Heritage Foundation Leadership for America

Some argue that "our broadcast media owe us more coverage of an event that remains an important component of the presidential campaign," referring to the major political conventions.

James Gattuso notes, however, that viewers have more choices than ever before and are exercising them. Viewership of convention coverage on cable, for example, is up strongly.

We would add that those arguing that the networks should be forced (or shamed) into political coverage 1) generally are public officials who would benefit, directly or indirectly, from the coverage and 2) that they often make vague and questionable appeals to the 'public interest.'

But what is the 'public interest?' The networks base their decisions on convention coverage on their knowledge of what most viewers actually want to watch, which the networks have determined is almost anything but for the conventions. We submit that the networks know more about this than any government official. So in this case, the 'public interest' consists of forcing the public to watch things that it would rather not--or, at the least, driving many people to change the channel or turn off the set entirely.

Reason's Jacob Sullum also has a quick response to those who seek to guard our public interest.

The odds are against it, to be sure, but some at the United Nations are exploring 'new revenue streams', writes Neil Hrab, and you can guess what that means:

A document to be released this September will introduce the latest scheme.  The Department of Economic and Social Affairs (DESA) will present the General Assembly with a study that DESA head Jose Antonio Ocampo calls "proposed global taxes." The report will consider 5 levies: an airline travel tax, a weapons sales tax, a carbon tax, a tax on currency trading transactions, and?I am not making this up?a lottery.

Hrab despairs that the UN seems to have abandoned its championing of free trade and economic freedom--in vogue for at least a few months--as a means of development to return to that perennial favorite: 'global wealth redistribution.'

Just imagine, as Hrab puts it, "a great big imaginary bull's-eye on the part of the map that the United States occupies."

We have long been wary of the minimum wage and concerned that raising it further would cost some Americans earning the minimum wage their jobs and may increase poverty and welfare caseloads. Labor policy analyst Paul Kersey's testimony on the economic effects of the minimum wage is here and a recent Kersey commentary on raising it is here. 

The Employment Policies Institute responds to a recent proposal to raise the minimum wage:

Using poverty statistics to justify an increase in the minimum wage is simply an election year ploy that ignores the economic evidence on the minimum wage, which shows the job destroying effects of the minimum wage actually makes poverty worse.
...
Even more troubling, the majority (70%) of the working poor will receive no benefit from the proposed increase because they already earn more than $7.00-an-hour. The reason they are in poverty has little to do with their wage level and more to do with the number of hours worked and their family size, something a minimum wage increase would make worse.
...
?The latest poverty figures should stop any candidate or policymaker from considering an increase in the minimum wage this election season,? said EPI research director Craig Garthwaite. ?It is a poorly targeted economic policy that will decrease job opportunities for the least skilled and push more families into poverty.?

Outsourcing is the 'main issue' in the current presidential race.

Says who?

The Hindustan Times says so.

The Wall Street Journal opines (subscription required) that tax competition is yielding good results even in Old Europe. Greece and Holland are the most recent entrants in this race for better tax policy:

The Olympics may be over, but the games seem to have inspired Greece to join a new competition: Tax cutting. By announcing that the corporate tax rate will be cut by almost a third to 25% over the next three years, the Greeks have signaled their intent to join the race to become Europe's most dynamic economy. And the Olympic spirit appears to be contagious. Just after the Greeks, the Dutch announced their intention to take part as well -- although it's not clear they fully understand the rules of the game. Their corporate tax rate will be reduced to 30% by 2007 so they "remain competitive."

Look here for much more on tax competition. Look here for a good introduction and overview.

(via The Market Center weblog)

As the Belmont Club describes, it seems many in France are genuinely confused why Islamic militants in Iraq would kidnap and threaten to kill French journalists. From the BBC:

The BBC's Angus Roxburgh in Paris reports that a large crowd of people gathered in the city's Trocadero Square on Monday evening, to show their support for Christian Chesnot of Radio France Internationale and Georges Malbrunot of Le Figaro newspaper. Thousands in France demonstrated solidarity with the journalists He says French people have been appalled by their plight, and are baffled that the country's citizens should have been targeted by Iraqi militants, given France's vocal opposition to the US-led invasion of Iraq.

Baffled? They shouldn't be.

On the Volokh Conspiracy weblog, Todd Zywicki committed a post last week on this topic, with several worthwhile links. Also, be sure to read Zywicki's article (or the abstract at least) "Baptists? The Political Economy of Environmental Interest Groups."

And if Zywicki's article title above doesn't make any sense, you simply must turn away from whatever you're doing, mute CSPAN, and read Bruce Yandle's seminal "Bootleggers and Baptists: The Education of a Regulatory Economist" (PDF link).

Would you believe that the U.S. government, via NASA, is subsidizing research into flying cars? The AP reports:

To make flying simpler, NASA is working on technologies that would automate more pilot's functions.

In 10 years, NASA hopes to have created technology for going door-to-door. These still wouldn't be full-fledged flying cars ? instead, they'd be small planes that can drive very short distances on side streets, after landing at a nearby airport.

In 15 years, they hope to have the technology for larger vehicles, seating as many as four passengers, and the ability to make vertical takeoffs.

Their current prototype looks something like this, which shows more taxpayer fleecing than even the above implies.

And the second surprise? NASA acknowledges that flying cars are, at a minimum, decades in the future. Still, it's never too soon to start talking about regulation.

According to a new report from the Stockholm International Peace Research Institute (we are going by the AP's authority on all of this), the number of people killed in battle worldwide has fallen to its lowest level in the post-World War II age.

The report credits UN peacekeeping for the improvement, but we wonder whether it has been extensive enough to account for such low casualty figures in the face of many protracted conflicts in which the UN is not involved.

Simply amazing.

Some argue that Americans work too much. Workers need to better balance their jobs with the demands of family and leisure. The solution, they say, is for the government to impose a cap on the number of hours that can be worked in a week, as is now law in several European countries.

Carl Horowitz of the Mises Institute thoroughly debunks these notions.

As we discussed previously, few in the media seemed to have actually read the CBO's report on the distributional effects of the Bush tax cuts. From this charge we except the Detroit News, which has a simple table on the cuts that is worth more than the thousands of words committed elsewhere.

Take a look, print it out, hang it on the wall.

(via Instapundit)

Italy's newly appointed finance minister Aug. 26 spoke out in favor of Prime Minister Silvio Berlusconi's controversial 12.5 billion euro ($15.4 billion) tax cut package, the new minister's first official comments on the subject. ...In the finance minister's comments, carried by state broadcaster RAI, Siniscalco said that the proposed cuts in marginal tax rates and more of what he called "capitalistic measures" would help spark the Italian economy toward faster growth. He said that the cuts would be funded by reductions in other parts of the budget, from the privatization of state-owned companies, and by rising tax revenue coming from improved economic growth. "The Italian government is determined to break out of what has become a low-growth equilibrium," Siniscalco said. "Italy has been implementing reforms aimed at increasing growth and Italy is now ahead of France and Germany in this regard."

The President makes a surprising and welcome announcement, the AP reports:

President Bush on Thursday ordered Cabinet agencies to pay more attention to private landowners, states and local governments on how to manage the environment.

The executive order, bypassing congressional action, was issued by the White House without fanfare while the president campaigned in New Mexico. It is in keeping with Bush's goal of having the government defer as much as possible to local interests. One result could be that national environmental policy is shaped more by economic pressures from local projects.

The new rule will require that government "takes appropriate account of and respects the interests of persons with ownership or other legally recognized interests in land and other natural resources."

And so environmentalists are already hopping mad. "It's another signal to federal agencies that they're supposed to ignore enforcing the law and defer to local governments and landowners," Carl Pope of the Sierra Club told the AP.

Heaven forfend that landowners have any say over what happens to their property or that the federal government defer to localities that have a better sense of the on-the-ground situation and residents' preferences.

Maybe the order isn't so surprising, after all, in the context of the Administration's efforts on behalf of communities that depend on snowmobiles, described by Erin Hymel here.

The Columbia State reports on two professors who have been fired from Benedict College for refusing to adhere to the college's grading policy.

That policy? As of this past school year, freshman are assigned grades based 60 percent on 'effort' and 40 percent on academics (no scare ticks here). Sophomores face a 50:50 breakdown, and juniors and seniors are judged on actual academic performance.

Professors Larry Williams and Milwood Motley disregarded the policy and now are paying the consequences. "I did it [awarded grades] strictly on academic performance,? Motley told the State. ?They told us to go back and recalculate the grades, and I just refused to do it."

Despite backing from a faculty grievance committee, Williams and Motley were fired.

College president David Swinton defended the grading policy on the grounds that a student would have to try really hard to pass without understanding, at all, the subject matter. Students, he said, "have to get an A in effort to guarantee that if they fail the subject matter, they can get the minimum passing grade."

Grace-Marie Turner looks at yesterday's Census report on the uninsured and reveals what's going on behind the numbers:

The number is already all over the news: 1.3 million Americans joined the ranks of the poor between 2002 and 2003. That's according to this year's "Income, Poverty, and Health Insurance Coverage in the United States" report from the Census Bureau (PDF link), but there's so much context missing from reporters' coverage.

