calls, e-mails, and social media entries. Like the NSA, it wants to know who is talking to whom, when, and wherefrom. It does so at the margins of legality, adds Le Monde. A 2006 EU directive obliges providers to store such metadata for six months.
American agencies supply the Germans (and, one assumes, other Europeans) with information they cant get themselves.
Yet like the police chief in Casablanca, the French president drew himself up to his full hauteur to demand a halt to the EU-U.S. talks on a trans-Atlantic free-trade deal. Luckily, the European Commission called out Your winnings, sir, and declared that it would go ahead with the trade negotiations despite the controversy. And for good reason: the EU stands to gain more from the deal than the United States. Meanwhile, the Merkel government has begun to climb down in the face of Snowdens tales, according to which the NSA monitors between 15 million and 60 million transmissions daily from Germany alone. Mr. No-no Seibert now concedes a longstanding cooperation between Germanys Bundesnachrichtendienst (BND) and U.S. agencies, all in accordance with law and order. The Intelligence Committee of the Bundestag knew all about it. Of course, the German government also remains keenly interested in the trade talks. This means that Merkel is unlikely to be too impressed by news magazine Der Spiegel, which has condemned the NSAs snooping as a state
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crime and urged Berlin to grant asylum to Snowden. And well she might remain tranquil. For there are three hard facts that speak more loudly than Snowdens words.
CO M I N G IN F R O M TH E CO LD ( WAR ) First, the discreet collaboration between the BND and U.S. spy agencies goes back to the very birth of the Federal Republic. Though the number of U.S. troops in reunified Germany has dwindled, the huge white listening spheres dotting the Bavarian landscape near Bad Aibling are an enduring testimony to the two countries hand-in-glove relationshipregardless of the departure of Russian troops in 1994. Second, both the United States and Germany have profited handsomely from this relationship. During the Cold War, the BND was Washingtons choice supplier of intelligence from the Warsaw Pact. It is said that the BND alerted the CIA of the impending Soviet march into Czechoslovakia in 1968. Another war story has it that the West Germans were first to know about the Soviet invasion of Afghanistan. More recently, in 2007, U.S. snoopers told German security agencies about the terror plot of the Sauerland Group of homegrown terrorists. They did so on the basis of intercepted e-mailsthe very unacceptable activity that Berlin recently denounced.
States, guided by interest rather than love, like to know what others are up tofriends or foes.
Third, the lady doth protest too much. It so happens that American agencies supply the Germans (and, one assumes, other Europeans as well) with information they are either technically unable to fish out of cyberspace themselves or are prohibited from doing so. Thus one hand washes the other. Not quite kosher, but not to be dispensed with. Still, best not to know. This is why presidents and chancellors have always kept their distance from their intelligence services. The reigning principle is plausible deniabilityuntil the story erupts. The Prism debacle, stirred up in the bowels of NSAs Fort Meade headquarters, is but the latest chapter in an old drama. In 2001, the European Parliament
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published a report about the infamous Echelon system, jointly managed by the United States, Britain, Canada, Australia, and New Zealand, which survived the Cold War and was being used to spy on private and commercial communications. Yet the huffing and puffing has always subsidedfor good old reasons of state. There are just too many plump fruits falling off the Anglo-American spy tree. And the Europeans will continue to savor them as long as they are unwilling to put up the funds for a Euro-NSA. It is so convenient to have the Americans tell you what the Russians are up to in Syria, or which homegrown terrorists are looking for a training camp in Pakistan. Realism (or resignation) finally tells the Europeans that cutting the umbilical cord will leave them worse off than ever. The United States and Britain will continue to snoop anyway, but without delivering goodies to the Europeans. Such are the cruel facts of life among nations.
New from the Hoover Press is Perjury: The HissChambers Case, third edition, by Allen Weinstein. To order, call 800.935.2882 or visit www.hooverpress.org.
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p o l it ic s
Another Bad Bounce

Signs that a political delusion may be about to die at last. By Thomas Sowell.
If you are driving along and suddenly see a big red rubber ball come bouncing out into the street, you might want to put your foot on the brake pedal, because a small child may well come running out into the street after it. We all understand that an inexperienced young child who has his mind fixed on one thing may ignore other things that are too dangerous to be ignored. Unfortunately, too much of what is said and done in politics is based on the same tunnel vision pursuit of some good thing, in utter disregard of the repercussions. For years, home ownership was a big good thing among both liberal Democrats like Congressman Barney Frank and Senator Christopher Dodd, on the one hand, and moderate Republicans like President George W. Bush on the other hand. Raising the rate of home ownership was the big red bouncing ball that they pursued out into the street, in utter disregard of the dangers. A political myth has been created that no one warned of those dangers. But among the many who did warn were yours truly in 2005, Fortune and Barrons magazines in 2004, and Britains Economist in 2003. Warnings specifically about the dangerous roles of Fannie Mae and Freddie Mac were made by Federal Reserve Chairman Alan Greenspan in 2005 and by Secretary of the Treasury John W. Snow in 2003.
Thomas Sowell is the Rose and Milton Friedman Senior Fellow on Public Policy at the Hoover Institution.
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Many, if not most, of the children who go running out into the street in pursuit of their bouncing ball may have been warned against this by their parents. But neither small children nor politicians always heed warnings. Politicians are of course more articulate than small children, so the pols are able to not only disregard warnings but ridicule them. That was what was done by Frank and Dodd, among many other politicians who made the pursuit of higher home ownership rates the Holy Grail. In pursuit of those higher home ownership rates, especially among lowincome people and minorities, the many vast powers of the federal governmentfrom the Federal Reserve to bank regulatory agencies and even the Department of Justice, which issued threats of antidiscrimination lawsuitswere used to force banks and other lenders to lower their standards for making mortgage loans. Lower lending standards of course meant higher risks of default. But these risksand the chain reactions throughout the whole financial systemwere like the traffic ignored by a small child dashing out into the street in pursuit of a bouncing ball. The whole economy got hit when the housing boom became a housing bust, and we are still trying to recover, years later.
Trying to make Middle East countries more democratic is the bipartisan bouncing ball of American foreign policy.
What makes all this painfully ironic is that the latest data show that the rate of home ownership today is lower than it has been in eighteen years. There was a rise of a few percentage points during the housing boom, but that was completely erased during the housing bust. Housing has been just one area where the bouncing ball approach to political decision making has led the country into one disaster after another. Pursuit of the bright red bouncing ball of universal health care has already begun to produce collisions with reality in the form of rising insurance premiums to cover the cost of generous government-mandated benefits, to be paid for by someone else.
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Here again, there have been many warnings, but the political response to those warnings was to rush ObamaCare to a vote before even the Congress members who voted for it had had a chance to read it. Now, one of the Democratic senators who voted for itSenator Max Baucushas called it a train wreck. And ObamaCare, with its thousands of regulations, has not even fully taken effect.
Neither small children nor politicians always heed warnings.
The same mindset has prevailed internationally. Trying to make Middle East countries more democratic is the bipartisan bouncing ball of American foreign policy. Some of these countries existed thousands of years before there was a United Statesand in all that time, they never came close to being democratic. Maybe democracy has prerequisites that do not exist in all places at all times. And maybe pursuing it in utter disregard of the repercussions which we have already begun to see in Libya and Egyptis one of the most dangerous pursuits of a bouncing ball.
Reprinted by permission of Creators Syndicate (www.creators.com). 2013 Creators Syndicate Inc. All rights reserved.
Available from the Hoover Press is Is Reality Optional? And Other Essays, by Thomas Sowell. To order, call 800.935.2882 or visit www.hooverpress.org.
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H E AL T H CAR E
The Coming Rate Shocks

Sleight of hand makes it appear that ObamaCare means cheaper premiums. Look closer. The savings arent there. By Daniel P. Kessler.
California and Oregon have announced the premiums for the health plans that will be offered through their ObamaCare insurance exchanges next year. Supporters of the law are jubilant. KQED, Northern Californias largest public radio station, reported that experts had warned of rate shock. That has not happened. The New York Times editorial page chimed in, writing that for the most part, the premiums will increase only slightly or even decrease for individuals and family coverage on the exchanges. A closer examination of these health plans reveals a less rosy picture. Although the premiums are lower than some anticipated, this has been achieved by designing the plans around much more limited provider networks and including greater cost-sharing than the typical commercial health insurance plan. The premiums for the policies that will be offered on the states exchanges are much higher than analogous plans being sold today. One of the most important features of any health plan is its networkthe group of doctors and hospitals that agree to serve the plans enrollees. Although the California and Oregon networks are not final, there are indications they will be narrow.
Daniel P. Kessler is a senior fellow at the Hoover Institution, a member of Hoovers Working Group on Health Care Policy, and a professor at Stanford Universitys Graduate School of Business and Law School.
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California HealthLine, a service of the California HealthCare Foundation, reports that some premier provider networks (such as Cedars-Sinai and UCLA Medical Center) are largely absent from the exchange plans. In Los Angeles County, most of the exchange plans are priced comparably to L.A. Care, the health plan for Medicaid beneficiaries. This suggests that the other exchange plans will have provider networks similar to those that serve Medicaidnetworks that have been criticized for giving beneficiaries inferior access to care. Even after the networks are made public, it will still be difficult to precisely determine their breadth. Thats because a physician who participates in a network does not have to accept an unlimited number of patients enrolled in the plan. Providers cant discriminate against patients on the basis of prohibited characteristics like race or ethnicity. They can limit the number of patients they take with exchange insurance if they are unable to handle any more patients. Exchange plans also involve much more cost-sharing than the typical plan. For example, the deductible of an individual silver planthe benchmark for determining the subsidies for low- and moderate-income peoplein the California exchange is $2,000, considerably higher than the $1,250 minimum deductible for a high-deductible health plan that qualifies for a health savings account under current federal law. (The deductible for a bronze, or budget, plan is $5,000.)
The purported savings have been achieved via much more limited provider networks and greater cost-sharing.
Determining whether premiums for exchange plans are higher or lower than premiums of currently available plans is therefore difficult because the two types of plans are not always directly comparable. However, one firms exchange plans can be evaluated against its current product line: Kaiser Permanente. Kaiser is the nations largest health maintenance organization that serves its enrollees through its own proprietary network. Its network will be roughly the same in 2014 as it is today, and the wide variety of plans it currently offers makes comparisons more feasible.
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This apples-to-apples assessment shows how much higher exchangeplan premiums will be. For example, a twenty-five-year-old man who lives in San Francisco can purchase a California 40/4000 policy from Kaiser today that has a $40 co-payment for office visits after a $4,000 deductible, with a $5,600 out-of-pocket maximum, for $140 per month. Kaisers most comparable exchange policya bronze plan with the minimum benefits and the highest out-of-pocket costshas a $5,000 deductible with a $6,400 out-of-pocket maximum, although it allows three office visits per year that are exempt from the deductible. It costs $227, 62 percent higher than its current comparable plan, the California 40/4000.
A physician who participates in a network does not have to accept an unlimited number of patients.
Oregons exchange policies are about the same. Today, a twenty-fiveyear-old man who lives in Portland can purchase an Oregon KP 2000/20 percent/HSA/Rx policy from Kaiser that has 20 percent co-payments, a $2,000 deductible, and a $5,000 out-of-pocket maximum. It costs $129 per month. The most comparable exchange plan, a silver plan, has 25 percent co-payments, a $1,750 deductible, and a $5,000 out-of-pocket maximum. It costs $229 per month78 percent higher. None of this means that the exchange plans will provide inferior care or inadequate protection against financial risk. But it does show that the Affordable Care Acts goal of expanded coverage is going to require much higher premiums, especially for young people, and significant changes in the access and low cost-sharing that Americans have come to expect.
Available from the Hoover Press is Healthy, Wealthy, and Wise: Five Steps to a Better Health Care System, second edition, by John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler. To order, call 800.935.2882 or visit www. hooverpress.org.
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H EALT H C ARE
No, He Cant
The president has no constitutional authority to suspend the employer mandateor, for that matter, any other law. By Michael W. McConnell.
President Obamas decision to suspend the employer mandate of the Affordable Care Act may be welcome relief to businesses affected by this provision, but it raises grave concerns about his understanding of the role of the executive in our system of government. Article II, Section 3, of the Constitution states that the president shall take Care that the Laws be faithfully executed. This is a duty, not a discretionary power. While the president does have substantial discretion about how to enforce a law, he has no discretion about whether to do so. This matterthe limits of executive powerhas deep historical roots. During the period of royal absolutism, English monarchs asserted a right to dispense with parliamentary statutes they disliked. King James IIs use of the prerogative was a key grievance that led to the Glorious Revolution of 1688. The very first provision of the English Bill of Rights of 1689the most important precursor to the U.S. Constitutiondeclared that the pretended power of suspending of laws, or the execution of laws, by regal authority, without consent of parliament, is illegal. To make sure that American presidents could not resurrect a similar prerogative, the framers of the Constitution made the faithful enforcement of the law a constitutional duty.
Michael W. McConnell is a senior fellow at the Hoover Institution and the Richard and Frances Mallery Professor and director of the Constitutional Law Center at Stanford Law School.
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The Justice Departments Office of Legal Counsel, which advises the president on legal and constitutional issues, has repeatedly opined that the president may decline to enforce laws he believes are unconstitutional. But these opinions have always insisted that the president has no authority, as one such memo put it in 1990, to refuse to enforce a statute he opposes for policy reasons. Attorneys general under Presidents Carter, Reagan, both Bushes, and Clinton all agreed on this point. With the exception of Richard Nixon, whose refusals to spend money appropriated by Congress were struck down by the courts, no prior president has claimed the power to negate a law that is concededly constitutional. In 1998, the Supreme Court struck down a congressional grant of lineitem veto authority to the president to cancel spending items in appropriations. The reason? The only constitutional power the president has to suspend or repeal statutes is to veto a bill or propose new legislation. Writing for the court in Clinton v. City of New York, Justice John Paul Stevens noted, There is no provision in the Constitution that authorizes the president to enact, to amend, or to repeal statutes. The employer mandate in the Affordable Care Act contains no provision allowing the president to suspend, delay, or repeal it. Section 1513(d) states in no uncertain terms that the amendments made by this section shall apply to months beginning after December 31, 2013. Imagine the outcry if Mitt Romney had been elected president and simply refused to enforce the whole of ObamaCare. This is not the first time Obama has suspended the operation of statutes by executive decree, but it is the most barefaced. In June 2012, for example, the administration stopped initiating deportation proceedings against some eight hundred thousand illegal immigrants who had come to the United States before age sixteen, lived here at least five years, and met a variety of other criteria. This was after Congress refused to enact the Dream Act, which would have allowed these individuals to stay in accordance with these conditions. Earlier in 2012, the president effectively replaced congressional requirements governing state compliance under the No Child Left Behind Act with new ones crafted by his administration. The president defended his suspension of the immigration laws as an exercise of prosecutorial discretion. He defended his amending of No
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Child Left Behind as an exercise of authority in the statute to waive certain requirements. The administration has yet to offer a legal justification for suspending the employer mandate. Republican opponents of ObamaCare might say that the suspension of the employer mandate is such good policy that theres no need to worry about constitutionality. But if the president can dispense with laws, and parts of laws, when he disagrees with them, the implications for constitutional government are dire. Democrats too may acquiesce in Obamas action, as they have his other aggressive assertions of executive power. Yet what will they say when a Republican president decides that the tax rate on capital gains is a drag on economic growth and instructs the IRS not to enforce it? And what of immigration reform? Why bother debating the details of a compromise if future presidents will feel free to disregard those parts of the statute that they dont like? The courts cannot be counted on to intervene in cases like this. As the Supreme Court recently held in Hollingsworth v. Perry, the same-sex marriage case involving Californias Proposition 8, private citizens do not have standing in court to challenge the executives refusal to enforce laws unless they have a personal stake in the matter. If a president declines to enforce tax laws, immigration laws, or restrictions on spendingto name a few plausible examplesit is very likely that no one will have standing to sue. Of all the stretches of executive power Americans have seen in the past few years, the presidents unilateral suspension of statutes may have the most disturbing long-term effects. As the Supreme Court said long ago (Kendall v. United States, 1838), allowing the president to refuse to enforce statutes passed by Congress would be clothing the president with a power to control the legislation of Congress, and paralyze the administration of justice.
Available from the Hoover Press is Reforming Americas Health Care System: The Flawed Vision of ObamaCare, edited by Scott W. Atlas. To order, call 800.935.2882 or visit www.hooverpress.org.
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H E AL T H CAR E
Medicare on Life Support