Here are a few points to keep in mind on today's numbers:

- The figures are from 2003, not from this year. Given the strong economic growth since 2003 and the major gain in working Americans (more Americans are working now than ever before, according to the Bureau of Labor Statistics), it is likely that poverty has decreased over the past year.

- Poverty is a lagging economic indicator and hits its peak a year or more after the end of a recession.

- That said, the increase in poverty stemming from the most recent recession was about half the increase from each of the previous two recessions. This chart compares how several recessions affected the poverty rate.

- In previous recessions, child poverty increased significantly, but the most recent recession affected child poverty little. The 1980 recession caused a 5.5 percentage point jump in child poverty. The 1990 recession caused a 2.7 percentage point jump in poverty. The 2001 recession, in contrast, caused only a 1.6 percentage point rise in child povery. This chart compares how several recessions affected child poverty.

- Welfare reform worked: The 1996 welfare reform drove down black child poverty from 42 percent, about where it had been stuck for decades, to 30 percent in 2001. In 2003, the rate hit 33.6 percent. See this paper for more on welfare reform, recession, and child poverty. See this paper for what remains to be done in welfare reform.

- The Census report shows that the number of Americans without health insurance grew. But the Census numbers on this have long been unreliable, coming in well above other measures, such as SIPP and MEPS, and undercounting Medicaid enrollees. This undercounting expanded in 2003. This chart shows the growing gap in Medicaid enrollment figures. In this paper, released today, Derek Hunter criticizes the Census Bureau's count of the uninsured, which by the Bureau's own estimation is unsound. Heritage's Stuart Butler suggests how to address the problem of uninsurance among small-business employees by offering tax credits here.

- The nature of poverty: As Robert Rector and others detail in this qualitative and statistical study of poverty in America, poverty, as defined by the government, has a very specific and often counterintuitive meaning. Some fact about the poor (more in this table):

• Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
• Seventy-six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.
• Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
• The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
• Nearly three-quarters of poor households own a car; 30 percent own two or more cars.
• Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
• Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
• Seventy-three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.

- The importance of work: As this paper by Robert Rector and Rea Hederman shows, a very large part of the income differences between America's highest and lowest income earners can be explained simply by quantity of work. Adjusting the 2002 Census data to include tax burden and government and non-government benefits (such as health insurance), Rector and Hederman find that if working-age adults with the least income worked as many hours as their higher-income counterparts, inequality drops. How much? In this scenario, the top fifth earn $2.91 for every $1 at the bottom. If welfare were further reformed to really require work, poverty would drop further than it already has since the 1996 reforms. This report discusses the relationship between parental work and child poverty. This chart shows the effects of accounting for household size, taxes, benefits, and quantity of work on income inequality.

- Father absence: Two-thirds of poor children reside in single-parent homes. If poor mothers married the fathers of their children, almost three-quarters would immediately be lifted out of poverty. If welfare were further reformed to encourage marriage, poverty would drop further than it already has since the 1996 reforms. This report explains the effect of marriage on child poverty. Look here for charts and statistics on the effects of marriage on poverty and other social ills.

Reason's Jesse Walker gets to the bottom of it all.

David Streitfeld reports in the L.A. Times on why economists are so confused about today's job market:

More than half a million unemployed people say their fortunes improved dramatically last month: They got a job.

Now if only someone could prove it.

According to the government's regular survey of the nation's households, 629,000 people started work in July. But when the government asked companies how many jobs they had added to their payrolls, the answer was only 32,000.

Again, the problem may be that these people just aren't being picked up by the payroll survey. And again, the household survey offers a better explanation:

But when the government asks 60,000 people directly about employment, as it also does every month, the jobs picture looks healthier. Although the 629,000 jump in July was unusually high, the cumulative increase in the household survey since March 2001 is 1.8 million jobs.

Streitfield tries puts a partisan gloss on the story, but the real issue remains: which survey better reflects today's economy? For many years, the payroll survey was the clear winner in that regard. We conclude, however, that today this is no longer the case.

Today's economy offers workers more opportunities and flexibility than ever before, much of which falls outside the bounds of traditional payroll employment. But the household survey picks this up clearly.

So is it partisan to prefer the survey that better measures what's going on today?

Or is it partisan to cling doggedly to the idea that payrolls remain a good measure of employment when so many measures indicate otherwise?

Macroeconomist Tim Kane and yours truly comment in today's USA Today on what's missing in the often-cited (but rarely questioned) payroll job survey:

The U.S. Bureau of Labor Statistics (BLS) recently snuck out a telling confession beneath everyone's radar: Its flagship payroll survey is likely undercounting hundreds of thousands of jobs.

Most economic observers were too busy fretting over the lackluster gain of 32,000 payroll jobs in July to take notice of the other positive indicators, let alone the quiet little study that acknowledges payrolls have a problem.

The study describes how job-changing can inflate the payroll survey's numbers artificially. When worker turnover is brisk, as in the late 1990s, millions of workers are counted twice when they switch jobs. About 3.9 million people changed employers during a typical month during the 1990s, but only 3.1 million do so now.

Fortunately, there is an alternative survey, also prepared by the Bureau of Labor Statistics. It doesn't suffer from the faults of the payroll survey, and its results are more in-line with what we know about today's economy:

The U.S. Labor Department's household survey, which is used to calculate the unemployment rate, is not subject to the job-changing effect. It surveys 60,000 households and counts self-employed consultants, real estate agents, farmers and other non-traditional workers who aren't on old-style payrolls.

In his July 20 testimony to Congress, Greenspan cited measures from the payroll and household surveys. Then the Federal Reserve, led by Greenspan, voted unanimously to raise interest rates. It said the economy is "poised to resume a stronger pace of expansion" and noted that labor-market conditions continue to improve. It's no secret which survey would lead to that conclusion.

See here for Kane's detailed critique of the payroll survey and here for our most recent jobs-numbers analysis.

No, we don't mean Christian Scientists, not exactly.

The idea, rather, is that groups like churches and synagogues could offer health insurance to parishioners that leverages the church community and adheres to members' ethical standards. No longer, for example, would devout Catholics be made to pay into risk pools that regularly dole out for abortion and other procedures with which they disagree. At a time when a national consensus on such issues of medical ethicality appears unlikely, faith-based health care programs could give individuals the ability that they now lack to pursue their own moral prerogatives.

Megan McArdle, no social conservative, discovers the role of marriage in preventing poverty and loses a bit of her skepticism towards the President's marriage initiative.

She concludes that, among too many poor, the culture of marriage has been broken and that her libertarian instincts (which we share) may mislead her on this issue:

Poor women want to get married just as much as middle class women do, but the social environment they live in just doesn't seem to enable it. Marriage seems to be better for everyone, but can the institution regenerate itself? And if not, what can? Predictibly, I don't expect any government campaign to amount to much--the government is best at writing checks, not changing people, and besides, my skin gets all crawly when the government starts telling people how to live. But what then?

For more on marriage and poverty, see The Positive Effects of Marriage: A Book of Charts (this is a must-read),  Understanding the President's Healthy Marriage Initiative, and  Marriage: Still the Safest Place for Women and Children. Find even more on this topic here.

California's Legislature commissioned a report on outsourcing that, to its surprise, concluded that the practice can benefit American workers:

"Because of the dynamics of the U.S. economy and offshoring's expected effect on productivity, the overall, longer-run effect of offshoring may be to increase living standards at home," they wrote.

How can offshoring preserve jobs? Consider the case of a company that's increasingly beset by foreign competition and can no longer turn a profit. Its choice might be to close down - taking all its jobs with it - or farm out some of its tasks to overseas workers, thus preserving the remaining positions.

"By sacrificing a small proportion of the jobs offered by the company, the other jobs remain," the paper said.

That's not all. The researchers also suggest that offshoring can even create new American jobs.

Companies looking to invest money in expansion base their decision on the projected rate of return. If, by offshoring some jobs those companies can earn a higher return, they are more likely to go ahead with the investment, which then will create more jobs at home.

Legislators had hoped to use the report to gin up support for legislation that would ban the state and its contractors from using offshore outsourcing and to score political points. (The report nonwithstanding, the bill passed.) And now? It's unclear whether the report will be released at all.

Five more bills that would restrict outsourcing are still pending.

Since revisions are likely to be in the offing, anyway, why not plug in a section on insourcing, which is the other side of the coin? California, after all, benefits more from foreign firms hiring U.S. workers than any other state:

California ranks first among the states with 713,500 "insourced" jobs -- those in the U.S. operations of foreign companies -- according to a report released...by the Organization for International Investment.
...
According to the report, California also ranks first in insourced manufacturing jobs in the U.S., with 193,000. The number of insourced jobs in the state grew by 156,000, or 28 percent, during the past five years.

The report also noted that U.S. subsidiaries of foreign firms pay their employees, on average, 16.5 percent more than U.S. companies.

We wonder what California's Legislature would have to say about, say, the government of an Indian state banning the use of software developed in the United States.

We've written before about the Pension Benefit Guaranty Corp., a government entity that insures private-sector pension plans, and the chance that it will require a massive injection of taxpayer money in the near future.