How desperate does Medicare have to become before policy makers act? By Scott W. Atlas.
Why dont Americans demand that our government leaders reform Medicare, and do it with the greatest of urgency? Nothing has really changed about the impending failure of the health care safety net for our seniors. Medicare is still going broke. It is generating massive debt and crowding out other essential constitutional obligations of government. And ultimately it will increasingly fail to provide access to important medical care, the reason for its very existence. Americans dont buy into the message of economic Armageddon for Medicare, and that may be understandable. Indeed, we have heard for many years from the Centers for Medicaid and Medicare that the Medicare Trust Fund will soon be bankrupt, with the year most recently estimated to be 2024. Yet Medicare certainly continues to function, even though seniors are probably unaware that it denies claims far more frequently than private insurers, and even though more and more doctors do not accept Medicare patients because of poor payments. Why would Medicare face bankruptcy and be unsustainable after seemingly delivering on its original promises for decades? One needs only to look at the nations demographics to understand.
Scott W. Atlas, MD, is the David and Joan Traitel Senior Fellow at the Hoover Institution and a member of Hoovers Working Group on Health Care Policy.
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An unprecedented ramp-up of enrollment into Medicare is going to occur over the next twenty years with the entrance of the baby boomer generation. After that will follow an increase at the same rate as over the past forty years. This translates into some stunning problems with financing Medicare. At Medicares inception in 1965, about 4.6 workers supported each beneficiary with their tax dollars. By 2011, only 3.3 workers per beneficiary were paying taxes to the program. By 2030, only 2.3 taxpayers will be funding the program per beneficiaryhalf the number when the program began. And that ratio will continue to decrease.
Left unchecked, Medicare, Medicaid, and other federally supported health care, along with Social Security, will consume 100 percent of tax revenues by 2050.
In addition, the impact of the aging of the population on future federal spending will be immense, in part because of the remarkable health gains allowing seniors not only to live longer but also to need the life-saving procedures and innovative treatments that never existed when the program began. The future is worse than bleak, even though liberal publications like the New York Times assert that there really is no need to fix Medicare now. In the economic forecast published in February by the Congressional Budget Office, the CBO revised down its ten-year spending projection for Medicare by $137 billion, or about 2 percent. The CBO recalculated its projections because spending in Medicare Parts A and B has risen by an average of only 2.9 percent per year since 2009, far less than the 8.4 percent annual growth seen between 2002 and 2009. Although the phenomenon is not fully understood, most policy makers recognize that several factors, including persistent high unemployment and reduced incomes of Americans, have contributed to the slowing of growth (notably not a decrease, but a slowing of the increase) in health expenditures. Are Americans so naive as to believe that the Affordable Care Act, a program that did not even exist in
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2009 and whose most significant regulations have yet to be implemented, should be credited?
B U R D E N IN G OU R CH I LD R E N Regardless of how Medicare is funded and how many taxpayers foot the bill, the program is simply not sustainable in its current form, by any economic analysis. Despite the relative slowdown in the hemorrhaging of the taxpayers money, the CBO estimated that total Medicare spending will reach over $1 trillion in fiscal year 2023, with total federal outlays for health care programs totaling $1.845 trillion. By 2050, Medicare, Medicaid, and other federally supported health care, along with Social Security, will consume literally 100 percent of all tax revenues, totaling over 18 percent of GDPeliminating any possible spending on national defense, other domestic programs, or interest on the national debt. Statistics and projections can be wrong, but shouldnt the possibility of crowding out virtually all other federal budget items alarm even the most passionate believers in social welfare programs? Voters should not tolerate delaying the inevitable at the expense of our children and grandchildren. From Medicare alone, the nation faces a long-term unfunded liability of more than $30 trillion by 2050. This debt represents an unconscionable burden on future generations.
More and more doctors refuse to take Medicare patients because of poor payments.
Even if Americans want to ignore the fiscal realities, one sad truth is unavoidable. Voters and our politicians seem unaware that a significant proportion of doctors already do not accept Medicare patients, primarily because of inadequate payment for services, and that number is increasing. The Medicare Payment Advisory Commission, an independent federal panel, said 29 percent of Medicare beneficiaries who were looking for a primary care doctor had trouble finding one. In the 2008 HSC national survey, more than 20 percent of primary care doctors refused to see any new Medicare patients (only 4.5 per79
cent refused all new privately insured patients); about 40 percent of primary care doctors and 20 percent of specialists refused most new Medicare patients. The problem of physician access is about to increase dramatically. By 2019, Medicare payments will become even lower than those under Medicaid. According to the Medicare trustees, Medicare payment reductions under the new law will cause hospitals, nursing facilities, and home health agencies to operate at a loss: 15 percent will lose money by 2019, 25 percent by 2030, and 40 percent by 2050. The trustees report openly acknowledged the obvious, that these health care facilities would have to withdraw from serving Medicare beneficiaries, or shift substantial portions of Medicare costs to their non-Medicare, non-Medicaid payers. The bottom line is that insurance without access to medical care is an illusion, but that is exactly what is in store for Medicare patients.
CO MM ON S EN S E PR E SCR I PTI O NS What can our government do to preserve and strengthen Medicare so that it can provide meaningful health coverage and access to medical care for Americas seniors, not just a facade of insurance? First, common sense must prevail on eligibility for entitlement programs like Medicare. Although impossible to estimate accurately, yearly savings of about $150 billion over the next decade would result from increasing the eligibility age to sixty-seven, according to the CBO. We know that Americans life expectancy has risen almost a full ten years since the inception of Medicare in 1966. Along with this significant prolongation of life, innumerable advances in medical care leading to better health among the elderly have become commonplace. Better health has allowed a far larger percentage of seniors to continue working, so they will probably have employer-sponsored insurance unless ObamaCare destroys the viability of that option. Indeed, the Bureau of Labor Statistics predicted that the number of workers between the ages of sixty-five and seventy-four would soar 83.4 percent between 2006 and 2016; it will rise 84.3 percent for those seventy-five and older. By 2016, workers sixty-five and older are expected to account for 6.1 percent of the total labor force, almost double their 2006 share of 3.6
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percent. This shift is already well under way. In just the past half-dozen years, the percentage of Americans over age sixty-five still working has increased about 10 percent. Clearly, todays sixty-five-year-old is not your fathers sixty-five-yearold by any criterion, so adjusting the eligibility age for Medicare coverage seems not only logical but a natural evolution. Second, the president and Congress should act within the core American principle that all Americans deserve liberty and personal choice in pursuit of health. It seems contradictory, almost absurd, that our president and representatives in Congress insist on selectively decreeing the availability of certain medical procedures (like abortion), while simultaneously limiting, as the sole insurance provider for seniors and as the definer of essential benefits for all insurers, access to the entire spectrum of medical tests and procedures in diseases. Rather than selecting benefits and distorting the availability of medical procedures, diagnostic algorithms, and treatment pathways, shouldnt government instead get out of the way and empower its citizens with more transparency of prices and information, as well as autonomy and choice about something as vital and personal as health care coverage?
All Americans deserve liberty and personal choice in pursuit of health.
What is to fear from allowing the Medicare benefit to be taken as cash by seniors who might want cheaper insurance more tailored to their needs? Similar cash payments are found throughout all other entitlement programs, including Social Security. Government beneficiaries dont receive bags of groceries or clothingall just as essential as health carechosen by the government. And we already know that premium-support payments work well within Medicare Part D, the prescription drug benefit delivered via private plans that submit bids, while the government provides a defined contribution to purchase those plans for Medicare beneficiaries. After seven years, the program is highly satisfactory to beneficiaries. It is also under budget, running more than 40 percent below its initial estimates, thus providing strong evidence that more consumer choice and competition control costs and benefit consumers.
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Medicare is in deep trouble, and regardless of some slowing in the rise of national health expenditures, it would be a failure of leadership if the government put off the necessary reforms of Medicare, our most important health care safety net for seniors. While the government continues the drumbeat of more top-down regulations on health care, insurance coverage, and payments to doctors, every year for the next two decades roughly three million to four million more seniors become eligible for Medicare. This is a demographic inevitability. Also inevitable are two very expensive consequences of increasing longevity arising from American medical technology and innovation: more people will eventually die of chronic diseases that require expensive drugs, diagnostics, and medical care, and more people will live with disorders that dont kill them but produce disability and poor health. Is the urgency not obvious?
Available from the Hoover Press is In Excellent Health: Setting the Record Straight on Americas Health Care, by Scott W. Atlas. To order, call 800.935.2882 or visit www. hooverpress.org.
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H E AL T H CAR E
Deflate the Disability Bubble

Inflated by broad eligibility and chronic unemployment, this troubled program is due to pop. By Michael J. Boskin.
Social Security and Medicare are the best-known of the major entitlement programs with looming financial disasters. While some argue about when they will run out of money, their projected seventy-five-year unfunded liabilities grow larger every year and now total $40 trillion. But the ticking time bomb of entitlement reform is Social Securitys Disability Insurance Fund. According to the Social Security trustees, the bomb is due to go offwhen the fund, running out of money, will need to make steep cuts in benefitsjust in time for the 2016 election. Without reform of this and other programs, beneficiaries arent the only ones who will suffer. The primary driver of surging costs in every entitlement program is not demography but rising real benefits per beneficiary. If entitlement cost growth isnt slowed soon, standard estimates imply that taxes to pay for them will eventually rise to crushing levels, sharply lowering incomes within a generation. With luck, the looming implosion of the Disability Insurance Fund will focus attention on other entitlements (and may dampen some of the happy talk now heard in Washington about the health of Social Security
Michael J. Boskin is a senior fellow at the Hoover Institution, a member of Hoovers Shultz-Stephenson Task Force on Energy Policy and Working Group on Economic Policy, and the T. M. Friedman Professor of Economics at Stanford University.
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and Medicare). Coming to grips with the disability program also may provide a guide to reform of the larger programs.
A N UN IN T EN DE D FALLB ACK The number of people collecting disability benefits has soared, especially in recent years, to almost 11 million in June, up from 2.7 million in 1970. The 2012 price tag was $140 billion, up eightfold, adjusted for inflation, from 1970. The quadrupling of beneficiaries over a few decades is far beyond what would be expected from demographic trends and elevated unemployment. What else has been going on? Government figures show that over that period the share of workers employed in manufacturing, mining, and agriculturewhere jobs are more physically demandinghas declined by between one-third and three-fourths since 1970. Meanwhile, employment in services has surgedincluding health, education, and finance. In the past, the Government Accountability Office routinely criticized the Disability Insurance Fund for not reviewing claims more often to make sure its beneficiaries were still eligible. In 1980, Congress increased the frequency of eligibility reviews. But that created a backlash, and in 1984 Congress actually broadened eligibility, based on subjective criteria such as back pain and arthritis. The range of mental illnesses covered was also widened. The complaints added by the broadened eligibility now exceed the formerly predominant and easier-to-identify ones such as cancer, blood disorders, heart disease, and major musculoskeletal problemsand they now draw the majority of monetary awards.
Disability insurance has become, in part, a form of extended unemployment insurance and early retirement.
Disability benefits also pay more than they used to relative to wages, weakening work incentives. And aging population and the increase in women with sufficient work history to qualify have also contributed to the astounding growth of the disability rolls. Even so, the rising share of forty-five- to sixty-four-year-olds (the group most at risk for disability and early retirement), due to the aging of the
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baby boomers, explains only a small part of the disability increases. Disability insurance has clearly become, in part, a form of extended unemployment insurance and early retirement, with Medicare benefits. More than twenty states today try to shift people from their welfare and Medicaid rolls onto disability insurance and Medicare, which are fully paid for by the federal government. Some unions help their members obtain disability insurancefor instance, when companies are downsizing and laying off workers.
Disability is now a Hotel California: you check in and you never leave short of death or retirement.
One fundamental lesson of the past decades is that the many overlapping benefit programs have become permeable. People figure out how to move from program to program, stretch boundaries, and take the best option. When government is offering benefitsor green-energy corporate welfare, too-big-to-fail bank subsidies, or tax breakspeople will find a way to take them.
B A L A N C E A N D SCR U TI NY The best alternative, as with so many government programs, is to slow spending. In this instance, it would mean targeting benefits far more effectively to those in real need and limiting payments for those who can reasonably be expected to work. Disability insurance helps many with serious ailments, but it needs to better balance work incentives with legitimate insurance. My own reading of research by prominent labor economistssuch as MITs David Autor, Penns Mark Duggan, the San Francisco Feds Mary Daly, and my Stanford colleague Luigi Pistaferrisuggests starting with a more sensible definition of disability, and more frequent re-evaluation. Eligibility should emphasize objective medicalas opposed to more subjective and vocationalcriteria, with a more rigorous appeals process for potential false rejections of meritorious but difficult-to-verify claims. About 40 percent of disability awards now follow appeals, of which a large majority are successful. Next, offer better incentives to return to work for those who can. This means early intervention and providing information about job options
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before people lose any attachment to the labor market and their skills deteriorate. Today, the disability-insurance program hardly focuses on the return to work. It is a Hotel California: you check in with a disability and dont leave unless you die or convert to Social Security retirement at age sixty-six. In 2009 only a tiny percentage of those on disability, 0.8 percent, returned to work or gave up the benefits for other reasons. Another useful reform would base disability-insurance employer taxes on disability experiencehigher taxes for employers with a higher incidence of disability among their employees. Such a policy, also called experience rating, would give companies a better incentive to help workers prevent debilitating problems and manage their return to work. The prevalence of workers claiming disability declined substantially in the Netherlands after experience rating was gradually adopted between 1998 and 2003. The surge in U.S. disability enrollments has far greater financial implications than the $140 billion spent in 2012 suggests. A new fifty-year-old enrolleethe mean age of those who go on disabilitywill collect to age sixty-six, at which time he or she will transfer to regular Social Security. The present value of disability-insurance benefits, plus Medicare costs, per new disabled worker is more than $300,000. The almost one million new disabled-worker awards in the past twelve monthsthere were also half a million awards for spouses and childrenwill cost about $300 billion. Whether triggered by a disability-insurance blowup in 2016 or not, entitlement reform cant wait. It will determine whether the United States can resume its path as a flexible, dynamic market society or slide further into an economically stagnant, European-style social-welfare state.
Available from the Hoover Press is Death Grip: Loosening the Laws Stranglehold over Economic Liberty, by Clint Bolick. To order, call 800.935.2882 or visit www.hooverpress.org.
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Sci e n ce
Against the Grain

The real mystery behind Oregons patch of mystery wheat is why we let the USDA suppress biotech crops in the first place. By Henry I. Miller.
It is a puzzle. In a single, unplanted field in Oregon, a few plants of a genetically engineered wheat variety were found. This variety has not been approved by the U.S. Department of Agriculture for widespread commercial use, and genetically engineered wheat has not been field tested anywhere for many years. How then did it get there? What we know is that a farmer who applied the herbicide glyphosate (Roundup) to eliminate all the vegetation from a wheat field in preparation for leaving it fallow noticed that a small number of wheat plants survived. He sent them off for testing by an Oregon State University professor, who found that they had been genetically engineered for glyphosate resistance. Some background: from 1998 through 2005, Monsanto received approval from the USDA to field test genetically engineered, glyphosate-resistant white spring wheat in sixteen states, including Oregon. However, because of the expense of research and development and a lack of interest from wheat farmers (who have since changed their minds), Monsanto dropped the project before the wheat was deregulated, or approved for unconditional release. The glyphosate-resistant wheat in the field in Oregon presents a conundrum in several respects: it was winter wheat, which is distinct from the white spring wheat in the old field trials, and Monsantos internal investigation found in any case that there was no prior test site at the location where the material under investigation was reported to have been presHenry I. Miller, MD, is the Robert Wesson Fellow in Scientific Philosophy and Public Policy at the Hoover Institution.
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ent. Because the two varieties pollinate at different times, it is unlikely that the glyphosate-resistance trait was transferred by wind.
The scientific consensus is that the newest techniques of genetic modification are essentially an extension, or refinement, of older, less-precise and less-predictable ones.
Robert Zemetra, a professor of plant breeding and genetics at Oregon State University, expressed some doubts that we will ever discover the events that led to the appearance of the genetically engineered wheat. Monsantos conclusion currently is that the genetically engineered plants in the fallow field arrived there through accidental or purposeful mixing of seed. Several weeks after the plants were first reported, Monsanto said it found their appearance highly suspicious, indicating that sabotage was the likely reason for the unapproved strains planting. Rob Fraley, Monsantos chief technology officer, explained that the distribution of the volunteer wheatin patches or clumpsis anomalous.Farmers normally distribute wheat uniformly throughout a field, so contamination of the seed supply should result in the offending plants appearing uniformly.No standard farming practices are consistent with, or can explain, a smattering in only 1 percent of a field or in patches or clumps, Fraley said. A frenzy of testing by Monsanto, the USDA, the South Korean Ministry of Food and Drug Safety, and others found no genetic insert conferring glyphosate resistance in the wheat seeds planted by the Oregon farmer who discovered the glyphosate-resistant wheat, in hundreds of varieties of wheat seed planted in Oregon, in six hundred samples of the two seed types the Oregon farmer had planted, in samples of flour milled in Oregon, or in wheat for export from the United States. In addition, scientists at Washington State University screened public and private varieties representing 90 percent of Washingtons soft white wheat crop and almost three-quarters of spring wheat varieties and found no evidence of glyphosate-resistant wheat. So the story is murky. But for the sake of argument, what if the genetically engineered, glyphosate-resistant wheat found by the Oregon farmer somehow did find its way into Wheaties or Wonder Bread? It would be inconsequential.
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The USDA found no safety problems when it evaluated glyphosate-resistant wheat in 2004, nor have there been any problems with the widespread cultivation and consumption of glyphosate-resistant soybeans, alfalfa, corn, cotton, spring canola, winter canola, and sugarbeets. Contamination with genetically engineered wheat would be roughly analogous to buying a new Toyota Camry and finding that the radio in it is from a Lexus. Nevertheless, there have been significant ripple effects from this flap, including the loss of millions of dollars of U.S. wheat exports, the filing of spurious lawsuits instigated by tractor-chasing lawyers, and the misperception that Frankencrops are running amok. The real culprit for this tempest is the USDAs contrived, unscientific, self-serving regulatory policy, which shows how progress can be arrested by the law of unintended vonsequences. The USDAs jurisdiction over the genetically engineered, glyphosate-resistant wheat found in Oregon is a historical fluke, an anomaly. Here is some of the sordid history.
A R E G U L A T O R Y E MPI R E G R O WS In 1986 the White House Office of Science and Technology Policy published a policy statement on the regulation of biotechnology that focused oversight and regulatory triggers on the risk-related characteristics of products, such as plants weediness or toxicity, rather than on the process used for genetic modification. This approach was reaffirmed in a 1992 policy statement that set forth the overarching principle for biotechnology regulation: the degree and intrusiveness of oversight should be based on the risk posed by the introduction and should not turn on the fact that an organism has been modified by a particular process or technique. Thus it reflected the broad consensus in the scientific community that the newest techniques of genetic modification were essentially an extension, or refinement, of older, less-precise and less-predictable ones, and that regulation should focus on the risk-related characteristics of products, not on the techniques used to make the products. But intent on building a gratuitous regulatory empire, the USDA heeded neither the consensus of the scientific community nor the directives from the White House. The resulting stultifying regulation has inhibited research and development, particularly in public institutions, ever since, and provided a never-ending source of all manner of mischief, including the furor in Oregon.
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In what way was the USDAs new biotechnology-regulation apparatus gratuitous? The departments Animal and Plant Health Inspection Service had long regulated the importation and interstate movement of organisms (plants, bacteria, fungi, viruses, etc.) that are plant pests, which were defined by means of an inclusive listessentially a thumbs up or down approach. A plant that an investigator might wish to introduce into the field is either on the inclusive, prohibited list of plants pestsand therefore requires a permitor its exempt.
Long field trials and bureaucratic red tape make genetically engineered plants extraordinarily expensive to develop and test.
This straightforward approach is risk-based, in that the organisms required to undergo case-by-case governmental review are an enhanced-risk group organisms that can injure or damage plantscompared to organisms not considered to be plant pests. But for more than a quarter-century, this riskbased USDA regulation has had an evil twin: a parallel regime focused exclusively on plants altered or produced with the most precise genetic engineering techniques. The USDA tortured the original concept of a plant pest as something known to be harmful and crafted a new, jury-rigged category: a regulated article, defined in a way that captures virtually every genetically engineered plant for case-by-case review, regardless of its potential risk. To perform a field trial with a regulated article, a researcher must apply to the USDA and submit extensive paperwork before, during, and after the field trial. After conducting field trials for a number of years at many sites, the developer then submits a vast amount of data and requests deregulation by the USDA, which is equivalent to approval for unconditional release. These requirements, which do not apply to plants genetically modified by more primitive conventional techniques, make genetically engineered plants extraordinarily expensive to develop and test. This discriminatory treatment of genetically engineered plants makes no sense. Plants have long been selected by nature and bred by humans or irradiated to create mutants with enhanced resistance or tolerance to external threatsinsects, disease organisms, herbicides, and environmental stresses to their survival and productivity. They have also been modified by farmers
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and plant breeders for other qualities. Corn, for example, has undergone gradual but drastic modification that has seen it evolve from the original grasslike plant, teosinte, with primitive, meager kernels, into modern varieties with regularly arranged kernels bulging with carbohydrates, oil, and protein. Primitive wheat breeders crafted durum (hard) wheat for pasta and softer varieties for cakes.
SE NS E L ES S A P P R O ACH Plant breeders have learned from experience about the need for risk analysis, assessment, and management. New varieties of plants (whichever techniques are used to craft them) that normally harbor relatively high levels of toxins such as celery, squash, and potatoesare analyzed carefully to make sure that levels of potentially harmful substances are still in the safe range. The degree of regulatory oversight should be proportionate to the perceived risk of the genetically engineered plant, which is a function of certain characteristics of the host plant (weediness, toxicity, ability to outcross, etc.) and the introduced gene. It is not the source or the method used to introduce a gene but its function thats important. For decades, however, plants made with the newest, most precise techniques have been subjected to the most regulation, independent of risk. Moreover, the fact that the USDAs regulatory policy makes deregulation a major action triggers certain required assessments under the National Environmental Policy Act, which has provided an opportunity for activists to enlist the courts in obstructing the deregulation of various genetically engineered plant varieties. Whether or not we solve the mystery of the wheat, we need sciencedriven public policy that captures for review those products that require it and exempts those that dont. Everything else is just chaff.
Available from the Hoover Press is To Americas Health: A Proposal to Reform the Food and Drug Administration, by Henry I. Miller. To order, call 800.935.2882 or visit www.hooverpress.org.
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E D U CAT I O N
Private Schools Left Behind