Richard Ippolito, former chief economist at PBGC, is worried, too:

[PBGC] had a surplus of $9.7 billion at the end of 2000 but a deficit of $11.2 billion at the end of 2003. Pension plan underfunding stands at more than $350 billion, which increases the likelihood that more pension plans will go under and taxpayers will eventually be called upon to provide a bailout.

Dan Drezner calls PBGC "an arcane policy entity..that I fear will be making news in, oh, about five years."

New orders for durable goods surged ahead 1.7 percent in July, far outstripping analysts' expectations, to $195.6 billion, according to numbers (PDF link) released today by the Department of Commerce. To date, new orders for 2004 are 12.4 percent ahead of levels in 2003.

Driving the gains was improved demand for airplanes, machinery, and communication equipment.

Unfilled orders posted a gain in July of 1.2 percent, hitting 533.5 billion.

Though defense spending on durable capital goods declined, non-defense capital goods more than offset the drop, pulling ahead 9.0 percent, the largest gain since mid-2002. This news is especially welcome, as capital spending is a good indicator of businesses' rising confidence in the economy.

There are two Americas, conclude Heritage's Robert Rector and Rea Hederman. "John Edwards is correct: There is one America that works a lot and pays a lot in taxes and another that works less and pays little, but the reality is the opposite of what he suggests. It is the higher-income families who work a lot and pay nearly all the taxes."

The bottom line: "Raising taxes even higher on hard-working families would be unfair and, by reducing future investments, would reduce economic growth, harming all Americans in the long run."

The Atlanta Business Chronicle reports on a new form of outsourcing:

[S]ome companies, such as Avion Systems Inc., are hiring American workers and sending them overseas to work. The company refers to what it does as "reverse outsourcing."

The telecom company has sent 100 American workers to developing nations in Africa and Asia.
...
"The primary motivations for outsourcing are the cost savings and the need to focus on core processes while outsourcing noncore activities," [Kanchana Raman, president of Avion Systems,] said. "In this case, foreign nations need the expertise of the U.S. workers. They need to have people who have the experience and talent, and are willing to pay the price for such skills."

It makes sense. This is the same motivation that draws so many foreign firms to 'insource' operations into the United States: American workers' in-demand skills and high productivity.

Sen. Charles Grassley, Chairman of the Senate Finance Committee, has approached the Treasury Department with a wonderful idea: why not let workers rollover funds left in their Flexible Spending Accounts (FSA) at the end of the year?

As things stand, the 'F' in 'FSA' is a bit of a misnomer. Workers can deduct contributions made to the accounts, which can then be used to fund medical and dental treatments that are not covered by insurance--that part is plenty flexible. But this is not: any funds left over at the end of the year must be forfeited to the employer. It is no surprise that workers haven't been so eager to use FSAs.

Grassley proposes that the Treasury determine whether it can rewrite the rules on its own, without legislative input, to let workers carry over $500 from year to year. He urges, "Modifying this rule would help millions of Americans meet their health care expenses and make the FSA rules more rational."

This would be a welcome step. As Nina Owcharenko has argued, "While, ideally, employees should be able to carry over all unused funds and/or be allowed to withdraw and pay taxes on the funds," a $500 rollover is "long overdue and would offer greater personal control over health care spending." This change, she said, would be "a welcome injection of the free-market principle of consumer choice and consumer decision-making into the existing structure of employer-sponsored health care coverage."

The NY Times presents one argument against the President's force restructuring proposal of last week that we find, to be honest, less than convincing.

You may recall that Germany, working with France, led UN opposition to the war in Iraq, particularly in the Security Council. German Chancellor Gerhard Schroeder even took an anti-American turn when a 2002 election became too close for comfort.

To be sure, Schroeder and President Bush have agreed to put their differences in the past and focus on present relations, which are well above the nadir of early 2003. German help in Afghanistan and German contributions to the war on terror are welcome. Still, protests against America's foreign policy and military actions remain common in Germany, if not so much as a year ago.

And now, it seems, a new round of protests will soon be underway. These, too, will target the U.S. military, but with a twist: the prostestors' aim is for U.S. troops to stay in Germany:

People here were badly shaken by President Bush's announcement this month that the United States would withdraw up to 70,000 troops from Europe and Asia during the next decade. The First Infantry Division, much of which is based in this tranquil northern Bavaria town, is among the units certain to go. While the Pentagon has not yet announced which bases it will close in the redeployment, locals know that Schweinfurt is on the most endangered list.

"The Germans like to keep up hope," said George Ohl, the civilian public affairs officer at Ledward Barracks. "But they've been taking stock this week. They understand that economically, it will be a big loss."

We wish the Germans no ills economically, but propping up bits of the Bavarian countryside is surely not the best use of our limited defense funding. If such aid is needed, the State Department is no doubt at the ready.

For more on force restructuring, see this paper from Jack Spencer.

Senate Intelligence Committee Chairman Pat Roberts released a plan over the weekend to reorganize the nation's intelligence services that would cut the CIA into pieces. Reaction has been swift and negative. "This proposal reflects a dangerous misunderstanding of the business of intelligence," said former CIA director George Tenet. "Proposals such as this would damage national security rather than improve it." Secretary of Defense Donald Rumsfeld, though guarded in his comments as he'd not yet read the proposal, said yesterday, "We have to be careful about it... You don't want, in the middle of the war, to go tearing up the pea patch" A spokesman for Sen. John Warner, Chairman of the Armed Services Committee, said the senator "would have concerns about any plan that would transfer critical, well-functioning intelligence assets away from the Department of Defense during wartime." Dismantling the CIA "would, in my judgment, be a step backward," said acting CIA director John McLaughlin. Criticism of the plan has been bipartisan, too: "Disbanding and scattering the Central Intelligence Agency at such a crucial time would be a severe mistake," said Sen. Jay Rockefeller, ranking Democrat on the Intelligence Committee.

Last year, at about this time, nearly everyone in Washington was thinking about the same one thing: Medicare. Medicare reform was in the air, as were plenty of proposals.

To make sense of it all, Walton Francis, in a Heritage Foundation Backgrounder, put together "Nine Tests for Rational Medicare Reform," a straightforward list of "certain pitfalls and solutions" that should be "obvious" to policymakers seeking to reform Medicare for the better.

Unfortunately, nothing is obvious in Washington, especially in health care policy, but one of Francis's 'pitfalls' was especially prescient in that respect. Francis argued that any sensible reform package should "Allow flexible service areas" for competing Medicare plans. This proposal was a direct response to calls from some analysts that the government specify uniform service areas for competitive plans operating within Medicare to "prevent plans from cherry-picking the healthiest."

Specifically, Francis predicted that uniform service areas would "create an administrative disaster" and "preclude participation by small plans specializing in particular areas." In other words, such a rule would "restrict the number of plans willing to offer services in a given area and reduce the ability of plans to manage their networks efficiently" and "deprive, not foster, enrollee choice of plans and providers while driving enrollee costs higher than necessary."

In total, Francis feared that a competitive system hobbled by burdensome regulation would not be able to demonstrate the benefits of competition and could scuttle competitive reforms far into the future.

Pretty straightforward, right? But you can probably guess by now where we're headed.

From an article in yesterday's New York Times:

Insurers Object to New Provision in Medicare Law
...
[T]he Blue Cross and Blue Shield plans, the backbone of the nation's private health insurance system, and other insurers said it was not feasible for them to establish networks of doctors and hospitals spanning large regions like New England or the Midwest.
...
Alissa Fox, policy director for the Blue Cross and Blue Shield Association, said, "The only way to assure vibrant competition and expand choices for beneficiaries is to establish 50 state-based regions.''

If the administration insists on multistate regions, Ms. Fox said, "it will be virtually impossible for most private plans to be ready for 2006,'' when drug benefits and new insurance options are supposed to become available. The level of financial risk increases with the size of a region, she said, so insurers will need more capital and larger reserves to operate in a multistate region.

So Francis was right on the money.

But we're not in the business of gloating. Rather, our business is solutions, and Heritage's Robert Moffit has written broadly on what needs to be done to make sure that Medicare Advantage, the program concerned, works:

[T]he character and quality of the Administration's regulatory regime will also determine Medicare Advantage's success. Over-regulation could discourage plan participation and undermine the program's capacity to function efficiently. In a recent speech to the American Enterprise Institute, Leonard Schaeffer, Chairman of Wellpoint (the nation's second largest publicly traded health insurer), said that Wellpoint's participation would depend upon the character and quality of CMS regulations: "We have to see the regulations."

There is a crucial lesson here: Beyond stubborn congressional insistence on artificially capped plan payments that did not reflect changing market conditions, over-regulation proved to be particularly damaging to the older Medicare+Choice program, undermining the enthusiastic participation of health plans.

The Times's reporting is disturbing, but to be sure, the matter of service areas can still be fixed. We do wonder, though, what issues are likely to pop up between now and 2006 that could affect the success of Medicare Advantage. As Moffit concludes, the Administration and Congress have "no excuse to repeat the failed regulatory and payment policies that undermined Medicare+Choice." Heritage has detailed those failed policies previously (see, e.g., here and here), to the point that the steps necessary to avoid them should be obvious.

But nothing, of course, is obvious here.