Charter schools and online learning are making old-fashioned private schools look...old-fashioned. By Chester E. Finn Jr.
Private education as we have known it is on its way out, at both the K12 and postsecondary levels. At the very least, its headed for dramatic shrinkage, save for a handful of places and circumstances, to be replaced by a very different set of institutional, governance, financing, and educationdelivery mechanisms. Consider todays realities. Private K12 enrollments are shrinkingby almost 13 percent from 2000 to 2010. Catholic schools are closing right and left. The Archdiocese of Philadelphia, for example, announced in January that forty-four of its one hundred and fifty-six elementary schools would cease operations. (A few won reprieves.) In addition, many independent schools (day schools and especially boarding schools) are having trouble filling their seatsat least with their customary clientele of tuition-paying American students. Traditional nonprofit private colleges are also challenged to fill their classroom seats and dorms, to which theyre responding by heavily discounting their tuition and fees for more and more students. Meanwhile, charter school enrollments are booming across the land. The charter share of the primary-secondary population is 5 percent nationally and north of 20 percent in twenty-five major cities. Massive
Chester E. Finn Jr. is a senior fellow at the Hoover Institution, chairman of Hoovers Koret Task Force on K12 Education, and president of the Thomas B. Fordham Foundation.
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open online courses (MOOCs) are booming, too, and online degree and certificate options proliferating. Public-sector college and university enrollments remain strong and now educate three students out of four. The proprietary (that is, for-profit) sector of postsecondary education is doing OK, despite its tortured relationship with federal financial aid. Whats really happening are big structural changes across the industry as the traditional model of private educationat both levelsbecomes unaffordable, unnecessary, or both, and as more viable options for students and families present themselves. While unemployment remains high, the marginal advantage of investing $30,000 or $50,000 a year in private schooling is diminishing, particularly when those dollars are invested in low-selectivity, lower-status private institutions. Recent analyses by AIRs Mark Schneider and Brookingss Stephanie Owen and Isabel Sawhill make it explicit:
People who attended the most selective private schools [colleges/universities] have a lifetime earnings premium of over $620,000....For those who attended a minimally selective or open-admission private school, the premium is only a third of that....[P]ublic schools tend to have higher ROIs than private schools, and more-selective schools offer higher returns than less-selective ones.
Alterations in the housing market may also play a role where K12 private schools are concerned. Not long ago, one could live in a nice house in the city for a lot less than a nice house in the suburbsand spend the money saved on private schooling for ones kids. In gentrifying cities, however, thats no longer so. Now one must pay more for a house in the city plus private school for the children. Thus, more parents are saying, Forget it, Ill go publicprovided the public sector can be made to supply me with a good charter or magnet school, or a virtual-education supplement to a decent neighborhood school. Three factors keep all these changes from being more visible and talked about. First, of course, theyre gradual, and thus (proverbially) difficult to perceive. Second, its not in the interest of private schools or colleges to acknowledge that they have a problemlest it create the educational equivalent
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of a run on the bank, with clients fleeing for fear of being abandoned after a sudden collapse. Much of the allure of private schools, after all, is based on their reputations, which they work hard to sustain. Hence they maintain a brave front while quietly shrinking, discountingand recruiting full-pay students from wealthy families in other lands, particularly in Asia. Third, elite private institutions are doing just fine, many besieged by more applicants than ever before. The wealthiest Americans can easily afford them and are ever more determined to secure for their children the advantages that come with attending them. And at the K12 level, a disproportionate fraction of those wealthy people live in major cities where the public school options are unappealing. So were not going to see an enrollment crisis anytime soon at Brown, Amherst, or Duke, nor at Andover, Sidwell Friends, or Trinity. Indeed, New Yorks new Avenues school is able to fill its classes with families willing and able to pay its staggering $43,000 per annum.
Private education is becoming unaffordable, unnecessary, or both, and students and families have more viable options.
Because these elite schools and colleges are also highly visibleand where the chattering classes want (and can afford) to enroll their own daughters and sonsthey create a facade of private-sector vitality. Behind it, however, like the Wizard of Ozs curtain and Potemkins building facades, there is much weakness, a weakness that probably afflicts the vast majority of todays private schools and colleges. Is this situation reversible? And should it be a matter of concern for education reformers and policy makers? Most other modern countries have essentially melded their private-education sectors into their systems of public financingand have accepted the tradeoffs that accompany such financing, namely government regulation of curriculum, teacher credentialing, student admissions, and more. We can see early examples of this in the United States, too, as vouchers gradually spread and private schools accommodate themselves to the state testing regimes and other rules that come with such financing.
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This is apt to be a limited remedy, however, because of American church-state entanglement anxieties that other countries dont share; prohibitions in many state constitutions that make such public financing difficult or impossible; and our conviction that whats valuable about private education is its freedom to be different. The policy dilemma is whether different-ness is precious enough, if with it comes gradual erosion of the different sector itself. One can also fairly ask whether U.S. private schools and colleges are really all that different from their public-sector counterparts. In practice, their education-delivery model is practically indistinguishable, save for the accoutrements the wealthiest of them can buy (trips to faraway lands, nifty technology, tiny classes, etc.). There is, however, a difference where religion is concerned: just 22.8 percent of K12 private school students are in secular schools, while about 32 percent of all private college students are enrolled in religiously affiliated institutions. In less-prosperous schools and colleges, religion may, at days end, be the only real difference between public and privateand the return on that investment, while perhaps significant, cannot be easily measured. Changing the delivery system might serve to make private education both more affordable and more different, and signs of such change are already evident, but rarely in the traditional nonprofit portions of the private sector. Instead, the boldest innovations are coming from entrepreneurs, most of them profit-seeking and most of them delivering instruction (and more) via technology rather than face-to-face in brick buildings that are open just six or eight hours a day for one hundred and eighty or so days a year.
One can fairly ask whether American private schools and colleges are really all that different from their public-sector counterparts.
Our elite universitiesthe ones that are still thriving and would continue to thrive without these changesare innovating, mostly for students other than their own. The MITs and Stanfords are teaming up with the Courseras and Udacityseducational technology companies specializing in online educationto offer online courses to thousands.
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Udacity has put a toe into the K12 waters, both by partnering with local school systems and by inviting students to enroll directly in its college-level courses. Nor is it likely to stop there. If trends continue, were going to see a bimodal system develop, with public schools (including charter schools) and ultra-elite private schools monopolizing the education space as the plethora of smaller private and parochial schools that once fell between them gradually fade away. Can run-of-the-mill private schools and colleges reboot? Can they change themselvesincluding both their delivery systems and their cost structuresenough to brighten their own futures? I wouldnt bet a years tuition on it.
Reprinted from Education Next (www.educationnext.org). 2013 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved.
Available from the Hoover Press is Reroute the Preschool Juggernaut, by Chester E. Finn Jr. To order, call 800.935.2882 or visit www.hooverpress.org.
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I M MIGRAT ION
The Value of an Immigrant

How should we value immigrants? Most of the discussion in the immigration debate leaves implicit this key question. Yet behind the recommendations for immigration reform is some notion of why immigration is useful and what goal we are trying to achieve by offering outsiders admission into the community of U.S. citizens. Leaving that target implicit rather than making it explicit often confuses the debate. It is for that reason that Hoovers Conte Initiative on Comprehensive Immigration Reform began by focusing on this key question that motivates the discussion on immigration reform. A number of reasons lie behind the desire of most U.S. residents to allow some immigration. Front and center among the most frequently discussed goals is the ability to augment the stock of human capital by bringing in outsiders. This is the make or buy decision. One way to enhance human capital in the United States is to improve our school system. Another is to bring in immigrants who already have high levels of human capital, perhaps gained in part from attending U.S. universities. Encouraging the skilled to immigrate may be one way to move human capital up a notch quickly and may, in the short run, be effective in acquiring human capital.
Edward Paul Lazear is the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution, chairman of Hoovers Conte Initiative on Comprehensive Immigration Reform, and the Jack Steele Parker Professor of Human Resources Management and Economics at Stanford Universitys Graduate School of Business.
National Archives
Until we clear up what we want from immigrants, well never clear up immigration policy. By Edward Paul Lazear.
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A 1908 photo from the Public Health Service shows immigrant children at Ellis Island. Immigration policy has always had to wrestle with many questions, including how much weight to give family reunification, how much an immigrant will contribute to the economy, and how strongly to insist on assimilation.
There are direct spillovers from immigrants to the native population. When immigrants arrive, some of what they produce is captured by them through the wages they receive. Some, though, accrues to others in the economy, namely, owners of capital and other workers who are complementary to the labor that immigrants provide. Others have thought of immigration as a way to improve the governments fiscal situation, although some worry that immigration will worsen the situation. If improving fiscal balance is the primary goal, then we are likely to prefer young, working, and high-income groups who will be net contributors to the budget. Another goal of allowing immigration is that of family reunification recognition that Americans would like their family members to join them and that current Americans value family members more highly than they would other immigrants. Family reunification is a worthy goal, but it is not necessarily completely consistent with economic goals, specifically that of improving human capital in the United States or providing the best relief to a stressed fiscal environment. Most people view the rapid assimilation of immigrants as desirable. The immigration filter-and-select rule affects the type of person coming in and also the rate of assimilation. More-balanced immigration (by national origin) tends to foster more rapid assimilation than does more concentrated
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immigration, and policies that result in a broader supply of immigrants will also likely speed up assimilation. Similarly, more-educated individuals tend to be more rapidly integrated into U.S. society and the economy than those with less education.
Most people view the rapid assimilation of immigrants as desirable.
Many of the economic factors may be subsumed in the general notion of selecting immigrants who are most likely to contribute to economic growth. There can be disagreement over who those immigrants are likely to be, but this goal is simple to understand and discuss and may serve as a useful backdrop to the immigrant debate. Finally, it is important to design an immigration system that is stable and not subverted by large flows of immigrants entering the country illegally. Most Americans prefer that new entrants come to the United States legally, using the system set up to accommodate them. Only when our goals are well articulated and stated explicitly can we have a reasoned, intelligent debate on how to change immigration policy in the most favorable way.
Reprinted from Advancing a Free Society, an online publication of the Hoover Institution. Read contributions to this series at www.advancingafreesociety.org/category/immigration/immigration-value. 2013 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved.
Available from the Hoover Press is The Debate in the United States over Immigration, edited by Peter J. Duignan and Lewis H. Gann. To order, call 800.935.2882 or visit www.hooverpress.org.
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I R AQ
Kurdistan Seizes Its Moment