Infoworld reports on yet another case of jobs being sent overseas. The story is so formulaic that we've just replaced the companies' names with X (the company outsourcing its jobs) and Y (the foreign outsourcing firm):

...energy giant [X] Corp. has signed a five-year agreement with [Y] Co.  to manage its IT infrastructure and support about 10,000 users across Europe.

Under the first phase of the deal, announced Monday, [Y] will manage [X]'s data center, servers and workstation services in Finland, Sweden and Norway. [Y] will initially support about 8,000 workstations, and provide on-site support and help desk services for about 10,000 users, [X] said.

The companies plan to extend the agreement at a later stage so that [Y] will manage infrastructure services in some of the other 17 countries in which [X] operates.

When completed, reports Infoworld, the deal could affect thousands of X's workers.

Does it matter, though, that X is Finnish energy giant Fortum and Y is the U.S. tech services provider Hewlett-Packard? While a good number of these positions will be located in Europe and filled by Europeans, many will employ American workers and any profits from the deal will bolster H.P.'s bottom line in the United States.

From one side, the Fortum/H.P. deal is outsourcing, sending jobs overseas to take advantage of efficiency, but from where we sit, it's insourcing, when foreign firms trust their operations to wildly productive American workers.

So which one is it? Both. Outsourcing is all about efficiency, and different workers in different countries have different comparative advantages. Out- and insourcing let these workers specialize, benefitting them and the companies that employ their services.

It is notable that U.S. workers' greatest comparative advantages are in complex and high-paying fields. On average, jobs insourced to the United States pay 19.1 percent more than other jobs.

The results: higher paying jobs and cheaper goods and services.

For more on comparative advantage and the gains to be had from trade in services, look here.

Glen Butler, a major in the Marines who is in Najaf, describes his experiences in the city and explains what's really going on on the ground:

I've learned that this enemy is not just a mass of angry Iraqis who want us to leave their country, as some would have you believe. The forces we're fighting around Iraq are a conglomeration of renegade Shiites, former Baathists, Iranians, Syrians, terrorists with ties to Ansar al-Islam and Al Qaeda, petty criminals, destitute citizens looking for excitement or money, and yes, even a few frustrated Iraqis who worry about Wal-Mart culture infringing on their neighborhood.

But I see the others who are on our side, appreciate us risking our lives, and know we're in the right. The Iraqi soldiers who are fighting alongside us are motivated to take their country back. I've not been deluded into thinking that we came here to free the Iraqis. That is indeed the icing on the cake, but I came here to prevent the still active "grave and gathering threat" from congealing into something we wouldn't be able to stop.

Withdrawal or pullback, he writes, is not the answer, and either would be disasterous to U.S. interests:

This country is breeding and attracting militants who are all eager to grab box cutters, dirty bombs, suicide vests or biological weapons, and then come fight us in Chicago, Santa Monica or Long Island. Falluja, in fact, was very close to becoming a city our forces could have controlled, and then given new schools and sewers and hospitals, before we pulled back in the spring. Now, essentially ignored, it has become a Taliban-like state of Islamic extremism, a terrorist safe haven. We must not let the same fate befall Najaf or Ramadi or the rest of Iraq.

"We can 'Live Free or Die' in New Hampshire or be oppressed by Vermont," Dorset, Vt., town manager Tom Glavin told the Monitor. Dorset has been in talks with officials from nearby Killington to join the latter in its push to secede to New Hampshire, where tax rates are low.

Some in Dorset are skeptical. "No one is being squeezed; We are taxed more heavily because we can be," said Melissa Hurst, who spends half of the year in New York City. "We can afford it."

Full-time residents, however, are less satisfied with taxation in Vermont. Manchester may be a wealthy town, but a town is made up of people," horse-breeder Ivan Beattie told the Monitor. "Towns don't pay taxes, people do."

We find Killington's idea intriguing. (Actual secession is very unlikely, requiring approval from, among others, Vermont's legislature.) If nothing else, this is a great example of the disasterous impact of excessive taxation and the great utility of tax competition.

Associate FDA commissioner William Hubbard argues that imported drugs aren't all they're cracked up to be--sometimes literally:

Proponents say that imported drugs are largely the same as FDA-approved medicines and that there is no evidence that these drugs are dangerous. But that is not what we are seeing on the front line every day.
...
In states with new programs to import drugs, evidence shows safety problems with foreign pharmacies outside our reach. A study of Wisconsin's program recently found that 35% of the foreign drugs coming into the state were unapproved or in violation.

Nina Owcharenko debunked several of the myths about drug importation earlier, including that imported drugs are subject to the same safety procedures as domestic drugs.

If you've not yet, be sure to read Norman Podhoretz's "World War IV: How It Started, What It Means, and Why We Have To Win" from the September Commentary. Podhoretz's historical thesis, evident in the title, is compelling, as is his formulation of the Bush doctrine.

At the very least, his tracing of the chronology of terrorism, coupled mostly with U.S. indifference, should be required reading.

Realists, including our own in-house, beware: you will find much with which to disagree in Podhoretz's prescriptions. But you knew that, right?

Pate McMichael looks into PART, the government's program rating tool, in Tech Central Station:

What have we been getting for our money?

Answering this question has gotten easier since 2002, when the Bush administration created something called the Program Assessment Rating Tool and made it a central part of its management agenda. By evaluating individual programs with hard questions that warrant a yes or no answer, PART reviews the individual purpose, scope, impact and relevance of every federal program and assigns each one an "effective," "moderately effective," "adequate" or "ineffective" rating. Programs that haven't gathered the necessary empirical evidence to measure results receive a "Results Not Demonstrated" rating.

McMichael agues that major cuts in federal spending are warranted. Around 40 percent of the programs measured so far can't even demonstrate any results.

Keith Miller and Alison Fraser took a look at PART back in the February and worked out two lists of programs to cut: the ineffective, which would save 17.3 billion per year and the ill-conceived, which would save 13.8 billion per year.

In an otherwise silly editorial urging increased public support of Washington's Metro subway system, the Washington Post does make one good point:

Local officials long have understood that public transit can never be self-sufficient. Revenue from fares doesn't match expenses on any system; in Washington, riders already pay a higher proportion of expenses than elsewhere. Successful systems invariably rely on some form of stable public financing to complement the take from fares. Such contributions benefit not only public transit users but drivers whose roads are less congested as a result.

(emphasis ours)

In other words, be very wary of anyone selling public transit who says that a new system "will pay for itself." Most won't even pay for ongoing expenses, let alone capital costs.

And even worse, cities that build transit systems will be forced for decades to suffer self-righteous editorials about the public's responsibility to pour ever more money into transit.

And what about public transit reducing congestion? Well, the results are likely more disappointing than the Post would care to acknowledge.

New overtime rules from the Department of Labor will come into effect on Monday. Heritage's Paul Kersey argues that these "clear, simple, and up-to-date standards will benefit both workers and employers." Kirk Johnson conducted an economic analysis to determine whom the rules will affect: in all, "a net 1 million workers will gain overtime protections through the new regulation."

It may be hard to believe, but more nuclear data has gone missing. What the Energy Department calls a "controlled removable electronic media" or CREM (we call it a "computer disk") has been lost in an "accounting discrepancy" (oops!) at the Department's Albuquerque field office. The disk contains information relating to nuclear weapons, says the Department, and all classified work has been stopped at the field office. "I am disappointed that we have found another case of lax procedures in protecting classified information," said DOE National Nuclear Security Administration Administrator Linton Brooks.

Note his choice of words: "disappointed" but not 'surprised.' The history of security breaches at DOE weapons facilities is long and goes back decades. We surveyed this history last month and concluded, "Without changes [in weapons lab oversight], that there will be more breaches is inevitable." Ron Utt goes into greater detail still in this paper from 1999.

We wrote yesterday and on Wednesday about a very misleading analysis from the American Federation of Teachers, the members of which oppose charter schools, that purports to show that charter school students fare worse than public school students.

Edu-weblog diva Joanne Jacobs notes that that AFT's campaign may already be bearing fruit. The Washington state teachers union, which is attempting to win a referendum in the state that would stop charter schools, is already trading on the AFT's (false) conclusions.

Pretty clever.

But we would be disappointed to learn that Washington's mathematics and statistics teachers are on board in this effort.

See the Jacobs link above for links to more commentary and analysis.

We wrote yesterday on the American Federation of Teachers' poorly conducted analysis of charter school performance.

Today, Jay Greene of the Manhatten Institute adds to the discussion with a piece in the NY Sun. Greene, for those who don't know, is one of the leading investigators of educational performance in non-traditional schools and co-author of Apples to Apples: An Evaluation of Charter Schools Serving General Student Populations (PDF link), a 2003 study that was the first to compare test scores between charter and public schools serving similar populations.

Go back a paragraph now and reread the title of that report if you skipped over it. The title is important.

In the Sun, Greene calls the AFT's comparative study "sheer nonsense" because "many charter schools are specifically designed to serve students with low test scores. Denouncing charter schools for having lower-than-average test scores is like denouncing drug rehab clinics for having more drug users than regular hospitals."

Thus the importance of the title of that year-old report: one cannot compare students' performance at two types of schools that teach very different populations of students.

But look at charter schools that teach the "general student population" and compare their performance to that of the nearest public schools, and the results are strikingly different from the ones at which AFT arrived. As described in Greene's study, charter schools outperform their public counterparts in math and reading:

Measuring test score improvements in eleven states over a one-year period, this study finds that charter schools serving the general student population outperformed nearby regular public schools on math tests by 0.08 standard deviations, equivalent to a benefit of 3 percentile points for a student starting at the 50th percentile. These charter schools also outperformed nearby regular public schools on reading tests by 0.04 standard deviations, equal to a benefit of 2 percentile points for a student starting at the 50th percentile.

The study?s strongest results came in Florida and Texas. In Texas, charter schools achieved year-to-year math score improvements 0.18 standard deviations higher than those of comparable regular public schools, and reading score improvements 0.19 standard deviations higher. These benefits are equivalent to 7 and 8 percentile points, respectively, from the 50th percentile. Florida charter schools achieved year-to-year math and reading score improvements that were each 0.15 standard deviations greater than those of nearby regular public schools, equivalent to a gain of 6 percentile points for a student starting at the 50th percentile.

Was AFT's analysis deliberately designed to avoid these results?

AFT's analysis is, in a sense, rather perverse because, as a standard, it would encourage charter schools to boost scores by focusing on less needy students. As Greene concludes, "Unfairly comparing charter schools to regular public schools punishes them for reaching out to the disadvantaged students that the regular public schools have most often failed."

By the 1980s, New Zealand's schools were a mess. As Maurice McTigue, former New Zealand Minister of Labor among many other cabinet-level positions, describes in Imprimus, the country was "failing about 30 percent of its children--especially those in lower socio-economic areas."

The problem seemed intractable because the standard remedy was ineffective: "We had put more and more money into education for 20 years, and achieved worse and worse results."

In the midst of a massive liberalization campaign, New Zealand decided to rethink education, too. "We hired international consultants...and they reported that for every dollar we were spending on education, 70 cents was being swallowed up by the administration."

For a pragmatist, what happened next is particularly heartening. "Once we heard this," says McTigue, "we immediately eliminated all of the Boards of Education in teh country." School control was devolved to local parents--not to administrators and not to teachers.

As radical as that was, New Zealand went even further. Parents could choose among public schools or, if they wished, take a voucher for the exact amount of money that would have been spent at the public schools on their children and apply it to private-school tuition.

Many feared the result would be an exodus from public schools, where students tested significantly below their private-school counterparts. It never happened. Instead, competition and the threat of losing funding spurred public school teachers and administrators, and public school performance made up the gap within the first two years of vouchers. Three years after vouchers became available, 87 percent of students were attending public schools, compared to 85 percent pre-vouchers.

And the results? As McTigue describes, New Zealand "moved from being about 14 or 15 percent below our international peers to being about 14 or 15 percent above our international peers in terms of educational achievement."

New Zealand's experience is just another piece in the education-reform puzzle. The more pieces that are added, the more we wonder about the motives of those who oppose educational choice for American families who can't now afford to send their children to private schools.

The first missile is in place in Alaska. Five more are on the way and will be installed by mid-October.

And now Secretary of Defense Donald Rumsfeld is drafting the rules under which America's missile-defense system will be put into operation later this year, bringing to an end America's complete vulnerability to the threat of intercontinental missiles.

Maj. Gen. John Holly, who directs missile-defense development, expects to assess the system's readiness by mid-September. "We're continuing to accumulate information and data on a daily basis, and as we get closer to a place where we think it will be appropriate to brief the leadership, we will do that," he said to reporters.

The system will have two purposes. First, it will be a testing platform by which missile-defense development can be accelerated and new systems subjected to operational rigors. Second, it will provide some defense against the North Korean missile threat and undoubtedly serve as a deterrent to that country.

Deployment represents "the triumph of hope and vision over pessimism and skepticism," Rumseld told a conference crowd yesterday.

Taiwan President Chen Shui-bian will stop in the United States today before continuing on a trip to Latin America.

China warns that the stopovers may be dangerous! "The use of 'stopovers' by the Taiwan authorities as an excuse to conduct activities splitting China and sabotaging China-U.S. relations is a trick they have consistently been using," said a spokesman in China's Foreign Ministry. "We urge the U.S. side...not to conduct any official dealings and contact with Taiwan, not to allow important Taiwan political figures to use 'stopovers' as an excuse to engage in splittist activities."

"Splittist"? (The word seems to be of Chinese invention; compare this search with this one.)

Sen. Sam Brownback spoke recently at Heritage on the Taiwan Relations Act at 25.

This is a nice little comment (53 kB image) on European (and especially German) response to the President's plans for troop realignment, which will scale down European deployments.

Found via Instapundit.

For more on realignment, read Jack Spencer's analysis of the President's plan.

The Washington Post notes a new poll:

More than half of the respondents in a national survey, to be released today by the nonpartisan Partnership for Public Service, said they would not be interested in working for the federal government. Fifty-six percent explained their disdain by saying there was "too much bureaucracy" in the federal service. Nearly half (49 percent) could not come up with an answer when asked whether there was anything that federal workers -- other than members of the military -- do particularly well.

The Post describes this as an 'image problem' that government should labor to fix, but we think it's great news that Americans think highly of and prefer to work in the 'productive sector' of the economy.

We are no longer surprised when claims without basis are widely reported as fact, but what happened yesterday when a teacher's union put out a misleading (to say the least) report on charter school performance takes the cake.

"Analyses are always welcome, but first things first. . . . Surely the interests of children are better served by timely and straightforward information about whether charter school performance measures up to the claims made for it."

So said Bella Rosenberg of the American Federation of Teachers, a union of public school teachers that is fearful of the growing popularity of charter schools.

But, as write William Howell, Paul Peterson, and Martin West, all researchers at Harvard's Program on Education Policy and Governance, "bad information is worse than none."

And the AFT's analysis of charter school performance, which received so much coverage yesterday (e.g., see here, here, here, here, here, and here; NPR's headlines: "Students at Charter Schools Lag Peers" and "Charter School Scores Seen as Bad News for Bush") "tells us hardly anything about the relative effectiveness of charter schools," say these researchers.

Working with "mountains of data . . . released without public announcement" from the Department of Education, the AFT concluded, "Charter schools are underperforming" relative to public schools.

No surprise (though one who has relied on newspaper coverage of the study may be surprised to read it), the situation is actually a lot more complex.

As the Harvard researchers explain, AFT didn't account for the fact that charters "are typically asked to serve problematic students in low-performing districts with many poor, minority children." In other words, comparing the student bodies at charter and public schools without accounting for these features is like comparing apples and oranges. Making a direct comparison, as did the AFT, is meaningless.

And the AFT study doesn't analyze performance over time. What matters most in evaluating charter schools is their effect on students. By looking at just a single point in time, it is impossible to tell how much students have learned by attending charter schools and whether this learning is an improvement over what could have been learned in public schools.

Nor does the AFT take into account how long a charter school has been in operation. The Harvard researchers note that "Almost one-third of the charter schools nationwide were less than two years old" when the data used by AFT was collected. Schools often have difficulties in their first year or two of operation, as they hire new teachers, establish school policies, and teach curricula for the first time. Any serious comparison of public and charter schools' performance would have to evaluate whether the length of time a school has been open explains some differences in schools' performance and, if so, control for it.

These omissions are not merely caveats or nitpicking points; they are fundamental flaws in the AFT's methodology that undermine any confidence in their analysis's results.

And any reporter who's taken introductory statistics or econometric courses should have known this from the beginning. For all those whose stories are linked above, we recommend Heritage's computer- assisted research and reporting program, which is free for reporters. Sign up here.

A quick case from Overcriminalized.com: 

On April 3, 2002, Kay Leibrand surrendered to the police. She was fingerprinted. They took her mug shots. The 61-year old grandmother and software engineer was told that she had broken the law. She might go to jail or perhaps she would get off with just a fine. On May 30, 2002, she was arraigned. Her crime was allowing street-side xylosma bushes to grow more than two feet high.

Leibrand, who eventually cut her hedge to stumps and was threatened with major fines and jail time, is the victim of overcriminalization. As described in the full case study, "Palo Alto successfully attacked one of its own citizens with a criminal statute about plant size."

Read the full case study here. Very little legal jargon, we promise!

Kay Leibrand's case is emblematic of over-criminalization, which is when formerly civil matters are brought into the criminal realm in ways that break the bounds of the traditional limits of criminality. While criminal acts once required both a bad intent and a harmful act, today many Americans are charged as criminals though they've done nothing that fits the common-sense, traditional view of criminality.

Overcriminalization creates a huge burden on the criminal justice system, the limited resources of which could be better used to fight crime as it is traditionally understood. Overcriminalization leads to legal confusion, selective enforcement, and unfair prosecutions. It dangles massive and disproportionate penalties over the heads of citizens who are honest and otherwise law-abiding.

Zero-tolerance laws in schools, the prosecution of honest and successful businessmen and women, and criminal cases against doctors who may have made billing errors are all examples of the burden that overcriminaliation puts on those whose behavior is not criminal, as the term is commonly understood.

For more case studies, court cases, and commentary, visit Heritage's Overcriminalized.com.