In the bustling, confident north, the pretense of one Iraq grows weaker by the day. By Fouad Ajami.
The weather has cooperated and the commencement ceremony, held outdoors, proceeds as plannedjubilant students, speakers straining for humor and advice, the awarding of diplomas. The campus, a modern structure of tan stone sitting handsomely atop a hill, framed by nearby mountains, could be anywhere in the American Southwest. But this isnt America. It is the American University of Iraq-Sulaimani, in Iraqi Kurdistans second-largest city. Nearly all of Kurdistans elite are on handformer peshmerga military commanders, technocrats, businessmen, and two of the regions most influential younger politicians, Barham Salih, former prime minister of the regional government, and Nechirvan Barzani, the current occupant of that position. The American University of Iraq-Sulaimani had been, as late as 2006, an impossible idea held by Salih, a devoted and driven modernizer with a doctorate of his own from the United Kingdom. Its first students attended classes in portable cabins. Today, in late May, a beautiful campus surrounds us, and degrees are being conferred in information technology, international studies, and business administration.
Fouad Ajami is a senior fellow at the Hoover Institution and co-chairman of Hoovers Herbert and Jane Dwight Working Group on Islamism and the International Order.
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A BIGGER WORLD: Texas Avenue is among the streets in the American Village complex in Erbil, a major city in Iraqi Kurdistan where oil-fueled prosperity and increasing independence from Baghdad are in evidence. The Kurds are the most pro-American population in this part of the Middle East.
The pride is palpable. Success and tranquillity have not been the lot of the Kurds, but now they are making, and safeguarding, their history.
W O R L D S A W A Y F R O M B AG H D AD The Kurds are not waiting on Baghdad. In May alone, 1,045 people were killed in Iraq and 2,377 wounded, and there were more than 560 episodes of violence. Several years back, a stranger venturing into Kurdistan was treated to tales of hurt and grief, the cruelty meted out by Saddam Husseins Baath regime. The memory lives on, but there is in the air a sense of vindicationand practicality. On the ruins of that old, cruel world the Kurds are busy building a decent public order. Geographically, Baghdad is just two hundred miles southwest, but it could be worlds away. Stran Abdullah, at forty-four one of Kurdistans most informed and talented journalists, tells me he hasnt been to Bagh102
dad in more than five years. For him, he says, it is now an alien city. Still, his Arabic is fluid and richa contrast to so many young Kurds who have lost touch with that language. He didnt quibble when I dubbed him Kurdistans last Iraqi. Everywhere, the pretense of one Iraq grows weaker by the day. Yet it is still observed, if only because a hard partition is destined to be a bloody affair. The line where Kurdistan ends and the rest of Iraq begins runs through an explosive mix of ethnic claims and economic ambitions. Kirkuk alone should suffice to sober up those who rush into the breachit is a city as rich in oil as it is in political troubles. One doesnt have to be terribly imaginative to foresee catastrophe in that tinderbox: ethnic cleansing, a Kurdish victory in Kirkuk matched by the eviction of Kurds from the Sunni Arab side of the dividing line. A people schooled in tragedy are not eager to call it up again. There is an economic boom in Kurdistan, and those here who have known privation for so long now savor their newfound prosperity. The traffic jams bear witness to that. There are more than a million cars on Kurdistans roads, in a place with fewer than five million people. The consumer goods of the world are here and plentiful. The regions capital, Erbil, is a surprise after the stark mountains: a boomtown with swanky hotels, shopping malls, and construction cranes everywhere. It has the feel of Houston and shades of Dubai. Entrepreneurship seems to be the peoples creed. The region produces two hundred thousand barrels of oil a day, expected to reach a million a day by 2015, and there is an estimated forty-five billion barrels in the ground. No wonder the optimism.
Now the troubles we have holding our own against Baghdad are the product of American policies.
Polaris Images/Max Becherer
The fantasy of Iraqi Kurdistan serving as a magnet for the Kurds of neighboring Syria, Iran, and perhaps southeast Turkey, in a bid for greater Kurdistan, has no takers here. A substantial refugee population from Syrian Kurdistan has made its way here. But the advice given the Syrian Kurds has been stick to your land, create facts on the ground, be wary of the
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PARTNERS: Nechirvan Barzani, prime minister of the Kurdish regional administration in Iraq, takes a call while visiting a Hyundai shipyard in Seoul, South Korea. South Korea is one of the countries working with the Kurdish government to develop oil resources.
Assad dictatorship and of the rebellion alike. This is a small, landlocked regional government and it knows better than to trifle with the two giants, Iran and Turkey, that overhang it. Turkish companies are the largest foreign presence here, and a recent deal struck between the regional government, a Turkish state-run oil firm, and ExxonMobil to develop projects in the region confirms that Turkey is now Kurdistans preferred outlet to the world. Ankaras historic distrust of the Kurds is rapidly receding, and Iraqi Kurdistan has played no small part in the recent truce between the Turkish government and the rebel Kurdistan Workers Party, or PKK.
A SP U R N ED F RI E ND The Kurds remain the most pro-American population in this swath of broad Middle Eastern geography. Yet Washington spurns the Kurds as it
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courts a strongman in Baghdad who has cast his lot with the Iranian theocracy and the Syrian dictatorship. In December 2011, as President Obama boasted of his strategic retreat in the region and of U.S. withdrawal from Iraq, he held up Iraqi Prime Minister Nouri al-Maliki as the elected leader of a sovereign, self-reliant, and democratic Iraq. Never mind that Maliki was hard at work intimidating the opposition, consolidating power, and warning the Kurds that all oil proceeds must run through Baghdad. A member of the Kurdish political class lamented to me: This world we have was bequeathed us by the United States, by the protection that Anglo-American air power gave us after the disastrous events of the first Gulf War of 199091. And now the troubles we have holding our own against Baghdad are the product of American policies as well. What American influence remained after military withdrawal was the U.S. pressure brought to bear on the Kurdsand the Turksagainst the oil deals pursued by Turkey in Kurdistan. But these oil and gas fields had their own power. The Kurds, the Turks, and the big oil companies defied the protestations of the White House. The supreme irony: at a time when Iraqis of all stripes were breaking with the idea of a dominion from Baghdad, the United States was arguing that Kurdistan ought not to run afoul of Baghdads dictates on oil exploration. The friends we spurn, the antagonists and strongmen we court: this is a recurrent theme in American diplomacy. Of late, Americas wars in Iraq have lacked for vindication. But look north to the Kurds for a redemption. Before the Obama retreat, a long-suffering people were sheltered by American power, and made the best of their chance.
Reuters/Jo Yong-Hak
New from the Hoover Press is The Syrian Rebellion, by Fouad Ajami. To order, call 800.935.2882 or visit www. hooverpress.org.
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EG YP T
Pendulum of Power
Instead of a new political system, Egyptians will get only a new Nasser. By Samuel Tadros.
As reporters and politicians around the world debate how best to describe Egypts most recent upheaval, Egyptian non-Islamists, to the amazement of everyone else, continue to insist it was they who removed President Morsi from powernot the military. Terminology, of course, is no small matter, for upon it hinges both U.S. aid to Egypt and, more important, the Egyptian peoples self-perception and pride. A peoples coup has become the preferred term by non-Islamists infuriated by the worlds failure to see events through their eyes. While there is no denying that a military coup toppled Egypts president, perhaps there is a more accurate description that captures the entire picture: counterrevolution. The word brings to mind images of the Bourbon restoration. A restoration of a man or a ruling family is not, however, what Egyptians seek. Hosni Mubarak and his son will not be ruling Egypt, but their ruling formulathe one the Egyptian state has been accustomed to since 1952is precisely what the driving forces behind this uprising are seeking, even if many do not realize it. Like the revolution it seeks to undo, the counterrevolution is deeply rooted in a mythological construction. The evils of the Mubarak regime
Samuel Tadros is a research fellow at the Hudson Institutes Center for Religious Freedom and a Professorial Lecturer at the Paul H. Nitze School of Advanced International Studies (SAIS) at Johns Hopkins University. He is the author of Motherland Lost: The Egyptian and Coptic Quest for Modernity (Hoover Institution Press, 2013).
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are replaced with evils of the Muslim Brotherhoods making. Instead of an imaginary $70 billion that an old ruler had stolen, a whole organization is accused of planning to sell Egyptian territory and pride from the Sinai to the Suez Canal and the pyramids. Facts are of little relevance; conspiracy theories have transcended reality and replaced it. The purported masterminds are still the samethe United States, Israel, and the Jewsbut the names of their perceived local agents have changed. In a sense, life is fair. The Brotherhood, which excelled in fabricating stories regarding its old enemies, has reaped what it has sown. The media monster has turned against it.
R U N N I N G BA C K TO TH E STATE Pictures of the masses in the square with the towering figure of their military savior, General Sisi, are impossible to ignore. So are the chants of the people, the military, and the police are one hand. Revolutionaries may fool themselves for a while that this is merely a passing moment, but soon enough reality will be haunting them. Egyptian non-Islamists have run away from the Islamist monster to the bosom of the state. In a sense their return was inevitable; the twenty-fifth of January was a moment of delusion. Egypts self-proclaimed liberals never stopped loving the state that created them, their utmost dream remaining a modernizing ruler in the mold of Mohamed Ali who would force modernity on a reluctant population.
Edmund Burke declared that nothing turns out to be so oppressive and unjust as a feeble government.
The Brotherhood insists it was given a bad hand, but it certainly helped make it worse. The great euphoria of the January revolution, which the Brotherhood cultivated, worked against the Islamists as high hopes met the sobering reality of a failed state. Their incompetence may have been their worst crime. Edmund Burke had rightly declared two centuries earlier that nothing turns out to be so oppressive and unjust as a feeble government. Insistent on ruling alone, they alienated almost everyone in the country, from the various state bodies to the
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A military helicopter hovers over Tahrir Square in Cairo during a pro-army demonstration in July. What non-Islamists hopefully called a peoples coup was also a return to a longestablished pattern in Egypt of reverting to a strong ruler.
non-Islamists and, most important, the traditional families of Egypt. Eric Trager, the brilliant scholar on the Brotherhood, observed that the source of Morsis strength was also the source of his downfall. The Brotherhoods organizational structure and unique membership process denied it the possibility of reaching out to the traditional families who controlled the patron-client networks in the countryside and incorporating them. Realizing that the continuation of the Brotherhoods rule meant their political death, these families struck back with a vengeance in the heart of the Delta. In the army they found their natural ally, with the urban middle class cheering along. Many commentators were quick to pronounce Islamism dead. Obituaries appeared before the body had even been found. Egyptians, it is argued, have risen against Islamism, and there is no turning back. It is true that the military will win this round. The Brotherhood stands no chance in front of the tanks. Its strategy of martyrdom can succeed only
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if it wins the narrative battle and people sympathize, but the militarys media blackout and the obedient journalists cheering along have made sure that wont happen. The Brotherhood has been dehumanized. It has been pronounced an alien body to the Egyptian nation. The militarys success in getting the Salafis on board also weakened the Brotherhoods argument that this is a war on all Islamists. No matter how good a fight the Brotherhood offers, it will lose this battle. But make no mistake: a battle it is, and the war is hardly over.
H O L L O W VI C TO R I E S In a couple years time, when non-Islamists prove to be as incompetent as the Brotherhood in solving Egypts structural problems, the Brotherhoods failures will not look as bad as they do today. Moreover, while the Brotherhoods understanding of democracy was flawed, its commitment to the ballot box as a means of political change and renunciation of violence was genuinewhat will rise from this battle will not share this commitment. Denied the fruits of their victory, Islamists will remember the words of Sayyid Qutb. Fighting jahiliyyah (barbarism) will tempt this generation as it has tempted others in the past. Christians will become a favorite target. The visible support the Coptic pope offered to the military coup will be neither forgotten nor forgiven.
The Muslim Brotherhood, which excelled in fabricating stories about its old enemies, has reaped what it has sown.
But this round has been won, again, by the military. Civilians will be appointed and in due time elected, but the military will continue to call the shots and rule Egypt as it has done for so many years. The worshiping crowds will get their new Nasser, but like the old one, he will have little to offer, for the road undertaken today is not as innovative as Egyptians seem to believe. Those methods have been tried many times before and they have never succeeded. Repression has not ended Islamism, and military rule has not led the country to prosperity or salvation. Defeats, failures, and disappointments are all lurking around the corner. The counterrevolutions victory will be short-lived. The Mubarak regime fell for a reason,
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and those reasons continue to exist. The Mubarak order may have been a tragedy, but the attempt to repeat it, as Marx would say, could only be a farce.
In a few years, non-Islamists will prove to be as incompetent as the Brotherhood in solving Egypts structural problems.
Farag Fouda, one of Egypts greatest intellectuals, wrote shortly before his assassination some twenty years ago that Egypt was caught in a vicious cycle: military regimes gave way to religious ones, which in turn were removed by military coups that in time gave rise to religious regimes. Breaking the cycle was a matter of life and death, he insisted, and could be broken only by building a true liberal alternative. The pride of modern Egypt has been far greater than its accomplishments, remarks Hoover senior fellow Fouad Ajami, as it continues to be a jaded country that has known many false starts and faded dawns. This time is no different.
Reprinted by permission of the Foreign Policy Research Institute (www.fpri.org). 2013 Foreign Policy Research Institute. All rights reserved.
New from the Hoover Press is Motherland Lost: The Egyptian and Coptic Quest for Modernity, by Samuel Tadros. To order, call 800.935.2882 or visit www. hooverpress.org.
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T H E M I D D L E E AST
Taking on Iran
Between empty ultimatums and threats of overwhelming force lies a diplomatic sweet spot. An interview with Abraham D. Sofaer.
Peter Slen, BookTV: Taking on Iran is the name of the book. The author is Abraham Sofaer, who is a senior fellow at the Hoover Institution. Dr. Sofaer, is our current strategy of sanctions working against Iran? Abraham D. Sofaer: Were certainly putting pressure on them economically, but its hurting the people of Iran more than its hurting the Iranian Revolutionary Guard Corps. They are really our enemy, and so the answer is no. Slen: In your book, you spend quite a bit of time talking about the IRGC, the Revolutionary Guard Corps. Who are they? Sofaer: They were created under the new Iranian constitution in 1979 with the assignment of defending the Islamic character of the Iranian Revolution. They have an enormous amount of assets and responsibilities. They are very radical. They control many defense industries. They have their own army, air force, and navy. They control the missile program, and they are under the ayatollah in charge of the nuclear program. They also have what they call a Quds Force, which does assassinations and other interventions abroad. Right now their Quds Force is the group thats helping Bashar al-Assad stay in power in Syria.
Abraham D. Sofaer is the George P. Shultz Senior Fellow in Foreign Policy and National Security Affairs at the Hoover Institution and a member of Hoovers Shultz-Stephenson Task Force on Energy Policy. His latest book is Taking on Iran: Strength, Diplomacy, and the Iranian Threat (Hoover Institution Press, 2013). Peter Slen is the executive producer of C-SPANs BookTV.
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Slen: And well get to their exportation of that kind of thing in a minute, but whats their relationship with the president of Iran? Who controls what? Sofaer: The president has his own areas of power, but the IRGC is answerable to the ayatollah. The president is under the ayatollah also, but could not order the IRGC to do something the ayatollah told them not to do or vice versa. Slen: What should be the goal in your view of our policy towards Iran? What should we be looking for? Sofaer: We should be looking for an option to the two basic options were considering now. The two options were considering are both highly undesirable. One is to attack Irans nuclear program and to prevent Iran from having the nuclear bomb. Of course, President Clinton promised he would do that with North Korea, and he didnt do it. And wisely so, because it would not have been sensible to allow a million South Koreans to be killed in an artillery barrage in exchange for preventing North Korea from having a nuclear weapon. The president has promised to prevent Iran from having a nuclear weapon, and that suggests an attack. It would be very costly, it could cost a lot of civilian deaths, a lot of pollution, and it could fail. It would certainly be regarded as illegitimate and illegal by most of the world. It would fail because Iran would leave the NPT, the NonProliferation Treaty, and proceed in secret to develop a nuclear weapon.
We should have stood up to the Iranian Revolutionary Guard Corps a long time ago.
The other option is to let Iran get a nuclear bomb and try to contain the nuclear-armed Iran. That is perhaps even worse than the option of attacking the nuclear program, because it is going to lead to the proliferation of nuclear weapons within the Middle East. And its going to destabilize that part of the world. Iran is a threat to Israel, and has threatened in fact that Israel should be wiped off the face of the earth. So you could have a major war between two nuclear powers. So both options are very undesirable. As yet we have failed to consider a third way, and thats what my book does.
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Slen: What is that third way? Sofaer: The third way is to change our policy relating to the IRGC, which has been one of indulgence and passivity. We have allowed the IRGC to sponsor the killing of American soldiers: our Marines in Lebanon, our airmen in Saudi Arabia, our soldiers in Iraq, and now our NATO soldiers in Afghanistan. We have allowed the IRGC to work with Hezbollah and other Assadists in Iraq to arm them to kill Americans. That is clearly illegal activity. We should have stood up to the IRGC a long time ago, starting with the Reagan administrationwhere we did stand up to the Soviet Union, and it made a big difference because we were able to negotiate effectively as a result. So we should stand up to the IRGC and defend ourselves from these IRGC-sponsored attacks. And then through that show of strength make serious negotiation possible.
Weve escalated the verbal war against Iran to a ridiculous point.
Slen: You have experienced negotiating directly with the Iranians, correct? Sofaer: Absolutely, for five years. Slen: In what capacity? Sofaer: I was legal adviser to the State Department under George Shultz and Jim Baker. I conducted the negotiations with Iran in The Hague. They were negotiations over claims, but claims included a lot of military things. We developed a good relationship, myself and the person I negotiated with, who is a member of the Council of Guardians. He was a member of the ten-person controlling body in the Iranian government. We were able to tackle some other issues as well. And I think we can negotiate effectively with Iran, but we must do so with a background of strength and with negotiating policies that are more analogous to what we did with the Soviet Union than to what were doing now. Slen: We interviewed Secretary Shultz a little while ago. And one of his rules of thumb was that if youre going to point a gun at somebody, be prepared to use it. Sofaer: Thats absolutely right. Weve escalated the verbal war against Iran to a ridiculous point, but we have not used the gun at all virtually.
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We have said that a nuclear-armed Iran would be unacceptable. We say that Irans support for terrorism is unacceptable, that we have the military option on the table. The president said hes going to prevent a nucleararmed Iran. And the vice president most recently said that the president isnt bluffing. So a lot of words have been expressed, but we have allowed Iran to kill about a thousand American soldiers in the last thirty years, and we have not pushed back adequately. The only time we pushed back was in 1987 in the Gulf. When we sank a bunch of Iranian speedboats and one Iranian ship, the Iranians got the message; they stopped putting mines in the Gulf and they stopped firing missiles at U.S.-flagged Kuwaiti vessels. So we made our point, and Iran if anything was more eager to negotiate with us as a result of that strength than before that exercise of strength. But other than that, we have done nothing. When they tried to kill the Saudi ambassador in Washington, D.C., two years ago, all we did was indict the IRGC officials we knew were responsible. We indicted Osama bin Laden twice and it didnt do any goodhe went on killing Americans and blowing up American ships until we actually took him out. And thats what you have to do with radicals who want to kill Americans. If you let them kill Americans, they will kill more Americans. Slen: But at the beginning of our discussion you said that we should not attack; attacking would be bad, it would be the wrong policy. How do you operate from a position of strength if youre not willing to use military force? Sofaer: To attack the nuclear facilities in Iran is very different from exercising self-defense against the IRGC. There are about ten nuclear facilities. They are spread all over the country and highly defended. An attack could cause all the damage I mentioned, including the alienation of the Iranian people, incidentally. Whereas attacking the IRGC in a form of self-defense would be regarded widely as legal, legitimate, and targeted. There are plenty of IRGC targets, convoys carrying arms right now into Afghanistan to help kill NATO troops. We could take out a convoy on the Iranian side of the border to make a point. This is a much more limited targeted activity, and yet it shows the Iranian government that were not going to tolerate the strategy of using the IRGC to attack us and to make it more difficult, if not impossible, for us to achieve our strategic purposes in places like Iraq and Afghanistan.
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Slen: In your book Taking on Iran, you have a chapter in here: Thirty Years of U.S. Weakness. Sofaer: Thats exactly right. And it starts with Jimmy Carter, but it was really striking for me as a member of the Reagan administration, where we were standing up to the Soviet Union. We said all the right things vis--vis Iran, but what did we end up doing? Nothing. We allowed them to kill Marines in Lebanon through Hezbollah. And then we said were not going to negotiate with terrorists, and then engaged in the Iran-Contra affair. So we did not cover ourselves with glory vis--vis Iran. We absolutely did the right thing with the Soviet Union, and we negotiated from strength and we negotiated in a meaningful way. I have the five negotiating principles that we used then, and we dont apply any of those principles concerning Iran. It just doesnt make any sense. Slen: What are those five negotiating principles?
A lot of words have been expressed, but we have allowed Iran to kill about a thousand American soldiers in the last thirty years.
Sofaer: The first is that you have to have rhetorical restraint. Dont say things are unacceptable and then accept them. Dont make a fool of the person youre negotiating with and make it more difficult for them to make concessions by pounding on your chest and claiming that youve achieved something. Make it easier for them by not crowing, as Ronald Reagan said. He would not crow when the Soviets did things we wanted them to do. The second is to treat them like a sovereign nation. That doesnt mean you have to accept them or even respect them, for that matter. But you have to engage them diplomatically. The Soviets were very concerned about that. They wanted to be treated as a sovereign state. They were the evil empire as far as we were concerned, and Ronald Reagan said so. But he still treated them with great respect and dignity when he engaged them. The third, maybe the most important, is linkage. We linked our willingness to talk to Iran to their behavior. Their behavior is terrible, but the behavior of the Soviet Union was equally bad, if not worse. What happened there was that Secretary Shultz and Ronald Reagan decided that
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instead of linking our willingness to talk, we have to stand up to these guys when they do something wrong. Refusing to talk does not deter an enemy. Standing up to an enemy does, potentially, and it makes talking more possible. The fourth is a broad agenda. We know the Iranians are interested in talking to us about a lot of things. We care about a lot of things in Iran, particularly human rights. But we never talk about that in the negotiations. All we talk about is the nuclear concessions we want. Thats not the way that we negotiated with the Soviets: we negotiated for baskets of things, including nuclear arms, but also including commercial, human rights, and regional issues. And every time our leaders met, they had a few things they had settled, agreements to sign. There was momentum created as a result of having a broad agenda, which we absolutely do not have with Iran. There is no momentum.
We could take out a convoy on the Iranian side of the border to make a point.
That leads me to the fifth and final point. It is the context in which you negotiate the forum. We have to be willing to talk to Iranians in any forum, secret meetings, private meetings, even the meetings of commercial leaders, the way we did with the Soviets. But what we do is hold the P5-plus-1 talksthe permanent five, plus Germany. And we go and sit down with the Iranians at a very high level with a very big to-do about it every time it happens. Its on television. We get up and say, Before we go in there were going to demand this. Were going to demand that. Theyre going to close [the nuclear enrichment site at] Fordow. Theyre going to stop enrichment. And they get up and say, Were not going to close Fordow, but well go in there and talk, sure. But were not going to do any of things that they want from us. And then they come out of their talks and they reassure their publics that they havent done anything. So those are the negotiating principles we used with our principal enemy in the world. Theres no reason we shouldnt use the same principles in negotiating with Iran.
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Slen: If Iran were to acquire nuclear weapons, would they be willing to negotiate? Wouldnt they feel stronger at that point? Sofaer: It would be a new ballgame. We might well negotiate with them. We negotiated with the Soviets after they acquired nuclear weapons, and Eisenhower and Truman both rejected preventive attacks on the Soviet Union before they had nuclear weapons. It was an unattainable idea. And I think that it might be similarly unattainable with Iran as well. We might be forced to have to negotiate with them after they acquire nuclear weapons. But its going to be a terrible, much more difficult problem. Because then they are going to cause the Sunni states to get nuclear weapons, maybe the Saudis, the Turks, and maybe the Egyptians. That is just going to make any kind of arrangements to stabilize that area of the world, and ultimately the world itself, much more difficult. So lets hope we dont get to that point. Thats what my books about: trying to have another way, another path where we exercise limited, discrete strength through force within Iran, but discrete and limited force against a highly unpopular entity within the state. This is an entity that is tyrannical with the people and very corrupt, and everyone in Iran knows it. So if we attack them, its not going to be anywhere near as damaging to our standing with the Iranian people as if we attack the nuclear program.
We absolutely did the right thing with the Soviet Union, and we negotiated from strength and we negotiated in a meaningful way.
That would give us the leverage we need, both externally and internally, to be able to talk to Iran in a meaningful way. We need that political leverage, and then I would advocate that we do talk to them in an in-depth, effective manner. We know how to do it. Weve done it. Slen: What should be our response if Israel would attack Iran? Sofaer: I hope that it doesnt come to that, obviously. The book is written about the United States. I am not an Israeli. Im Jewish, and I know what Israel and the prime minister of Israel have to face every day. You could have another Holocaust if Iran were to get a nuclear weapon. There are only fifteen million Jews left in the world. The Germans killed six million in World War II. We Jews keep track of our history, and if someone
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was the prime minister of Israel at the time of a nuclear attack on Israel, however unlikely that may be, that is something that you dont want to be written down in history for. So the pressure on Israel to do something is tremendous. I still believe that Iran does not want a war. But there are elements within Iran that almost want to create a sense of desperation. It helps them domestically. It makes them look like theyre really radical. So what should we do? First, I think were doing the right thing by trying to convince Israel not to attack Iran at this point. But we need to really get something going thats an alternative to a major attack. This book is the best I can do. Id like to see the United States try it. In the meantime, I would really hope that Israel does not attack Iran. Who knows when it would end? Even if there were no nuclear war, there would be ongoing war and terrorism. It would just multiply the problems Israel faces today. But we do need to come up with ideas to do more to solve this problem.
Reprinted by permission of BookTV (www.booktv.org). 2013 National Cable Satellite Corporation. All rights reserved.
New from the Hoover Press is Taking on Iran: Strength, Diplomacy, and the Iranian Threat, by Abraham D. Sofaer. To order, call 800.935.2882 or visit www. hooverpress.org.
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T H E M I D D L E E AST
Unholy Alliance
Alas for Lebanon. Syria, Iran, and Hezbollah have turned the country into an arena for their unending proxy wars. By Marius Deeb.
Lebanon has been subjected to the onslaught of Syria, Iran, and Hezbollah for more than three decades. The first two attempts to re-establish a Lebanese polity imbued with free, liberal, democratic, and pluralistic ideals were nipped in the bud by Syrias President Hafez al-Assad, first when he killed President-elect Bachir Gemayel on September 14, 1982, and then when he dislodged from power the interim prime minister, General Michel Aoun, on October 13, 1990. The Maronite Catholic political leaders led Lebanons first two attempts to create a democratic polity, while the thirdwhich culminated in the Cedar Revolution on March 14, 2005was begun by the Maronite Catholic Church and its Patriarch Sfair. Today the ideals of this Cedar Revolution, supported by the majority of the Lebanese people, constitute a glimmer of hope for Lebanon to remain free, pluralistic, and open to the whole world. Meanwhile next door, Syrias allies, the Iranian regime and Lebanonbased Hezbollah, have joined the war against the Syrian opposition. Thousands of Iranian Revolutionary Guard Corps have been fighting in Syria, just as thousands of Hezbollah fighters have been involved in combat in Damascus and especially in the Syrian province of Homs, which lies next to the northeastern region of Lebanon where Hezbollah has a
Marius Deeb is a lecturer at the Paul H. Nitze School of Advanced International Studies (SAIS) at Johns Hopkins University. He is the author of Syria, Iran, and Hezbollah: The Unholy Alliance and Its War on Lebanon (Hoover Institution Press, 2013).
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MARTYRDOM: A boy looks up at a billboard showing Mohamed Hassan Shehade, a Hezbollah fighter who died in the Syrian conflict. In the background of the image is a Shiite shrine in Damascus. The death of a Hezbollah fighter in Syria is explained as occurring while performing his jihadi duty.
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major stronghold. More than a hundred Hezbollah fighters have been killed in Syria, though they have been buried discreetly in their Lebanese hometowns without mention of where they died. Only when high-ranking Hezbollah commander Ali Hussein Nassif was killed in Syria was there a public funeral. The death of a Hezbollah fighter in Syria is explained as occurring while performing his jihadi duty. In addition to the thousands of fighters provided by Hezbollah and Iran to Syria, Iran has given Assad more than $10 billion to prop up his regime. Both Iran and Hezbollah are concerned about what will happen if Assad were toppled. The future of that alliance is at stake. Yet the unraveling of the Iran-Syria-Hezbollah axis is in the offing, as the Syrian ruler will never be able to re-establish his authority over all of his country. His inevitable departure from Damascus could lead to his retreat into the Alawite region in northwestern Syria, bordered by Turkey, Lebanon, and the Mediterranean. Perhaps the old dream of the Alawites of forming their own state might yet come true. After all, the grandfather of the Syrian president once signed a petition, dated June 15, 1936, with other notables of the Alawite community addressed to the French prime minister, Lon Blum, asking for an independent Alawite state. One question is whether the new rulers in Damascus would accept the landlocked Syria that would arise from such a division. Moreover, would Turkey accept the establishment of an Alawite state next door when it has twenty million Alawites of its own?
A P E R S O N A L NO TE To think about Lebanon as free, liberal, democratic, and open to the world reminds me of the Lebanon I knew in my childhood and youth during 1950 to 1965. I was fortunate enough to live in Beirut during that golden age. My sister and I went to an elementary school, adjacent to the Jewish quarter of Wadi Abu Jamil, run by a Quaker headmistress. A couple hundred meters away, the presidential residence was located on Qantari Street. Schools of every description were everywhere. Although it was a golden age, it was marred by a brief civil war that lasted one hundred days, beginning in May 1958. As a consequence, my family moved to the Ras Beirut quarter, that is, the tip of the peninsula where the sea borders Beirut on three sides. Sitting on the balcony of
Reuters/Ali Hashisho
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HOPE AND CHANGE: A Lebanese man wraps his son in the national flag during a rally in support of Lebanons army last summer. In recent years, Lebanese have proved helpless to hold their own against those who would undo the peace of their country.
our apartment I could see and smell the Mediterranean. It was a paradise on earth with cafes, restaurants, shops, bookstores, cinemas, and beaches. There was also the lovely campus of the American University of Beirut. All these places were within walking distance of our home. This was the cosmopolitan Beirut, with a large number of Americans and Europeans along with Lebanese of all backgrounds. My family and I felt totally at home in Ras Beirut. The Lebanon that I knew was not just Beirut and the Mediterranean coast. As the poet, essayist, and statesman Michel Chiha put it: Lebanon is the interpenetration of the Mountain and the Sea. By virtue of his profession as the headmaster of a prominent school in Beirut, my father had long summer holidays and he liked to spend them in the mountains of Lebanon. My father belonged to a Greek Orthodox family from the town of Al-Khiyam in the Marjeyoun (meaning the meadow of springs) region of southern Lebanon.
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I was delighted to spend the summers there, savoring grapes and figs, visiting our land in the Marj, and drinking the cold, pristine water of the holy spring of Derdarah. It was there that I heard from my grandmother the stories about my grandfather, who had forged political alliances and links with the notable Druze family of Qays in the nearby town of Hasbaya, with the feudal lord Kamel al-Asaad of Taibay, and with the Abdallah family of his hometown, Al-Khiyam. What is striking about these memories was the peace and tranquility that characterized Lebanon. Whether in Marjeyoun, close to the Israeli border, or in the mountains of Keserwan where my family also spent summer holidays, peace and security prevailed. I recall driving up to Rayfoun at a time when the Lebanese president, Fouad Chehab, had a summer residence along the way in the town of Ajaltoun. A couple of times we found ourselves traveling behind the president, who rode in the back seat with no one accompanying him but his driver, plus a single guard: a soldier riding a motorcycle. Nevertheless, Lebanon was not a perfect country. It had its feuds and follies, its sectarian fault lines. Almost no one could foresee the ruin that would befall it in the decades to come. A nemesis overtook its civility, and two more-powerful states, Iran and Syria, unleashed on that fragile land their brand of politicsmayhem and unlimited violence. The small country once celebrated for beauty and splendor came to stand for endless wars perpetuated by external powers. The Lebanese proved helpless to hold their own against those who would undo the peace of their country. Worse yet, in the ascendency of Hezbollah, some Lebanese themselves aided and abetted the forces of destruction.
Excerpted from Syria, Iran, and Hezbollah: The Unholy Alliance and Its War on Lebanon (Hoover Institution Press, 2013). 2013 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved.
Agence France-Presse/Anwar Amro
New from the Hoover Press is Syria, Iran, and Hezbollah: The Unholy Alliance and Its War on Lebanon, by Marius Deeb. To order, call 800.935.2882 or visit www. hooverpress.org.
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I N TERVIEW
We Are Going to Stand on Principle