Tech Liberation is a new group weblog hosted by technology guru Adam Thierer of Cato. Contributors include Heritage's James Gattuso, Braden Cox and Solveig Singleton of CEI, Thomas Pearson, and others.

We can tell from the first few posts up--on that awful idea that France create its own news network, the Apple/Real spat, and other topics--that this is going to be a daily read.

This is the hot book of the moment in France, according to a post on the news and technology website Slashdot. Bounjour Paresse, or 'Hello Laziness,' encourages French workers to embrace sloth. "Imitate me, mid-level executives, white-collar workers, neo-slaves, the damned of the tertiary sector," writes the book's author, Corinne Maier, as reported in this LA Daily News article.

As corporate life in France offers no chance of success, workers should "spread gangrene through the system from inside," she suggests. Maier argues that advancement in France's business world 'comes less from ambition than endurance,' as the Daily News puts it. 'Workers remain at their jobs until retirement, stymieing the promotion of those below them, she argues, yet a system of patronage and stiff legal protections make it difficult for employers to fire anyone.'

We would note that those who favor worker notification for outsourcing, extended unemployment benefits, mandatory employer-sponsored health coverage, and the like frequently point to France's success with all of these initiatives. We would also note that France's economy is expected to grow at about half the rate of the United States' in 2004 and 2005 and that unemployment in France is at 9.9 percent.

Anyway, Vive la France!

In what can only be heard as an ominous statement, Venezuelan President Hugo Chavez, who just survived a referendum on his presidency, told supporters yesterday, "Venezuela has changed forever." He added, "There is no going back." Chavez called the referendum a victory for opponents of globalized capitalism, reports the Houston Chronicle. Stephen Johnson and Ariel Cohen comment on what the United States needs to do to keep Venezuela in the democratic fold.

Investors Business Daily, a fine and honest newspaper, picks up our criticism from the other day of how media covered the CBO report on tax burden. The report shows that the Bush tax cuts shift tax burden ever so slightly away from middle tier earners and to the highest earners. Most stories we read on the matter reported exactly the opposite, as if no one had actually read the CBO report.

By now, everyone's heard of offshore outsourcing, by which American companies can obtain services from overseas. Less known, however, is insourcing, when foreign companies send jobs to the United States. For some time, insourcing has been growing more quickly than outsourcing, but it's still below the political radar.

The Organization for International Investment notes several facts about insourcing in the United States:

• U.S. subsidiaries of foreign firms employ 6.4 million Americans for a combined payroll of $350 billion.
• These jobs pay, on average, 19.1 percent more than the average U.S. job.
• About 34 percent of insourced jobs are in manufacturing.
• These subsidiaries count for 22.4 of U.S. exports.
• The number of insourced jobs grew by 7.8 percent per year, on average, over the past 15 years; the number of outsourced jobs grew by 3.8 percent per year, on average.

Find more information, including state by state statistics, on OFII's facts and figures page.

And now U.S. businesses, and the business press, are finally starting to take notice, as this article from Businessweek attests:

Judging by various outfits' plans, this trickle of reverse offshoring may well turn into a flood. In their attempts to pacify U.S. customers spooked by offshoring failures and bad publicity, these companies could end up creating more jobs than they take away.
...
Foreign investment for setting up U.S. subsidiaries and plants doubled, to $82 billion, between 2002 and 2003, according to the Commerce Dept. That means 400,000 new jobs, most of them tech-related, figures the Organization for International Investment, a trade association based in Washington, D.C. Over the same period, outsourcing has taken away about 300,000 U.S. jobs, according to tech consultancy Forrester Research. So, on a net basis, foreign outfits have actually added some 100,000 U.S. jobs.

Not surprising. As we have noted before, U.S. workers may cost more on an hourly basis, but are often productive enough to more than overcome that price disadvantage, especially for the most complex and lucrative services.

So as American firms are sending some of their less demanding tasks overseas, more and more foreign firms are looking to America to help with management and consulting, high-tech manufacturing, research and development, and marketing. And as Businessweek reports, among those foreign firms are some of India's outsourcing giants, like Wipro.

Economic pessimists who would count out the U.S. economy need to rethink their objections to free trade in services; the numbers are nipping at their heels.

A list of hearings published this morning in CQ Today:

* Senate Commerce 9:30 a.m., 253 Russell

Testimony from commission Chairman Thomas H. Kean, Vice Chairman Lee H. Hamilton and Homeland Security Undersecretary Asa Hutchinson.

* Senate Governmental Affairs 9:30 a.m., 342 Dirksen

Hearing on reorganizing the intelligence community with testimony from former CIA directors R. James Woolsey, Stansfield Turner and William H. Webster.

* Senate Armed Services 2:30 p.m., 325 Russell

Hearing on Pentagon implications of intelligence reorganization proposals.

Aug. 17

* Senate Armed Services 9:30 a.m., 325 Russell

Hearing on Pentagon implications of intelligence reorganization proposals.

* House Homeland Security 9:30 a.m., 2118 Rayburn

Testimony from Kean and Hamilton, State Department, FBI and Terrorist Threat Integration Center.

* Senate Governmental Affairs 9 a.m., 216 Hart

Testimony from families of Sept. 11 victims on the need for overhauls.

Aug. 18

* House Select Intelligence 9 a.m., H-405 Capitol

Kean, Hamilton, acting CIA Director John E. McLaughlin, FBI Director Robert S. Mueller III, former FBI Director Louis Freeh, former CIA Director George J. Tenet invited to testify in closed session.

Aug. 19

* Senate Judiciary 10 a.m., 226 Dirksen

Hearing on border security and commission recommendations dealing with federal law enforcement.

Aug. 20

* House Judiciary 10 a.m., 2141 Rayburn

Commercial and Administrative Law Subcommittee and Constitution Subcommittee hold joint hearing on commission's recommendation about the Pentagon's Technology and Privacy Advisory Committee.

Aug. 23

* House Financial Services 10 a.m., 2128 Rayburn

Hearing on terrorist financing.

Aug. 25

* House Select Intelligence 9 a.m., 2325 Rayburn

Kean, Hamilton, Tenet,McLaughlin, former CIA Director Robert M. Gates testify in open hearing on intelligence community restructuring.

* House Transportation 10 a.m., 2167 Rayburn

Aviation Subcommittee hearing on commission's air security recommendations.

* House Transportation 2 p.m., 2167 Rayburn

Coast Guard and Maritime Transportation Subcommittee hearing on seacoast security recommendations.

Aug. 26

* House Veterans' Affairs 10 a.m., 334 Cannon

VA preparedness for homeland security role.

August

* House International Relations Dates, times, rooms TBA

Hearings on terrorist sanctuaries, travel visas, role of public diplomacy.

Get through all that? That's 15 hearings, just this week, by our count, on terror and security-related matters. It's a wonder that the senior staff of the Department of Homeland Security has any time left for, you know, homeland security

"If this list doesn't scream for Congressional reorganization, I don't know anything that does," said one analyst friend of ours. We can't help but agree.

Of course, this is nothing new. James Carafano wrote on the need for oversight reform last month:

Supervision of the Department [of Homeland Security]?s operations is fragmented and incoherent. In the Senate, the Government Affairs Committee provides nominal oversight, while the House has established a temporary select committee. Nevertheless, jurisdiction over Department activities remains split among dozens of committees and subcommittees in both houses. The result has been oversight overload. From January to June 2004, Department representatives testified before a staggering 126 hearings. That?s an average of one-and-a-half testimonies for every day of the legislative session. In addition, a typical day for the Department includes at least a dozen meetings or briefings to legislators and staff.

And as Carafano describes, this fragmented oversight has already had a tangible effect on homeland security.

Reuters goes gaga over a new report from the CBO. Reuters' lead:

President Bush's tax cuts have transferred the federal tax burden from the richest Americans to middle-class families, with one-third of them benefiting people with the top 1 percent of income, according to a government report cited in newspapers on Friday.

Let's take a look at how the 'transfer' is going.

The Richest Americans
According to the CBO report, the top 20 percent of income earners would have paid 64.0 percent of federal taxes in 2004 without the Bush tax cuts. As it is, with the Bush cuts, they will pay 'only' 63.5 percent. And what happens in 2005? The top earners would have paid 64.0 percent of federal taxes but now, because of this egregious 'transfer,' will pay only 64.3 percent (no sic!), which to our reading looks like an increase in tax burden.

The proportion of federal taxes that will be paid by the top 20 percent of earners is higher under the Bush tax cuts from 2005 through 2010, according to the CBO report that Reuters purportedly cites. From 2011 through 2014, as far into the future as the report projects, the top 20 percent of earners will pay, under the Bush tax cuts, the same proportion of federal taxes that they would have without the Bush tax cuts.

Middle Class Families
Now let's look at the middle 20 percent of earners. In 2004, they would have paid 10.4 percent of federal taxes without the Bush cuts. With the cuts, they will pay 10.5 percent of federal taxes. Note, however, that because of the cuts, the federal tax burden for the middle 20 percent of earners dropped from 16.5 percent to 14.6 percent. In other words, these earners are paying a slight bit more of federal taxes, but a lot less in federal taxes. In other words, their taxes were cut.

The proportion of federal taxes that will be paid by the middle 20 percent of earners is slightly higher (one-tenth of a percent) in 2004 and 2006. The proportion of federal taxes that will be paid by the middle 20 percent of earners is lower in 2005, 2008, 2009, and 2012. It is unchanged in the other years through 2014, as far into the future as the CBO report projects.

To Summarize
From 2005 to 2010, the tax cuts that Reuters reports have "transferred the federal tax burden from the richest Americans to middle-class families" raise the comparative tax burden for the richest Americans and lower the burden, a bit, for middle-class families. Throughout the time period, the actual tax burden on both groups is reduced.

And it's not just Reuters. The Post, for example, headlines "Tax Burden Shifts to Middle," which is a good headline, if false

Don't believe us?
You don't have to. Click here (PDF link) for the CBO report and look at 'Table 4' on page 13.

Venezuelan President Hugo Chavez said yesterday that it would be "impossible" for him to lose the recall vote scheduled for this weekend.

Recall several factors in the election that Stephen Johnson listed back in June:

• On May 18, a slim majority of pro-Chávez deputies in the National Assembly passed a law expanding the Supreme Justice Tribunal from 20 to 32 justices and made it possible to approve nominees and remove incumbents by simple majority vote. A subsequent ?packed? court could concoct reasons to stop the recall or allow Chávez to manipulate the results.
   
• The CNE-designed ballot appears to favor President Chávez. According to the Miami Herald, it asks voters if they think their popular and democratically elected leader should ?leave office early,? with a ?no? box placed above ?yes.?
   
• Fraud is possible with the government?s purchase of electronic voting machines from a company of which the government is now part-owner. The decision to replace the old system was reportedly made in a secret meeting of the three pro-Chávez CNE members. Similar paperless machines have come under fire in the United States for software that can be rigged and weak audit trails.
   
• Unfair distribution of identification cards could deflate the number of opponents who can vote while increasing the ranks of Chávez supporters. Electoral officials reportedly have delayed or denied new credentials to voters who signed the recall petition, while credentialing teams in military trucks circulate in neighborhoods where Chávez is popular.
   
• Chávez continues to intimidate opponents. Government police claim they found fake ID cards, computers, and printers in raids on offices of an opposition party this month, but witnesses say they saw the police carry in suspicious bundles. The government has charged referendum organizers with conspiracy for accepting a grant from the U.S.-funded National Endowment for Democracy, even though the Chávez administration has accepted thousands of doctors, teachers, and intelligence officers from Cuban dictator Fidel Castro.
   
• Chávez commands huge state resources. He has earmarked $1.7 billion to spend on the poor. Oil income has been diverted to an account in a state-owned bank where it allegedly funds the president?s campaign. Chávez can command radio and TV stations to broadcast his speeches without equal time for opponents. And in June, he revealed plans to enlist millions of ?patriotic? electoral patrols to surveil neighborhoods, under the authority of a campaign committee made up of high government officials.

So when Chavez says "The advantage we have over the opposition is such that it's impossible there will be a surprise," he is probably, and unfortunately, right.

In a paper released yesterday, Johnson and Ariel Cohen conclude simply, "Hugo Chávez is no democrat." The United States, they write, "should redouble efforts to ensure that pluralism and free choice defeat authoritarianism and misery."

What a great title for this editorial in the Monitor-- "Congress, Reform Thyself, Too." Good points within:

While Congress has been quick to move on the commission's findings relating to the executive branch, it still hasn't turned a much-needed eye on the way it oversees how the administration collects, analyzes, and disseminates intelligence - even though the commission called such oversight "dysfunctional."

Since the recommendations were made last month, no less than nine congressional committees have come forward with legislation related to reforming the intelligence community. Such duplication perpetuates a waste of time and effort. It can also mean the same public officials must deliver roughly the same testimony to each committee.
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Streamlining intelligence oversight must go hand in hand with reforming intelligence itself. As the commission notes, that is one of its most difficult, but essential, ideas.

For a different take, but similar conclusion, from James Carafano, look here.

The BBC reports on economic growth in Singapore:

Singapore's economy grew at a rate of 12.5% in the three months to June from the same period a year earlier.

It is the fastest quarterly expansion in a decade, and confirms the country's status as one of Asia's fastest growing economies.

The acceleration comes despite slowdowns last year due to SARS.

What could be causing this spurt of economic energy? We don't think it's any coincidence that Singapore is number two in Heritage's Index of Economic Freedom. Singaporean entrepreneurs enjoy an almost nonexistant tariff rate on imports, low taxes and government spending, low inflation, few restrictions on capital flows or banking and finance, and little regulation or violation of property rights.

Singapore isn't perfect (in some sectors, government intervenes too much), but it's lesson should be clear: business environment matters to growth a great deal.

Alex Tabarrok notes a killer headline in yesterday's NY Times.

The article to which he links is Judith Miller's summation of Paul Volcker's Monday press conference.

The only item from Volcker's preliminary report on the Oil-for-Food scandal Miller saw fit to pass on: UN Secretary-General Kofi Annan's warning staff members that being caught hiding, removing, or destroying documents relevant to the investigation "could result in disciplinary action."

Well, we hope so.

So, yes, "a slow start," as Mr. Volcker put it, seems about right.

The U.S. Federal Reserve raised interest rates a quarter point this afternoon to 1.5 percent, as widely expected.

In its explanatory statement, the Fed waxes optimistic on the state of the economy. Despite a recent "softness...The economy nevertheless appears poised to resume a stronger pace of expansion going forward."

Fed Chairman Alan Greenspan cites high energy prices as the culprit for any slowing of growth. "It is nonetheless the case that the little bulge in inflationary pressures seems to have created a soft patch here and it is something obviously we are watching very closely," he said in testimony to Congress last month.

In today's release, the Fed states that "a portion" of recent inflation is due to "transitory factors," or, again, high oil prices, which may abate shortly. Prices today are still at a recent high and may rise further still with risks to production in Iraq, Russia, and Venezuela. Many analysts believe, however, that oil is unlikely to rise much above $50 per barrel, the point at which Chinese demand is likely to wane.

And while the Fed stuck to its guns that "accommodation can be removed at a pace that is likely to be measured" (i.e., expect rates to continue their 'measured' rise), it promised to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability" (i.e., "we're not totally inflexible about all this"). This is the Fed's promise that it will not let the economy stall by tightening policy too quickly.

The President has tapped Rep. Porter Goss of Florida today to head the CIA. Goss heads the House Intelligence Committee and is a former CIA officer.

Heritage Foundation president Ed Feulner has called Goss "well qualified" to head the CIA.

In discussing the 9/11 Commission's report from last month, Heritage's James Jay Carafano argues that reform of the national intelligence community must be a priority and that appointing a CIA chief is a first step in that direction. Given the ongoing terrorist threat, Carafano urges that "lawmakers should waste no time" considering the nomination. But an appointment isn't the last step either. "It's time to act" on intelligence reform, writes Carafano.

An agenda for that reform is described here.

The AP reports on Paul Volcker's press conference yesterday on his investigation into U.N. complicity in the Oil-for-Food scandal. Volcker says that a report will be available in mid-2005.

Quotes:

• "[T]he allegations of misconduct and maladministration are serious."
• "If you really wanted to wrap this up, in the sense of chasing down every contractor involved here and what happened to the money, I think we'd be here until the next century. Obviously, we want to investigate enough of these cases to have an understanding, as best we can, of what happened."
• On the scale: "10,000 boxes ... with millions of pages."
• The release of its report next year "does not mean the investigation as a whole will be completed because there's so much going on outside the U.N. that we have to follow up on as well."

After having the refrain pounded into their skulls for months now, many believe that the administration?s signature education initiative No Child Left Behind is underfunded?that is, that it imposes requirements on the states without providing adequate monies to accomplish them. No fans of unfunded mandates on the states, we have taken this argument seriously but still found it wanting.

And now more evidence proves the fallacy of underfunding once again.

As The Washington Times reported last week, the Administration has been distributing a new publication entitled "10 Facts About K-12 Education Funding," which details the funding of NCLB. It is surprising just how steep the funding increases have been (think Mt. Everest?see especially the chart showing the increase in per pupil funding since 1965 on page 5).

The publication directly rebuts the NEA's continued attempts to undermine NCLB and its reforms, which impose some (apparently unwelcome) accountability on schools and teachers. The Times reports that the union launched a "grassroots campaign to rally public opposition to NCLB and Mr. Bush's re-election" at their annual meeting in July. But federal spending on education is higher than ever before and comprises a larger proportion of total education spending than ever before. As regards funding, which NEA and its allies say is the issue of the day, we are not sure what is the NEA?s specific complaint behind all its rhetoric and posturing.

In fact, as noted by the House Committee on Education and the Workforce and reported in newspapers like the Las Vegas Sun and Michigan's Holland Sentinel, some states are returning education funds to the federal government that they have been unable to spend quickly enough. As Committee Chairman John Boehner puts it, the Feds are just "pumping gas into a flooded engine." Find the Committee?s report here.

Another pickup from the Times's editorial page. The Times is concerned that Congress will not reform its oversight of homeland security as called for in the 9/11 Commission's report:

Congress has so far ducked what the commission called one of its "most difficult and important" recommendations - its earnest plea that Congress get its own house in order by streamlining the rules, regulations and insanely redundant committee structure that make it impossible to exercise rational oversight over the intelligence activities of the executive branch.