Senator Rand Paul on libertarianism and the GOP; the Senate; and the Constitution. An interview with Peter Robinson.
Peter Robinson, Uncommon Knowledge: With us today, Senator Rand Paul. Born in 1963, Randall Howard Paul attended Baylor, then received his medical degree from Duke. Although raised in Texas, after medical school Dr. Paul moved to Kentucky, where his wife grew up, to begin practicing ophthalmology and become active in politics, founding Kentucky Taxpayers United. In 2010, Dr. Paul was elected to the United States Senate. The son of former Congressman Ron Paul, who ran for president once as a Libertarian and twice as a Republican, Senator Paul has in two years in the Senate become a national figure. As a recent issue of the Economist put it, Senator Paul is definitely not his dad....Rand Paul is trying to build a coalition that can win. Senator Paul, welcome. Senator Rand Paul: Glad to be with you.
G O VE R N IN G P HI LO SO PH Y Robinson: Let me quote you: The government isnt inherently stupid. It just doesnt get the same signals. Explain that. Paul: I usually say theyre not inherently stupid but its a debatable question. And the reason is that theres a difference between what drives the
Rand Paul is the junior U.S. senator for Kentucky. Peter Robinson is the editor of the Hoover Digest, the host of Uncommon Knowledge, and a research fellow at the Hoover Institution.
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marketplace and what drives the excellence of the marketplace. And I usually say there are two reasons for minimal government. One is a liberty argument: the more you give up of your wealth and your earnings the less liberty you have since you want to minimize government size. But you also want to minimize government size because of efficiency. As Milton Friedman said, nobody spends someone elses money as wisely as they spend their own. And I think that is what gets at the heart of inherent stupidity, that theyre just not getting the signal that a private businessperson gets as far as trying to maximize the profit. And I am actually in favor of trying to put some of that back into government, to try to make government more efficient. I would actually pay government officials on how much savings they find in their department. Robinson: So youd suggest bonuses based on savings instead of everincreasing salaries based on the size of your department? Paul: Exactly, and the incentive now when there is money left in your department is to spend it all so you get it next year. Robinson: Youre the third of five children of Congressman and Mrs. Ron Paul. How did you come to your political philosophy? Was this dinner table conversation in the Paul household when you were a kid? Paul: Well, in my case, theres probably the argument of nature versus nurture. And I may have had both. I think were all born with an instinct to individualism. As a teenager I remember calculating how old Id be in the year 2000, and how Id be completely independent and Id make my own decisions, stay up as late I want, eat what I want, go where I want, earn my own money. I think we all have a little bit of that inside of us, maybe some to one degree or more. But then there is also the nurture argument in the sense that I have read most of the free-market economists, I am a student of history, and I would really like to see a government that truly is limited, and that our freedom is much more expansive.
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Robinson: Okay, so lets spend a moment considering what has gone wrong. William Voegeli wrote a book, Never Enough, on the expansion of the welfare state. And he made this very striking point, that from 1940 to 2007, welfare spending grew at an average annual rate of just over 4 percent, and this is while income is growing at about 2.4 percent. So for almost seven decades, year in and year out, under presidents of both parties, under Congresses of both parties, the federal welfare leviathan has continued to grow. Ronald Reagan held back the growth in spending, but even he wasnt able to cut it. Why? Whats the political dynamic?
I would actually pay government officials on how much savings they find in their department.
Paul: Even welfare reform affected maybe four programs out of seventy or eighty programs, so it wasnt complete enough. I put it in more personal terms, and I think this is something that can appeal to people across both parties as well as independents: if you look like me, and you hop out of your truck, you ought to be working. I think most people believe that. Were now registering more people as disabled, though, than were employing people. And thats a real problem, but its a gradual problem. Republicans and Democrats have been complicit in this, but its growing, and people worry that such a great deal of dependency will ultimately drag us down as a country. And thats where the burden of debt comes in. But our message is a more difficult one; we need to explain to those who are working class and trying to get ahead that this burden of big government, that all this stuff that government is offering you really has unintended consequences of dragging the economy down, dragging job creation down. Robinson: In March you introduced a budget that would have eliminated the federal deficit in five years. You voted against the House budget that Paul Ryan put together because, even though the press was attacking it as too dramatic and too draconian, it would have reduced the federal deficit over ten years, and you said that wasnt fast enough. Paul: I think were dragging a lot of the party in the right direction. Ryans first budget was going to balance in twenty-eight years; now hes come up to ten years. You know, there were some unrealistic things. They were
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going to get rid of ObamaCare spending, but he left in the ObamaCare taxes. So we really think we need to change. And Im for a much more dramatic change than some of the gradualists in our party. I think we ought to just have a flat income tax: 17 percent personal, 17 percent corporate, very few deductions. Youd have a lot less revenuethis would not be revenue neutralbut I think youd see an explosion in the economy as you left all that money in the economy. Robinson: Senator, here is the first incidence of the question that comes up again and again, listening to you, reading your speeches. What makes him think hes different? Republicans have been pushing for a flat tax since at least 1996, when Steve Forbes ran for president. Paul: But he didnt win. If hed won, we would have it by now. So we need to win. Robinson: So thats the point. What makes you think youre different? Ill put it crudely because this is a question thats in the air about you. Is Rand Paul just making a point? And so be it, let him make a point; theres nothing wrong with it; its a valid point. Or does he see a political opportunity; can he actually get things done? Paul: I dont think anybody can sit here and say Im different, Im going to be the one, Im the one. Thats a little bit presumptuous. However, I would say that theres a route to victory for Republicans nationally, without diluting our message, being for something passionately, but I think it takes a twist thats slightly different. Youre from Californiaits a blue state. Robinson: It sure is. Paul: To bring it back red, youre going to have to attract people different than the standard cookie-cutter Republican has been, so I am offering some things different. And the libertarian twist to that I think has appealed to ethnic minorities, youth, and independents. Its really a message that gets beyond just our hard-core Republicans, but it isnt antithetical to what hard-core Republicans stand for. But its enough of a twist that I think it has a chance to resonate in areas where weve not done very well.
G E T T I N G T O KNO W R AND PAU L Robinson: Let me just briefly go through a few other issues so people get a chance to know where you stand. ObamaCare?
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Paul: Against. Robinson: OK, done with that. But where does it stand? This fall this thing gets rolled out in a way that finally will affect the way millions of Americans purchase their health insurance. Paul Krugman of the New York Times says the big surprise will be how well it works, not how badly.
Theres a route to victory for Republicans nationally, without diluting our message.
Paul: This will not be the first time Ive disagreed with Paul Krugman. What Id say is we fought many different times, but Im not giving up the fight. We fought and lost originally in Congress, we fought again in the presidential campaign and lost, we fought at the Supreme Court and lost, narrowly, and I think it was still wrongly decided. But were going to have one more fight, when the bills come due. Initially the federal government is going to pay for it, because thats free. Youve heard we have a printing press up here, so it really does not cost anything. But then ultimately the bills are going to be directed back to state governments. And what theyll find is that when you offer people a free credit card to go get health care that they love it, and so they use it all the time. But then it costs so much there isnt enough money, so then they have to come back and they have to tell you, oh no, someone is going to have to screen you, theyre going to have to ration how often you go to the doctor. And then theyll come to the physician and say, we were paying you $20 a visit, but there are too many people coming to see you so we are going to have to pay you $10 a visit. So theyll have to reduce the expenditureswhat they pay hospitals and doctorsand they will also have to limit access, which is another word for rationing. And the state governments, despite all of this, will still face bankruptcy. Not just the states like California or Illinois that are in trouble, states that are relatively sound are going to face problems, because Medicaid is already a driving force toward insolvency at the state level. So I think theres going to be one more big fight on ObamaCareat the state legislative level. Robinson: And when? This year? Next year?
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Paul: As the bills come due, and I think the switching over to the states is 2014, but some of it may be 2015. Robinson: But for sure in time for the presidential election in 2016. Paul: I think so, I think it will still be a hot topic in 2016. Robinson: OK, social issues. Senator Rand Paul: I am 100 percent prolife. I believe abortion is taking the life of an innocent human being. Where I come from in Northern California, when someone says hes a libertarian, 98 percent of the time hes saying hes libertarian about that. He is pro-choicekeep the government out of the bedroom. This is an unusual position in my experience for a libertarian to take. How do you square that one up? Paul: What I would say is that there is a primary and fundamental role for government. And that role is to stop aggression of one individual against another individual. So the question comes down to when do you think someone is an individual, when do you think life begins. And then I think you get more to the heart of the matter. The real debate is, when does life begin? And I think as you have that discussion, it becomes difficult to be flippant about it.
What theyll find is that when you offer people a free credit card to go get health care that they love it, and so they use it all the time.
For example, I am an ophthalmologist and I examine babies in the neonatal nursery that can fit in the palm of my hand, one-pound babies that are alive. I look in their eyes to check against a disease that can cause blindness that can be treated now, but a week before they were inside the mother and they just didnt exist? Theres not a life at that point? And so increasingly, later on in gestation, people are somewhat horrified by things like Dr. Gosnell snipping the spinal cords; they are horrified by people crushing the skull to get a live baby out or injecting things into them to kill them. So many people think that towards the end this isnt that different from a nursery, so how can it be that this is just a womans body and that there isnt another individual there? But its a tough debate, and we will have disagreements like this within the party. And if we leave the decisions to local jurisdictions, I think we
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can have more of a diversity of opinion within the party, and within the country. Robinson: Overturn Roe v. Wade and send it back to the states? Paul: Yes, I think the states would be a better area for this. Robinson: Gay marriage. Senator Rand Paul: I believe in the historical definition of marriage. That being said...Im not for limiting contracts between adults.
I have nothing but the greatest respect for the body of the Senate, the House, the rules, the Constitution. We have simply chosen to use the rules to try to protect the American people from overzealous and big government.
Paul: I stand with the founding fathers on this. Marriage was always a state issue in their day, and thats the way it was written. We didnt write a lot of things like that into the federal Constitution. In fact, not only issues like that which didnt really involve crime, but issues of crime were all state issues. There were about four different things that were federal crimes under the Constitution, and nobody really conceived of all these things. Now anytime theres a terrible tragedy, theres got to be a federal law, instead of why dont you go to your state legislature, because thats maybe more appropriately where this should be handled. Robinson: Let me quote Daniel Patrick Moynihan from his famous report, The Negro Family: The Case for National Action: The fundamental problem is that of family structure. The Negro family in the urban ghettos is crumbling. A middle class group has managed to save itself, but for vast numbers of the unskilled and poorly educated, the fabric of social relationships has all but disintegrated....So long as this situation persists, the cycle of poverty and disadvantage will continue to repeat itself. Moynihan wrote that in 1965, when the illegitimacy rate among African-Americans was 25 percent. Today, among whites the illegitimacy rate is 36 percent, among Hispanics more than half, and among African-Americans more than 72 percent. So you can see where this is going. Block grants, lower taxes, more economic
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growthwhat does any of it matter if the American family continues to disintegrate? Paul: Now its no longer, if it ever was, a racial problem. Its a cultural problem; its across all races. Charles Murray writes about this in Coming Apart and he looks at the different strata. And its an amazing thing that should be taught in every school: there are two groups of people in our country, those who have kids when theyre not married and those who dont. And the ones in the middle class who are achieving well are those who had kids when they were married. The ones in poverty are those who are having kids, sometimes five or six kids, without being married. I cant make a law to tell you to get married or your kids to get married. So it really is the idea that something bigger has to happen. This is what I say in the churches all the time: dont look toward your politicians for all the answers, look to your spiritual leaders. This country needs a revival and a cultural reformation, but its not going to come from government or a law.
Whether I do or dont run, I do want to be part of the Republican Party becoming a national party again.
Robinson: So this is one thing I wanted to draw out, because another element of libertarianism tends to be a sort of agnosticism. You wont find too many libertarians showing up in church. And yet, there is Senator Rand Paul. So the question is, if the breakdown of the family produces a demand for big government, it certainly produces Democratic voters. We know single mothers, young adults who have been raised in broken homes, elderly people who are living in isolation because they no longer have family support, those are folks who tend to vote Democratic. If you care about small government, theres almost a requirement to care about supporting a family, isnt there? And do you draw that conclusion? Paul: Well, I think so. Yes, and there are different ways to look at, because there is one, which is a moral and religious argument for the family and for the traditions of it Robinson: And libertarian though you are, you buy the moral argument? Paul: Yes, but there is also an argument that is completely beyond religion. If you are an agnostic libertarian, you say keep the government out
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of my family structure. I would also say, why dont we simply teach that there is an economic argument for this: that poverty is associated with having kids before youre married and the family structure helps to keep you out of poverty. Its not a perfect society, and I think the danger in saying things like this is, people are saying, well I had my kids before I was married, and look, Im doing fine, or Im not a bad person, or Im divorced. So it isnt really directed toward the individual, but when you look at the statistics, its an enormous cultural problem. And this is sort of an argument for birth control; its an argument for planning your family, and planning when you have it.
E X P A N DI N G T HE B ASE Robinson: The Senate of the United States: Rand Paul of Kentucky, Ted Cruz of Texas, Marco Rubio of Florida, Mike Lee of Utah, the list could go on. All freshmen, all conservative, all insisting on making themselves heard now and not waiting around for a few terms until the seniority system begins to work in their favor. Congressional scholar Thomas Mann of the Brookings Institution: These are all highly visible, intelligent, articulate people who have a disdain for the institution of which they are a part and dont accept the [conventional] notion of what kind of body it should be. Paul: I like the intelligent and articulate part. Robinson: He left out good-looking. Paul: Yes, and athletic. But I would say that I would differ with the description that we have disdain for the body. I have nothing but the greatest respect for the body of the Senate, the House, the rules, the Constitution. We have simply chosen to use the rules to try to protect the American people from overzealous and big government. Robinson: In recent months youve been in New Hampshire and Iowa, and you just got back from a trip to California. When do you intend to decide whether youre going to be a candidate in 2016? Right now would be nice: make a little news. Paul: You know, it must just be a coincidence. I dont know why those states keep popping up on my schedule. But no, whether I do or dont run, I do want to be part of the Republican Party becoming a national party again. I think weve become a regional party and were seriously
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in danger of becoming a red state party, but we have states we need to compete in. We need to compete in New England again. Were losing our grip, even in New Hampshire. We need to compete on the West Coast. And I truly think we can, particularly if we have a message, and it does need to be a less-aggressive foreign policy, it does need to be a message that allows people in the party to disagree on some of the cultural issues. And it also needs to be a message that says to the youth, were going to stand on principle for the Bill of Rights, were going to stand against indefinite detention, against a drone program that would strike Americans without any due process. Robinson: Your colleague, Senator John McCain, referring to your filibuster stance on drone attacks: It always seems to be the whacko birds that get the media megaphone. Did that filibuster do anything good, did it accomplish anything within the Senate? Paul: Absolutely, not only just within the Senate but within the country. It has shown that when you stand passionately on principle for something as sacred as the right to trial by jury, that it attracts people from across the spectrum and we have had people from the left, the right, the middle. A huge outpouring. I think we had one million retweets that day. So it was just an incredible thing, and it really is a burgeoning movement that I think becomes a movement that can win nationally again for the Republican Party. Robinson: Rand Paul, junior senator from Kentucky, thank you very much. Paul: Thank you.
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VAL U ES
Still the Essential Nation

After a lifetime of service to the nation, a reflection on Americas role in the world. By George P. Shultz.
American exceptionalism is defined by freedom. The founders brilliant achievement was to design a democracy capable of thriving on a continental scale. They created a country in which everyone should have the opportunity to reap the rewards of their own hard work, ingenuity, or willingness to take risks. Over time, and often with great difficulty, including the devastating Civil War, the power of oughtthe recognition that all men are created equalclosed in on reality. Millions of people eventually came to America and migrated across a great continent to enjoy the benefits of freedom. Alexis de Tocqueville recognized that democracy, if it were to succeed as what he sensed was a force of history, would depend on what Americans made of their freedom. The world took careful note as it watched America wage its monumental Civil War to end slavery and then amend the Constitution to guarantee in law the freedoms won in battle. The rise of wealth and military might tempted the United States to become one of the imperial powers that dominated the world in the early twentieth century. It soon turned away from overseas territorial control and entered World War I as a force for freedom. As that war was ending, President Wilson made imperial Germanys call for an armistice
George P. Shultz is the Thomas W. and Susan B. Ford Distinguished Fellow at the Hoover Institution, the chairman of Hoovers Shultz-Stephenson Task Force on Energy Policy, and a member of Hoovers Working Group on Economic Policy.
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conditional on the kaisers abdication and the establishment of republican government. In the 1920s and 1930s, the United States stepped away from world politics only to find itself indispensable in dealing with the growing aggressions of imperial Japan and the Third Reich. During World War II, the United States assumed an expanded role as leader of the free world against regimes bent on destroying world order. In the postwar years, the United States helped Germany and Japan become democracies, pillars of responsible government, and market-based economies along with other countries in Europe and Asia. Then, through the long decades of the Cold War, fraught with anxiety, the United States upheld the cause of freedom against a Marxist-Leninist ideology utterly opposed to every element of the established international system, including the state, diplomacy, international law, human rights, open trade, and market economics. From the very outset of the Cold War, the United States uniquely set and supported a global agenda that has laid the foundation for world progress ever since. And that progress has centered on freedom: a market-based, open-trading global economy; freedom of expression, which naturally called forth democratization; and adherence to an international system that included the juridical doctrine of the equality of states. Just as individuals could be citizens of a state, so states could be citizens of a world order with democratic freedoms, as we Americans urged. The United States also promoted collective security as the preferred way to contain or turn back aggression. When collective security proved unattainable, the United States had the courage, and weathered the political criticism when necessary, to act unilaterally in defending world order. In recent years, the idea has emerged that the world should not expect the United States to continue the constructive leading role it has taken in the past. It is imperative to recognize that abandoning that role would result in a world that resembles nothing like the one we have known for three-quarters of a century. Strategic decisions are now required in every major category of national interest and international security. Americans must decide what kind of nation the United States will be, whether to follow the European social model or revitalize the unique American way. Only the latter is capable
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of getting the economy on track with sustainable, strong growth without inflation. Reviving the American approach also will allow continuing military strength from which the United States can meet new versions of old challenges, maintaining the freedom of the seas through a strong Navy and a ratified Law of the Sea Treaty and confronting the unprecedented problems of cyberspace.
The United States uniquely set and supported a global agenda that has laid the foundation for world progress.
Research and development are at peak levels on the critical issues of energy, climate change, and health; breakthrough possibilities are in sight. But if these efforts falter, not only will there be a slowdown in progress but adversarial trends will worsen. America has been a leader in R&D in many areas, including medical science and pharmaceutical breakthroughs for the betterment of the world. Failure to control the huge costs of growing entitlement programs will prevent the development of life-enhancing innovations. More fundamentally, investment in R&D and its accompanying entrepreneurship is indispensable to propelling a growth economy, upon which everything else depends. Greater investment in R&D and entrepreneurship will allow us to play from a strong hand, conducting a more effective diplomacy for the balanced management of big-power relations and employing international organizations as responsible mechanisms for peace, progress, and democratization. The United States must once again carry the torch of freedom.
TH E UR G E N T N EE D FO R A STR O NG U .S. The world is awash in change. The re-emergence of the United States as a strong, respected player on the global stage is the key to a more coherent world. As in the Reagan era, we Americans need to stand tall, proud of our heritage. The United States could lead at the end of World War II because it was the only country left standing. As we found our own way to a vibrant and successful economy and continued to flourish as an open and democratic
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country, the United States became an example to the world. In many ways, our nation was justifiably regarded as a shining city on a hill. The United States must get its economic house in order and once again produce a healthy, expanding economy without inflation. Today, our economy is lackluster at best and our democratic friends in Europe are in the midst of a financial crisis. Our first step, therefore, should be to take action to get our economy on track: Put into place economic policies consistent with prosperity without inflation and leave them there. Emphasize permanent rather than temporary measures. This will entail sharp reform in the personal and corporate tax systems; stripping out preferences, largely used by the wealthy; and lowering rates for everyone. Reform the Social Security system by changing the indexing of benefits from wages to prices, and design a health care system that provides universal access and in which consumers are more involved in the process. Greater consumer involvement will help get costs under control, especially as more information on prices and outcomes becomes available and markets grow more competitive. Point spending toward the level of revenue that would be generated at high employment by the emerging tax system. Establish a simple-to-understand regulatory framework. Create the foundation for rules-based policies (as distinct from discretionary and unpredictable policies) by the Federal Reserve as the system works its way out of excessive support for the debt of the U.S. Treasury. As the committee I chaired in 1980 counseled President-elect Reagan on general principles, sharp change in present economic policy is an absolute necessity. Though our problems are severe, they are not intractable. Having been produced by government policy, they can be redressed by a change in policy. Here are the key points: The essence of good policy is good strategy. The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success.
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Consistency in policy is critical to effectiveness. Individuals and business enterprises plan on a long-range basis. They require an environment in which they can conduct their affairs with confidence. The success of economic policy will be a direct reflection of our ability to maintain a steady course. Rough times will come and crises of one kind or anothersome small, some of great momentwill arise. Sustained effort through these testing times requires a public that understands and supports the policies that are in place. Of equal and related importance is an informed and supportive Congress. The United States can regain its leadership on the worlds stage on the basis of economic and military strength and confidence in the freedoms we advocate and demonstrate. Now is the time for America to take a leading role in the creation of a new global economic and security commons, the advantages of which will benefit countries around the world, including the United States. America has arrived at a fundamental turning point. We must raise our sights, realizing that what is at stake is nothing less than our ability to honor the legacy of our founding fathers by ensuring the strength and security of this great nation for centuries to come. The United States and its allies have difficult work ahead. The need is clear, the path is well marked, and the stakes are monumental. Let us maintain a sense of urgency as we take the bold actions required to secure our future.
Excerpted from Issues on My Mind: Strategies for the Future (Hoover Institution Press, 2013). 2013 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved.
New from the Hoover Press is Issues on My Mind: Strategies for the Future, by George P. Shultz. To order, call 800.935.2882 or visit www.hooverpress.org.
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V AL U E S
Who Speaks for Black Americans?

When jurors rejected the racial narrative surrounding the Zimmerman trial, they also rejected certain present-day civil rights leaders. By Shelby Steele.
The verdict that declared George Zimmerman not guilty of murdering Trayvon Martin was a traumatic event for Americas civil rights establishment and for many black elites across the media, government, and academia. When you have grown used to American institutions being so intimidated by the prospect of black wrath that they invent mushy ideas like diversity and inclusiveness simply to escape that wrath, then the crisp reading of the law that the Zimmerman jury displayed comes as a shock. On television you saw black leaders from every background congealing into a chorus of umbrage and complaint. But they werent so much outraged at a horrible injustice as they were affronted by the disregard of their own authority. The jury effectively said to them, You wont call the tune here. We will work within the law. Todays black leadership pretty much lives off the lingering fumes of moral authority from its glory days in the 1950s and 60s. The Zimmerman verdict let us see this and feel a little embarrassed for them. Consider the pathos of a leadership that once transformed the nation now lusting
Shelby Steele is the Robert J. and Marion E. Oster Senior Fellow at the Hoover Institution and a member of Hoovers Herbert and Jane Dwight Working Group on Islamism and the International Order.
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for the conviction of the contrite and mortified George Zimmerman, as if a stint in prison for him would somehow assure more peace and security for black teenagers everywhere. This, despite the fact that nearly one black teenager a day is shot dead on the South Side of Chicagoto name only one cityby another black teenager.
The black leadership is fighting to maintain its authority to tell society how it must think about blacks and respond to them.
This would not be the first time that a movement begun in profound moral clarity, and that achieved greatness, waned away into a parody of itselfnot because it was wrong but because it was successful. Todays civil rights leaders have missed the obvious: the success of their forebears in achieving social transformation denied to them the heroism that was inescapable for a Martin Luther King Jr. or a James Farmer or a Nelson Mandela. Jesse Jackson and Al Sharpton cannot write a timeless letter to us from a Birmingham jail or walk, as John Lewis did in 1965, across the Edmund Pettus Bridge in Selma, Alabama, into a maelstrom of police dogs and billy clubs. That America is no longer here (which is not to say that every trace of it is gone). The Revs. Jackson and Sharpton have been consigned to a hard fate: they can never be more than redundancies, echoes of the great men they emulate because America has changed. How hard to be a King or Mandela today when your monstrous enemy is no more than the cherubic George Zimmerman. Why did the civil rights leadership use its greatly depleted moral authority to support Trayvon Martin? This young man was, after all, no Rosa Parksa figure of indisputable human dignity set upon by the rank evil of white supremacy. The tragedy is that his death will come to very little. There was no important principle or coherent protest implied in that first nose-breaking punch. It was just dumb bravado, a tough-guy punch. The civil rights leadership rallied to Trayvons cause (and not to the cause of those hundreds of black kids slain in Americas inner cities this very year) to keep alive a certain cultural truth that is the sole source of the leaderships dwindling power. Put bluntly, this leadership rather
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easily tolerates black kids killing other black kids. But it cannot abide a white person (and Zimmerman, with his Hispanic background, was pushed into a white identity by the media over his objections) getting away with killing a black person without undermining the leaderships very reason for being. The purpose of todays civil rights establishment is not to seek justice, but to seek power for blacks in American life based on the presumption that they are still, in a thousand subtle ways, victimized by white racism. This idea of victimization is an example of what I call a poetic truth. Like poetic license, it bends the actual truth in order to put forward a larger and more essential truthone that, of course, serves ones cause. Poetic truths succeed by casting themselves as perfectly obvious: America is a racist nation; the immigration debate is driven by racism; Zimmerman racially stereotyped Trayvon. And we say, Yes, of course, lest we seem to be racist. Poetic truths work by moral intimidation, not reason. In the Zimmerman/Martin case the civil rights establishment was fighting for the poetic truth that white animus toward blacks is still such that a black teenagerSkittles and ice tea in handcan be shot dead simply for walking home. But actually this establishment is fighting to maintain its authority to wield poetic truththe authority to tell the larger society how it must think about blacks, how it must respond to them, what it owes them and, then, to brook no argument.
A movement that began in profound moral clarity and achieved greatness has waned away into a parody of itselfnot because it was wrong but because it was successful.
The Zimmerman/Martin tragedy has been explosive because it triggered a fight over authority. Who gets to say what things meanthe supporters of George Zimmerman, who say he acted in self-defense, or the civil rights establishment that says he profiled and murdered a black child? Where is the authority to resolve this? The six-member Florida jury, looking carefully at the evidence, decided that Zimmerman pulled the trigger in self-defense and not in a fury of racial hatred.
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And precisely at the point of this verdict is where all of America began to see this hollowed-out civil rights establishment slip into pathos. Almost everyone saw this verdict coming. It is impossible to see how this jury could have applied the actual law to this body of evidence and come up with a different conclusion. The civil rights establishments mistake was to get ahead of itself, to be seduced by its own poetic truth even when there was no evidence to support it. And even now its leaders hope against hope that some leaf of actual racial victimization will be turned over for all to see. This is how a once-great social movement looks when it becomes infested with obsolescence. One wants to scream at all those outraged at the Zimmerman verdict: where is your outrage over the collapse of the black family? Todays civil rights leaders swat at mosquitoes like Zimmerman when they have elephants on their back. Seventy-three percent of all black children are born without fathers married to their mothers. And you want to bring the nation to a standstill over George Zimmerman? There are vast career opportunities, money, and political power to be gleaned from the specter of Zimmerman as a racial profiler/murderer, but there is only hard and selfless work to be done in tackling an illegitimacy rate that threatens to consign blacks to something like permanent inferiority. If there is anything good to be drawn from the Zimmerman/Martin tragedy, it is only the further revelation of the corruption and irrelevance of todays civil rights leadership.
Available from the Hoover Press is Race and Economics: How Much Can Be Blamed on Discrimination? by Walter E. Williams. To order, call 800.935.2882 or visit www. hooverpress.org.
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H I ST O R Y AN D CU L T U R E
Shermans Way
The Civil War general was a prophet not of total war, as his critics charge, but of conclusive war. By Victor Davis Hanson.
History is replete with successful invadersXerxes at Athens, Napoleon in Moscow, the Germans inside the rubble of Stalingrad, the Chinese Communists at Seoul in 1951who found their occupation of an enemys defeated capital or key city of either little value or real peril, given that a large undefeated enemy force was still nearby and most of the occupied city lay in ruins or was without supply. In contrast, in 1864 William Tecumseh Sherman saw Atlanta as the beginning, not the end, of his Georgia campaign. Sherman was sometimes unsteadyespecially between Bull Run and Shiloh, when he suffered severe depression. He often overstated his own case in his memoirs and unfairly deprecated the efforts of others. There were plenty of better battlefield tacticians on both sides of the Civil War: Lee, Longstreet, or Jackson, and Grant, Thomas, or Sheridan. He seemed surprised by his setback at Kennesaw Mountainand both earlier at Shiloh and later at Bentonville. That said, no Civil War commander possessed a more astute appraisal of the nature of contemporary warfare, how to form and pursue grand strategy, and the critical nexus between war, civil society, popular support, and electoral politics. And few American generals have since.
Victor Davis Hanson is the Martin and Illie Anderson Senior Fellow at the Hoover Institution. His latest book is The Savior Generals: How Five Great Commanders Saved Wars that Were LostFrom Ancient Greece to Iraq (Bloomsbury Press, 2013).
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After the capture of Atlanta, to the shock of its remaining residents and to the outrage of his adversary, Confederate General John Bell Hood, Sherman forced most people to flee the city and set about garrisoning it as a depot for further operations. He neither apologized nor expressed one iota of regret for shelling the city on his approach. As he put it to Hood, in an exchange of letters after taking the city, I was not bound by the laws of war to
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give notice of the shelling of Atlanta, a fortified town, with magazines, arsenals, foundries, and public stores; you were bound to take notice. See the books. This is the conclusion of our correspondence, which I did not begin, and terminate with satisfaction. Sherman set out on November 17 from Atlanta on his famous fiveweek march to the sea, reaching and capturing Savannah on December 21. From there, he undertook an even more arduous march through the Carolinas in an effort to enter Virginia at the rear of Robert E. Lees Army of Northern Virginia. When the war ended in April 1865, Sherman had torn apart the South, humiliated the enemy,
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and caused massive defections from Lees army as Confederate soldiers in Virginia heard constant bad news of a huge Union force running amok among their friends and family to the rear. Sherman, as an Ohioan with long residence in California, was at heart a westerner, familiar with navigation and supply over the new nations great distances by wagon, train, and ship. He felt comfortable with like kind, especially marching, camping out, and meeting the challenges of wideopen spaces and rough terrain. After Bull Run, the first great battle of the war, Sherman never again fought in Virginia or Marylandthe meat grinders that would devour the Army of the Potomac.
No Civil War commander possessed a more astute appraisal of contemporary warfare, grand strategy, and the critical nexus between war, civil society, popular support, and electoral politics.
Indeed, he would not return to the east until his final great march through the Carolinas. Pitched battles in the Richmond and Washington corridors were of an entirely different sort from the long marches through Georgia and the Carolinas, for which Sherman was far better suited. We do not know what Sherman might have done in Grants place during the awful spring and summer of 1864, but he might well not have had the same avenues to enact his evolving ideas about modern total war as he did out west.
M I S UN DE R S T A N D I NG SH E R MAN Sherman is often characterized as a heartless prophet of modern, total, and merciless war, with the burning of Atlanta or Columbia serving as a sort of precursor to Dresden or Hamburg. That characterizationfanned by Shermans own vivid and occasionally hyperbolic use of nouns and verbs such as cruelty, hell, ruin, howl, smashing, and breakingis not accurate, if such a charge refers to the level of damage he inflicted on either the Confederate army or its population. In comparison to horrific battles elsewhere, few of the enemysoldiers or civiliansdied, either inside Atlanta or on his subsequent marches through Georgia and the
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Carolinas. Where Sherman, in the moral sense, proved a revolutionary figure was not in the killing of civilians or waging total war, but in his radical notions of proper culpability in war. It made no sense to him that the slave-owning plantation class of the Old South, which had plunged the nation into war, should be relatively free from the costs of combat while mostly non-slave-owning and poorer Southerners were dying in droves in northern Virginia. Sherman saw that the destruction of the Southern mystique of superior gallantry was essential to Lincolns victory. Often in obnoxious fashion, he would instruct the South about the various dichotomies of the war. Industry and material advantage would nullify martial gallantry. The Souths pride in Southern civic superiority would, so Sherman further assumed, be questioned by the fact of a hundred thousand Union soldiers tramping wherever they pleased.
Where Sherman, in the moral sense, proved revolutionary was not in killing civilians or waging total war, but in his radical notions of proper culpability in war.
Sherman often tried to explain his evolving views in the context of the morality of the new age of warfare. In an August 14, 1864, letter to James Guthrie, a politician, railroad executive, and political ally, Sherman remarked as he neared Atlanta,
We must, to live and prosper, be governed by law, and as near that which we inherited as possible. Our hitherto political and private differences were settled by debate, or vote, or decree of a court. We are still willing to return to that system, but our adversaries say no, and appeal to war....Other simple remedies were within their choice. You know it and they know it, but they wanted war, and I say let us give them all they want; not a word of argument, not a sign of let up, no cave in till we are whipped or they are....The only principle in this war is, which party can whip.
More important still, for all the invective against Sherman, who was reviled as a terrorist in Southern papers, his ravaging was largely aimed at Confederate buildings, rails, telegraph systems, and the property of the
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slave-owning elite. For that he has never been forgiven, reminding us that Machiavelli warned in The Prince of the political repercussions of damaging property: Men will sooner forget the death of their father than the loss of their patrimony. Yet Shermans ultimate aims were to shorten the war and thereby save lives by marches that humiliated and demoralized the enemy population rather than butchering soldiers in head-to-head combat. He would be all the more hated the more he focused on property and the less he targeted Confederate soldiers. Or, as Noah Trudeau concluded:
Total war implies a military operation meant to obliterate civilian infrastructure preparatory to imposing a new order on that society. Sherman had no such desires. His more limited goal was to make any continuance of rebellion so unpalatable to Southern civilians that they would view a return to the Union as the lesser of two evils. The overwhelming force he applied made it clear to all that the so-called Confederacy lacked the wherewithal to guarantee personal security. Shermans decision to add civilian property to the mix stemmed from his belief in collective responsibility and his determination to punish the Southern leaders who should have been looking out for the welfare of their people by finding an accommodation with him.
For Sherman, like Clausewitz earlier, armies were political tools. He reminded the nation that an army and its civilian supporters were inseparable from each other. Yet unlike Clausewitz, Sherman did not see the need to find the enemys main army and destroy it on the field of battle. The key was submissionwhether materially or psychologicallyof the entire civilian infrastructure that produced armies, a strategy not always predicated on set battle. Attack that civilian root, and its military fruit would die on the vine. For Sherman, inconclusive wars often resulted even when armies simply gave up or in isolation were defeatedas if decisive battle was rarely decisive. In contrast, lasting peace was built through convincing an entire population that it had been both collectively defeated and humiliated, and that it bore the wages of its initial unwise aggression, and therefore that it should cease the production of war material and the contribution of men to the cause. Or, as Sherman put it once to General George Thomas, I propose to demonstrate the vulnerability of the South, and make its inhabitants feel that war and individual ruin are synonymous terms.
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Much of later subsequent military history may well confirm Shermans thinking that hostile armies were inseparable from hostile people, especially when we reflect upon the ephemeral peace that followed the First World War, in comparison with the lasting peace after the Second. Sherman was far more adept at ruining Southern morale without killing thousands of civilians than were his twentieth-century disciples. When Confederate armies did not meet him in huge pitched battles during the Atlanta campaign and the later march to the sea, Sherman grasped how he had struck at the very nerve of the supposed military gallantry and dash of Confederate cavaliers. Or, as he once put it to a Southern acquaintance, Your biggest armies in Virginia and Georgia lie behind forts, and dare not come out and fight us cowards of the North, who have come five hundred miles into their country to accept the challenge.
For Sherman, decisive battle was rarely decisive. Lasting peace was built through convincing a population that it had been collectively defeated and humiliated.
Sherman is also known as a revolutionary in his uncanny appreciation of the material resources of the new industrial age. Even before the war began, Sherman saw that industrial production and material resources would be more a determinant than claims of superior bravery. In a prescient antebellum conversation with his friend and colleague David F. Boyd at the Louisiana Seminary of Learning and Military Academy (the precursor to Louisiana State University), Shermanstill residing in the Southlet loose with a screed about the nature of war on the horizon:
The North can make a steam-engine, locomotive, or railway car; hardly a yard of cloth or shoes can you make. You are rushing into war with one of the most powerful, ingeniously mechanical, and determined people on earthright at your doors. You are bound to fail. Only in your spirit and determination are you prepared for war. In all else you are totally unprepared, with a bad cause to start with....If your people would but stop and think, they must see that in the end you will surely fail.
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Grant may have believed, though he never explicitly wrote, that the Norths far greater population (twenty-two million versus the Souths nine million, including slaves) meant that he could defeat the South even while losing three soldiers to Lees two. But such arithmetic assumed that a more affluent Northern public would accept such losses until Lee quit. In contrast, Sherman looked to different statistics: the North possessed a 23-1 edge in manufacturing, a 10-1 superiority in arms production, well over twice the rail and telegraph infrastructure of the South, and a better informed and more fickle public. That meant that Sherman would have the resources to equip large armies to go into the South and waste the far more limited material resources of the Confederacy, while losing fewer soldiers in battle and thus maintaining public support.
The brilliance of Shermans revolutionary strategic vision would be overshadowed by the controversies over his supposed embrace of total war.
Grant, Hood, and Lee, like Sherman, finally grasped that rifled musketry, and soon the repeating cartridge rifle, along with far more lethal artillery, could destroy hundreds, even thousands of men in a few hours. But unlike Sherman, they were still not ready to abandon noble charges, head-on assaultsall the stuff of a once-glorious Western way of war that could prove suicidal. Since his horrific first day at Shiloh (April 6, 1862), Sherman had begun to craft a new manner of mobile warfare that could both bring victory and save his army from the oblivion of industrial warfare that would destroy tens of thousands of Americans at Antietam, Gettysburg, and Cold Harbor. Later, in his formal analysis of the lessons of the Civil War, Sherman repeatedly stressed both the physical and psychological benefits of keeping soldiers moving. A sense of linear progress was critical, freed from the stifling strictures of a bureaucratic and noncombatant military to the rear. In other words, once in the field, overwhelming necessity overrides all law. The more he could ensure that his men would have a good chance of surviving their victory, the more he could demand rigorous labor and physical sac150
rifice from them during his incessant marching. Only on the road, Sherman was the law, not his superiors Grant, General Henry Halleck, or Lincoln. Sherman also appreciated the importance of new forms of communication. When the telegraph and mass-produced and circulated newspapers were wedded to a free society, suddenly news from the front could reach the public within days, if not hoursoften raw and hysterically editorialized. That meant, in a consensual society, that casualties suffered at Shiloh, Antietam, or Gettysburg could incite panic and hysteria and overshadow the eventual story of tactical victory itself. A general in the new age of warfare could win a battle, but lose the public will to continue. All hard-won victories in their immediate aftermath could be seen as Pyrrhic. Sherman accepted that new fact of media influence, even as he railed against reporters as purveyors of doom who could destroy public support for any army by inexact and incomplete reporting.
You are rushing into war. . . . You are bound to fail.
Lee and Grant may well have been better generals than Sherman, in the sense of deploying forces on the battlefield and keeping an iron nerve amid the bloodletting. But both nearly wrecked public support for their causes. It was Lees misfortune that he had a disciple like the heedless John Bell Hood rather than like William Tecumseh Sherman, who as a Confederate commander might have caused havoc by slashing his way to the North, destroying the Union economy and morale, as Lee held down Grant and the Army of the Potomac in the east. Grant had a distant subordinate who made him look good; in contrast, Lee had one who made him look quite bad. Yet in the end, as with most savior generals, the brilliance of Shermans revolutionary strategic vision was overshadowed by the controversies over his supposed embrace of total war. Military historians came to appreciate that Sherman had saved lives by bringing the war to a close; yet millions in the South, and nearly as many in the North, would forever deem him uncouth and barbarous. Sherman accepted not only that charge but the additional one that his outspokenness had in some sense needlessly incurred it. In a letter to his wife, Ellen, he best summed up the paradox of wanting to explain to a nation what war was about while conceding the result would
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be unpalatable: I know what I said will be gall and wormwood to some, but it will make others think. But then again, Sherman seemed almost to wish to shock the public, or at least be disliked by it; as he wrote his brother in the midst of the Atlanta campaign, I was in hopes I could remain unpopular.
CH AR G I N G A H E A D Unlike Confederate generals Joseph E. Johnston and John Bell Hood, who were not exactly clear about their ultimate aims other than stopping the enemy, Sherman not only planned to take Atlanta but was already envisioning where and how his larger strategic ideas about industrial warfare would play out on marches to the sea and northward through the Carolinas. Shermans famous exchanges with Hood right after taking Atlanta were soon quoted in newspapers and books as larger lessons about the nature of modern war itself. To Hoods objection that Sherman had first fired on Atlanta, where civilians were intermingled among his batteries, and then, upon its capture, ordered its population to be evacuated, Sherman in his reply described in brilliant fashion the new, expanded parameters of modern war and its rationale:
In the name of common-sense, I ask you not to appeal to a just God in such a sacrilegious manner. You who, in the midst of peace and prosperity, have plunged a nation into wardark and cruel warwho dared and badgered us to battle, insulted our flag, seized our arsenals and forts that were left in the honorable custody of peaceful ordnance-sergeants, seized and made prisoners of war the very garrisons sent to protect your people against negroes and Indians, long before any overt act was committed by the (to you) hated Lincoln government, tried to force Kentucky and Missouri into rebellion, spite of themselves; falsified the vote of Louisiana, turned loose your privateers to plunder unarmed ships; expelled Union families by the thousands, burned their houses, and declared, by an act of your Congress, the confiscation of all debts due Northern men for goods had and received?...If we must be enemies let us be men, and fight it out as we propose to do, and not deal in such hypocritical appeals to God and humanity.
The stolid and straightforward George Thomas might have endlessly chased the retreating Johnston and Hood. Grant might have plowed straight for Atlanta, almost taken the city, and yet lost eighty thousand
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soldiers in the attempt. Each time a Southern general tried to go northward to threaten Union territoryAlbert Sidney Johnston at Shiloh, Lee at Gettysburg, Hood outside Nashvillehe wrecked his army and ended up dead or retreating southward. Sherman knew how to keep his soldiers mobile, minimize losses, and take an all-important city like Atlanta, using it as a stepping-stone for greater things yet to comeand thereby winning Lincoln the election. More important, at his best he was able to translate his new philosophy of war into rhetoric that would soon galvanize the nation. Atlanta was not merely captured, but ours and fairly won. Savannah did not merely fall, but was presented to the country as a Christmas present. Georgia would not be dissected but made to howl, in a war so terrible of synonymous ruin for civilians. His famous postbellum pronouncement that war is hell was simply a variation on what he had told the nation throughout most of the Civil War. As in the case of Themistocles, individual battles were not, for Sherman, ends in themselves, nor even theater operations that served strategic purposes, but elements of far larger sociological war. With Sherman stymiedor defeatedin Georgia rather than triumphant in Atlanta, Lincoln would not have been re-elected. With a President McClellan in the White House, there would have been enormous pressure to settle differences by permanent separation between North and South, or a return to a slave-owning Southern United States. Quite simply, without Uncle Billys men in Atlanta on September 2, 1864, the United States as we know it today might very well not exist.
Excerpted by permission from The Savior Generals: How Five Great Commanders Saved Wars that Were LostFrom Ancient Greece to Iraq, by Victor Davis Hanson (Bloomsbury Press, 2013). 2013 by Victor Davis Hanson. All rights reserved.
Available from the Hoover Press is Conserving Liberty, by Mark Blitz. To order, call 800.935.2882 or visit www. hooverpress.org.
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H I S TORY AND C ULTURE
Declaration of Dependence
Tocqueville admired the independence of the Americans he met. Their descendants now swaddle themselves in a regulatory state. By Niall Ferguson.
In Democracy in America, published in 1833, Alexis de Tocqueville marveled at the way Americans preferred voluntary association to government regulation. The inhabitant of the United States, he wrote, has only a defiant and restive regard for social authority and he appeals to it...only when he cannot do without it. Unlike Frenchmen, he continued, who instinctively looked to the state to provide economic and social order, Americans relied on their own efforts. In the United States, they associate for the goals of public security, of commerce and industry, of morality and religion. There is nothing the human will despairs of attaining by the free action of the collective power of individuals. What especially amazed Tocqueville was the sheer range of nongovernmental organizations Americans formed: Not only do they have commercial and industrial associations...but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fetes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools.
Niall Ferguson is a senior fellow at the Hoover Institution and the Laurence A. Tisch Professor of History at Harvard University. His latest book is The Great Degeneration: How Institutions Decay and Economies Die (Penguin Press, 2013).
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Tocqueville would not recognize America today. Indeed, so completely has associational life collapsed, and so enormously has the state grown, that he would be forced to conclude that, at some point between 1833 and 2013, France must have conquered the United States.
A N A T I O N O F NO N-B E LO NG E R S The decline of American associational life was memorably documented in Robert Putnams seminal 1995 essay Bowling Alone, which documented the exodus of Americans from bowling leagues, Rotary clubs, and the like. Since then, the downward trend in social capital has only continued. According to the 2006 World Values Survey, active membership even of religious associations has declined from just over half the population to little more than a third (37 percent). The proportion of Americans who are active
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members of cultural associations is down to 14 percent from 24 percent; for professional associations the figure is now just 12 percent, compared with more than a fifth in 1995. And no, Facebook is not a substitute. Instead of joining together to get things done, Americans have increasingly become dependent on Washington. On foreign policy, it may still be true that Americans are from Mars and Europeans from Venus. But when it comes to domestic policy, we all now come from the same place: Planet Government. As the Competitive Enterprise Institutes Clyde Wayne Crews shows in his invaluable annual survey of the federal regulatory state, we have become the regulation nation almost imperceptibly. Excluding blank pages, the 2012 Federal Registerthe official directory of regulation today runs to 78,961 pages. Back in 1986 it was 44,812 pages. In 1936 it was just 2,620. True, our economy today is much larger than it was in 1936around twelve times larger, allowing for inflation. But the Federal Register has grown by a factor of thirty in the same period. The last time regulation was cut was under Ronald Reagan, when the number of pages in the Federal Register fell 31 percent. Surprise: real GDP grew 30 percent in that same period. But Leviathans diet lasted just eight years. Since 1993, 81,883 new rules have been issued. In the past ten years, the final rules issued by our sixty-three federal departments, agencies, and commissions have outnumbered laws passed by Congress 223 to 1. Right now there are 4,062 new regulations at various stages of implementation, of which 224 are deemed economically significant, that is, their economic impact will exceed $100 million. The cost of all this, Crews estimates, is $1.8 trillion annuallythats on top of the federal governments $3.5 trillion in outlays, so it is equivalent to an invisible 65 percent surcharge on your federal taxes, or nearly 12 percent of GDP. Especially invidious is the fact that the costs of regulation for small businesses (those with fewer than twenty employees) are 36 percent higher per employee than they are for bigger firms. Next years big treat will be the implementation of the Affordable Care Act, something every small business in the country must be looking for156
ward to with eager anticipation. Then, as Senator Rob Portman of Ohio warned a few months ago, we can anticipate the Labor Departments new fiduciary rule, which will increase the cost of retirement planning for middle class workers; the EPAs new Ozone Rule, which will impose up to $90 billion in yearly costs on American manufacturers; and, in 2015, the Department of Transportations Rear-View Camera Rule. Thats so you never have to turn your head around when backing up. President Obama occasionally pays lip service to the idea of tax reform. But nothing actually gets done and the Internal Revenue Service code (plus associated regulations) just keeps growingit passed the nine-million-word mark back in 2005, according to the Tax Foundation, meaning nearly 19 percent more verbiage than ten years before. While some taxes may have been cut in the intervening years, the tax code just kept growing. I wonder if all this could have anything to do with the fact that we still have nearly twelve million people out of work, plus eight million working part-time jobs, five long years after the financial crisis began.
S UF F O C A T IN G R U LE S Genius that he was, Tocqueville saw this transformation of America coming. Toward the end of Democracy in America he warned against the government becoming an immense tutelary power...absolute, detailed, regular...cover[ing] [societys] surface with a network of small, complicated, painstaking, uniform rules through which the most original minds and the most vigorous souls cannot clear a way. Tocqueville also foresaw exactly how this regulatory state would suffocate the spirit of free enterprise: It rarely forces one to act, but it constantly opposes itself to ones acting; it does not destroy, it prevents things from being born; it does not tyrannize, it hinders, compromises, enervates, extinguishes, dazes, and finally reduces [the] nation to being nothing more than a herd of timid and industrious animals of which the government is the shepherd. If that makes you bleat with frustration, theres still hope.
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Windows into History

In seldom-seen treasures from the Hoover Archives, stories of artists and their times. By Nicholas Siekierski.
The Hoover Institutions Library and Archives is known as a premier repository for historical documentation, but a surprising number of items could also be described as art. An exhibition titled Art and History: Treasures from the Hoover Library and Archives has transformed the Hoover exhibit pavilion on the Stanford campus into an art gallery, showcasing the work of artists who captured in their art unique periods in history. Each object on display, whether created by a professional or an amateur, expresses her or his place and experience in a world both inspiring and tumultuous. The exhibit includes striking selections spanning the twentieth century: images from Hoovers poster collection, hand-painted letters of appreciation from recipients of humanitarian aid after World War I, dramatic sketches of life in the Gulag, rare art journals, icons from prerevolutionary Russia, and numerous other items, many displayed for the first time. The objects are vessels that have traveled across time and thousands of miles. They might have been created by an anonymous prisoner-craftsman in a Nazi concentration camp, a Chinese Communist who collected sketches of the Long March with Mao Zedongs troops, a propagandist who secretly created paintings that bitterly contradicted the Soviet reality he was ordered to depict, or an American photographer who captured candid scenes on U.S. warships in the Pacific Theater. Art and History runs through December 20. The exhibit is open to the public Tuesday through Saturday, 11 a.m. to 4 p.m., and is free of charge. For more information, go to www.hoover-library-and-archives.org or call (650) 723-3563.
Nicholas Siekierski, an assistant archivist, is the exhibits and outreach coordinator at the Hoover Archives.
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All images Hoover Institution Archives
DESTRUCTION: Ivan Alekseevich Vladimirov painted Socialist Realist works that extolled the Soviet Union and its leaders, but he also produced works showing the revolutions brutal and destructive side. This 1918 painting shows revolutionaries vandalizing a room in the Winter Palace in Petrograd. Hoover War Library curator Frank Golder, who collected widely in Russia beginning in 1920, commissioned this and other works from Vladimirov.
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CONFISCATION: This 1920 Vladimirov painting (detail), which shows peasants pleading with soldiers not to take their cattle, was another in the series of works intended to show life in Russia, where the realities of everyday living stood in stark contrast to Bolshevik propaganda.
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END OF EMPIRE: A silver-framed icon, painted in 1914 to commemorate a royal marriage in Russia, shows saints Felix and Irina, the patron saints of the bride and groom. The bridegroom, Prince Felix Felixovitch Yusupov, later was one of the men responsible for the murder of Rasputin.
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ALL QUIET: German Soldiers on the Eastern Front, painted by an unknown artist, depicts a calm moment along a front line during World War I. With its riflemen huddled in blankets for warmth, a samovar steaming between them, the image shows a wartime moment devoid of violence or squalorand raises the question of how the artist found the time and materials to paint it.
NATIONAL HERO: Ignace J. Paderewski (18601941), the celebrated concert pianist and composer, played a key part in the political history of his native Poland. This charcoal drawing by Wadysaw T. Benda (18731948) dates from 1910, three years before Paderewski moved to California. Paderewski, a fervent nationalist, was active in Polish wartime relief, working with his friend Herbert Hoover, who had met Paderewski years before at Stanford. Paderewski then became Polands first prime minister after World War I. The pianist is memorialized with a bronze statue and an annual piano competition in Paso Robles, California, where he owned orchards and vineyards in the early twentieth century.
ABOVE: Huang Zhens sketchbook chronicled the formative Long March in 1934 of the Chinese Red Army, during which tens of thousands died of hardship and wounds and Mao Zedong emerged as the Communist leader. Huang himself went on to become a prominent diplomat in Communist China. Here he writes, in part, Under the leadership of the Chinese Communists, the Red Army is invincible. Whatever is ahead of us, be it dangerous mountain orbad water, we willovercome. LEFT: This wooden double inkwell of a fox and a rabbit, longtime folktale adversaries, stood in the office of the commander of the Mauthausen concentration camp near Linz, Austria. It was carved between 1939 and 1945 by a prisoner, an unknown Czechoslovak Jehovahs Witness. The fox appears to be arresting the rabbit for stealing.
ABOVE: Edward Steichen (18791973) photographed fashion spreads for Vogue and other magazines before World War II. Enlisting in the Navy in 1942, he documented some of the most dramatic battles of the Pacific, as well as close-ups of men at war. In this photo, Ensign A. H. Bull Durham Jr., a Navy pilot from Houston, tells of downing two Zeros over Kwajalein before returning to his carrier on December 4, 1943. RIGHT: Twelve contemporary artists created prints in 1971 as a response to the conspiracy trial of the Chicago Seven activists. The inspiration of Chicago-born artist Pearl Hirshfield, the portfolio was published in 1972 in a limited edition of 150 copies. It was meant to be both an artistic project and a fundraiser for the defendants legal appeals, and was a synthesis of politics and art. This artwork, titled Mother and Child, was created by Romare Bearden, one of the pre-eminent African-American artists of his generation.
On the Cover
As summer ends, so do visions of pleasant days by the sea. Seaside villages like this one in an undated Spanish travel poster suggest not just seasons past but whole ways of life changed. This image of mantilla-wearing women coming and going from a chapel nestled in colorful flowers harks back to an image of Spain that predates modern travel and development, which has profoundly changed destinations like Spains Mediterranean shoremuch of which falls under the elastic name of Playas de Levante. The poster doesnt say which village along Spains one thousand miles of Mediterranean coast it means to portray. Levante comes from levantarto raise or risethe view of the sun rising over the water. The seaside as a whole has been a tourism hot spot for visitors from cold countries for many years, but not until the 1960s and beyond did tourism become such an overwhelming economic engine for Spain, bringing airports, high-rises, and the rest. Exhibit A for this transformation is Benidorm. Invaded by the Moors in the eighth century, today this city along La Costa Blanca (itself a tourism term invented by an airline) is invaded by five million tourists a year. Benidorm went from fishing village to skyscrapers in a generation, touting an image of a place to leave cares behind. On Benidorms official tourism website you find a guide for activities that suggests, helpfully, partying all night long. Author Giles Tremlett wrote in Ghosts of Spain: Travels Through a Countrys Hidden Past that Benidorm is where package tourism was born. Airand-hotel deals opened the floodgates of affordable international travel to millions in Britain, Germany, and elsewhere in Europethe crowds that one columnist condescendingly called wide-bodied jets bearing widebodied holidaymakers. Tremlett was a bit kinder, writing that
Benidorm has also become a huge joke. British newspapers occasionally come here to sneer. I know this because, as a correspondent, I have done it too. But I also have a creeping respect for this carbuncular miracle, this
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slick, garish tourism machine that sells one thing, and one thing alonethe pleasure of a two-week holiday away from the floor. No one is forced to come to Benidorm, yet five million visitors do every year....Whatever happens, the revolution that began with Benidorm and its bikinis is bound to bring even more, huge changes. accounts department, telephone sales, or the factory
Those huge changes ensure that even as Spain struggles with Europes economic troubles and high unemployment, the tourism industry keeps it afloat among the worlds top travel destinations. Tied into the international marketplace for tourism, Spain senses economic tremors from everywherethe current political upheaval in Egypt, for instance, casts a ripple onto Spanish shores. Samuel Johnson said that when a man is tired of London, he is tired of life. Perhaps when one is tired of Benidorm, one is tired of nightlife. But the Levante, the hazily defined region where it sits, has a more enduring distinction than a night out, or even a two-week binge. Its a distinction a Californian would appreciate. Summer may not last forever, but on the Playas de Levante it does last well into the fall months, thanks to a favorable climate. An enticing thought for October: endless summer. Charles Lindsey
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hoover institution on war, revolution and peace
Board of Overseers
Marc L. Abramowitz Victoria Tory Agnich Frederick L. Allen Jack R. Anderson Martin Anderson Barbara Barrett Robert G. Barrett Frank E. Baxter Donald R. Beall Stephen D. Bechtel Jr. Peter B. Bedford Peter S. Bing Walter E. Blessey Jr. Joanne Whittier Blokker William K. Blount James J. Bochnowski Wendy H. Borcherdt William K. Bowes Jr. Richard W. Boyce Scott C. Brittingham James J. Carroll III Robert H. Castellini Rod Cooper Paul L. Davies Jr. Paul Lewis Lew Davies III John B. De Nault Steven A. Denning* Dixon R. Doll Susanne Fitger Donnelly Joseph W. Donner Herbert M. Dwight
William C. Edwards Gerald E. Egan Charles H. Chuck Esserman Jeffrey A. Farber Carly Fiorina Clayton W. Frye Jr. Stephen B. Gaddis Samuel L. Ginn Michael Gleba Cynthia Fry Gunn Paul G. Haaga Jr. Arthur E. Hall Everett J. Hauck W. Kurt Hauser John L. Hennessy* Warner W. Henry Sarah Page Herrick Heather R. Higgins Allan Hoover III Margaret Hoover Preston B. Hotchkis Philip Hudner Gail A. Jaquish Charles B. Johnson Franklin P. Johnson Jr. Mark Chapin Johnson John Jordan Steve Kahng Mary Myers Kauppila David B. Kennedy Raymond V. Knowles Jr.
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Donald L. Koch Richard Kovacevich Henry N. Kuechler III Peyton M. Lake Carl V. Larson Jr. Allen J. Lauer Bill Laughlin Howard H. Leach Walter Loewenstern Jr. Robert H. Malott Frank B. Mapel Shirley Cox Matteson Richard B. Mayor Craig O. McCaw Bowen H. McCoy Burton J. McMurtry Roger S. Mertz Jeremiah Milbank III Mitchell Milias David T. Morgenthaler Sr. Charles T. Munger Jr. George E. Myers Robert G. ODonnell Robert J. Oster Joel C. Peterson James E. Piereson Jay A. Precourt George J. Records Christopher R. Redlich Jr. Kathleen Cab Rogers
James N. Russell Richard M. Scaife Roderick W. Shepard Thomas M. Siebel George W. Siguler William E. Simon Jr. Boyd C. Smith James M. Smith, MD John R. Stahr William C. Steere Jr. Thomas F. Stephenson Robert J. Swain W. Clarke Swanson Jr. Curtis Sloane Tamkin Tad Taube Robert A. Teitsworth L. Sherman Telleen Peter A. Thiel Thomas J. Tierney David T. Traitel Victor S. Trione Don Tykeson Nani S. Warren Dean A. Watkins Dody Waugh Jack R. Wheatley Paul H. Wick Norman Tad Williamson Richard G. Wolford Marcia R. Wythes
*Ex officio members of the Board
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The Hoover Institution on War, Revolution and Peace was established at Stanford University in 1919 by Herbert Hoover, a member of Stanfords pioneer graduating class of 1895 and the thirty-rst president of the United States. Since 1919 the Institution has evolved from a library and repository of documents to an active public policy research center. Simultaneously, the Institution has evolved into an internationally recognized library and archives housing tens of millions of books and archival documents relating to political, economic, and social change.
The Institutions overarching goals are to Understand the causes and consequences of economic, political, and social change Analyze the effects of government actions relating to public policies
Generate and disseminate ideas directed at positive public policy formation using reasoned arguments and intellectual rigor, converting conceptual insights into practical policy initiatives judged to be benecial to society
Ideas have consequences, and a free ow of competing ideas leads to an evolution of policy adoptions and associated consequences affecting the well-being of society. The Hoover Institution endeavors to be a prominent contributor of ideas having positive consequences. In the words of President Hoover, This Institution supports the Constitution of the United States, its Bill of Rights, and its method of representative government. Both our social and economic systems are based on private enterprise from which springs initiative and ingenuity. . . . The Federal Government should undertake no governmental, social, or economic action, except where local government or the people cannot undertake it for themselves. . . . The overall mission of this Institution is . . . to recall the voice of experience against the making of war, . . . to recall mans endeavors to make and preserve peace, and to sustain for America the safeguards of the American way of life. . . . The Institution itself must constantly and dynamically point the road to peace, to personal freedom, and to the safeguards of the American system. To achieve these goals, the Institution conducts research using its library and archival assets under the auspices of three programs: Democracy and Free Markets, American Institutions and Economic Performance, and International Rivalries and Global Cooperation. These programs address, respectively, political economy abroad, political economy domestically, and political and economic relationships internationally.
The Hoover Institution is supported by donations from individuals, foundations, corporations, and partnerships. If you are interested in supporting the research programs of the Hoover Institution or the Hoover Library and Archives, please contact the Office of Development, telephone 650.725.6715 or fax 650.723.1952. Gifts to the Hoover Institution are tax deductible under applicable rules. The Hoover Institution is part of Stanford Universitys tax-exempt status as a Section 501(c)(3) public charity. Confirming documentation is available upon request.
The Hoover Institution gratefully acknowledges the support of its benefactors in establishing the communications and information dissemination program. Significant gifts for the support of the Hoover Digest are acknowledged from
Bertha And John Garabedian Charitable Foundation The Jordan Vineyard and Winery Joan and David Traitel
The Hoover Institution gratefully acknowledges generous support from the Founders of the Program on American Institutions and Economic Performance
Tad and Dianne Taube Taube Family Foundation Koret Foundation

and a Cornerstone Gift from
Sarah Scaife Foundation
Professional journalists are invited to visit the Hoover Institution to share their perspectives and engage in a dialogue with the Hoover community. Leadership and significant gift support to reinvigorate and sustain the William and Barbara Edwards Media Fellows Program are acknowledged from
William K. Bowes Jr. William C. Edwards Charles B. Johnson Tad and Cici Williamson
H OOVER DIGEST 2013 N O. 4

The Economy Taxes Intelligence Politics Health Care Science Education Immigration Iraq Egypt The Middle East Interview: Rand Paul Values History and Culture Hoover Archives

Hoover Digest, 2013, No. 4, Fall

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RESEARCH AND OPINION O N P U B L I C P O L I C Y 2013 NO 4 FALL

Research and Opinion on Public Policy

Managing Editor, Hoover Institution Press

boyd c. smith thomas f. stephenson

Tad and Dianne Taube Director

Deputy Director, Davies Family Senior Fellow

richard sousa stephen langlois david davenport donald c. meyer

Senior Associate Directors

Counselors to the Director

christopher s. dauer colin stewart eric wakin eryn witcher

denise elson jeffrey m. jones noel s. kolak

HOOVER DIGEST 2013 NO. 4 FA L L

Austerity Versus Stimulus

Another Uncertainty Principle

Many Happier Returns

Hoover Digest N 2013 No. 4

The Inequality Delusion

Lives in the Balance

Watching the Detectives

Hoover Digest N 2013 No. 4

Another Bad Bounce

The Coming Rate Shocks

Medicare on Life Support

Deflate the Disability Bubble

Hoover Digest N 2013 No. 4

Against the Grain

Private Schools Left Behind

The Value of an Immigrant

Kurdistan Seizes Its Moment

Hoover Digest N 2013 No. 4

We Are Going to Stand on Principle

Still the Essential Nation

Who Speaks for Black Americans?

Hoover Digest N 2013 No. 4

H istory and C ul ture

Windows into History

Hoover Digest N 2013 No. 4

Failure Is an Option A Very Good One

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Austerity Versus Stimulus

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Another Uncertainty Principle

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Hoover Digest N 2013 No. 4

Illustration by Taylor Jones for the Hoover Digest.