The commission's other proposed reforms - calling for a new national intelligence director and a new National Counterterrorism Center - will not work unless Congressional oversight changes too. Yet almost nobody really expects much reform. For all the talk of the need for sacrifice in today's new and dangerous world, Congress seems unwilling to confront the task of tearing down a committee structure that members prize above everything except re-election itself.

Heritage's James Carafano has written extensively on the need for reform of congressional oversight of homeland security. He described the problem clearly in this paper from early July:

Congressional oversight?lead by committees and professional staffs with the experience and expertise to address difficult, complex issues?plays an important role in achieving these ends. To this point, the Congress has failed to provide that kind of leadership.

Supervision of the Department?s operations is fragmented and incoherent. In the Senate, the Government Affairs Committee provides nominal oversight, while the House has established a temporary select committee. Nevertheless, jurisdiction over Department activities remains split among dozens of committees and subcommittees in both houses. The result has been oversight overload. From January to June 2004, Department representatives testified before a staggering 126 hearings. That?s an average of one-and-a-half testimonies for every day of the legislative session. In addition, a typical day for the Department includes at least a dozen meetings or briefings to legislators and staff.

There's more on the faults of the current arrangements, and it's all worth reading. The Times is right--oversight reform is absolutely necessary.

Someone on the New York Times's editorial board has a penchant for Heritage studies (though we can only imagine how often he's overruled!).

The Times editorialized yesterday on the risk of a taxpayer-funded bailout of private pension plans:

In the past three years, bankrupt companies, mostly in unionized, old-economy industries, have dumped $11.2 billion in pension obligations on the Pension Benefit Guaranty Corporation, the federal agency that insures the pensions of 44 million people.
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Not surprisingly, the specter of a taxpayer bailout hangs over the pension agency, inviting comparisons to the savings and loan debacle of the 1980's. Things are not that bad - yet. As long as the economy and stock market improve, so should many pensions, since their health is tied to prevailing financial conditions.

But in one way, the S.&L. comparison is apt. In the 1980's, government missteps exacerbated the S.&L. crisis. Today, again, government bears some responsibility for current pension problems. Congress must take steps now, both to strengthen pensions and the agency that insures them.

Heritage's David John wrote on this issue in January, reaching a similar conclusion:

Twenty years ago, Congress faced a funding crisis in the savings and loan industry by allowing S&Ls to declare that they had more assets than they actually did. Congress also passed provisions that gave even more undeserved benefits to specific companies that had the lobbying muscle to get that language hidden in bills.
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As the American philosopher George Santayana noted, ?Those who cannot remember the past are doomed to repeat it.?

As John notes, both taxpayers and beneficiaries stand to lose out if the PBGC needs a bailout.

We wrote about it last week.

Today of all days, the Labor Department published its very first, preliminary assessment of the impact of job-changing on the payroll survey. It acknoweldges the Heritage Foundation's analysis from March 2004 that worker turnover has a significant effect on the payroll survey, inflating the total count by over a million jobs, but also by over-emphasizing job losses during business cycles when turnover declines. Since March 2001, BLS estimates that the "job-changing effect" has led to an overstatement of 251,000 job losses in currently published data.

Read the BLS study here (PDF link).

The Department of Labor's July Employment Situation Report is out this morning, and the news is good. We can already tell, at 8:30 in the morning, how this is going to be spun, though.

The economy created 32,000 net new payroll jobs in July--marking the 11th straight month of gains but coming in well below analysts' expectation of 247,000. But at the same time, the employment rate dropped a tenth of a percent, to 5.5 percent. So what's going on?

The key, once again, is the difference between the two employment surveys. The payroll survey measures employment at established firms, but omits employment by LLC partnerships and the self-employed. But LLCs are gaining in popularity at a good clip, bringing jobs with them, and more Americans are self-employed than ever before. None of these positions are counted in the payroll survey. Worse, as Tim Kane has explained, another flaw in the payroll survey causes it to overcount in times of great labor market flux, such as in the late 1990s.

According to the household survey, however, 629,000 Americans entered the workforce in July, causing a net drop in unemployment of 52,000. So the gap between the two surveys, which had narrowed a bit in recent months, is back and strong.

What does this mean? It means that more Americans are working than ever and that they're taking advantage, more than ever, of the flexibility of today's economy and labor market.

So we already know exactly how this is going to be spun, but we know the real story, too.

Key numbers:

• Payroll employment has risen 1.5 million since August 2003.
• Health care added 20,000 jobs in July, bringing its total for the year to 292,000.
• Professional and business service employment continues to boom. The sector added 42,000 jobs in July, bringing it to 622,000 since its recent low in March 2003.
• Manufacturing added 10,000 jobs in July, nearly all in durables despite a larger-than-usual seasonal slowdown in auto production of 20,500 jobs. Manufacturing has added 91,000 since January of this year. Leading the pack this month were machinery and computer and electronic products, all business inputs that portend future growth.
• While part-time work grew in July, the number of Americans working part-time jobs for economic reasons actually declined by 23,000. This was more than offset by the 210,000 who chose part-time work for non-economic reasons--for example, so a mother and father could spend more time with their children.

Look here for in-depth analysis of today's numbers by Tim Kane and Rea Hederman.

A new article in the McKinsey Quarterly, excerpted by Forbes, explains why the debate over outsourcing is 'misplaced':

[T]he problem is neither trade itself nor globalization more broadly but rather the question of how the country should allocate the benefits of global trade. Trade in services, like other forms of international trade, benefits the United States as a whole by making the economic pie bigger and raising the standard of living. Outsourcing jobs abroad can help keep companies profitable, thereby preserving other U.S. jobs. The cost savings can be used to lower prices and to offer consumers new and better types of services. By raising productivity, offshoring enables companies to invest more in the next-generation technologies and business ideas that create new jobs. And with the world's most flexible and innovative economy, the United States is uniquely positioned to benefit from the trend. After all, despite a large overall trade deficit, the country has consistently run a surplus in its international trade in services.

In other words, the tradeoff isn't between jobs at home and jobs abroad, but between low-end jobs today and even better jobs tomorrow.

Economist Russell Roberts makes a similar point today about our tendency to "romaticize manufacturing jobs and look down on service jobs":

The American economy is very good at creating jobs. The key question is what kind of jobs. Imagine keeping long-distance technology unchanged at its 1920 level. We'd have saved the jobs of all those telephone operators and made the world poorer and more isolated. We let those jobs go and created new jobs in all the industries we couldn't have dreamed of in 1920.

Ironically, the process of substituting technology for people is what creates our rising standard of living over time. It appears to be the opposite?surely we can't get richer as a people if we're losing jobs in the telephone industry?surely that makes us poorer. But it makes the nation as a whole richer to have cheap long-distance. The telephone operators who lose their jobs have to find a new job. Sometimes it will pay less because their skills may not be as useful in other industries that will arise. But their children and grandchildren inherit a richer world where people are closer together. Do that in industry after industry and you get a change in our standard of living over the last 100 years of something between ten and thirty TIMES higher.

Technological disruptions and rising productivity (whether from outsourcing or innovation) can cause job losses, but these are a necessary part of an economy that's constantly elevating resources to more efficient uses. The end result of so much such disruption over so many years is America's great and still rising prosperity.

Policies that would slow or stifle the market would be a salve to those who suffer from progress, but these come with costs, both immediate and long-term. Restrictions on outsourcing, for example, cost consumers and taxpayers soon after they're enacted. And in the end, the cost is dearer: spans of compounded growth sacrificed.

Who's afraid of media consolidation in the Internet and digital cable age? Not Slate's Jack Shafer:

In the long run, competition and the dynamism of markets keep any five media conglomerates from dictating "what most citizens will learn." But corporate ownership of media so rankles [The New Media Monopoly author Ben] Bagdikian that I doubt the variations of who's on top and who's slid into corporate oblivion make much difference to him. I'm sure my testament that for all the news media's faults, its quality and variety have never been greater, sounds Panglossian to Bagdikian. But I challenge him to name a time in America's history when the news media did a better job than it does today. Who longs for the days of William Randolph Hearst? Of three broadcast networks? Of the days before the Internet?

We fell out of our chair upon reading Shafer's final thought: "On the hunch that Bagdikian plans to write an eighth edition of The Media Monopoly, I invite him to read my next column about ending spectrum socialism and freeing the airwaves to true competition."

Is Shafer talking about spectrum as property, as opposed to today's policy of spectrum as regulated privilige? See, e.g., here and here

And James Gattuso comments on media concentration and the FCC's station ownership rules here.

Economist Peter Gordon posts on the last bastion of industrial policy in the United States:

Just a week ago, the LA Times reported that the new LA-Pasadena light-rail Gold Line carries approximately 15,000 riders per day instead of the expected 30,000. Given the costs of the project, you don't want to know the costs per rider.

Today, the LA Times reports that local leaders have agreed to throw another $1.3 billion at the same project. It's other people's money. So, who's counting?

As a group, the 20 largest U.S. metro areas declined in transit use (all trip purposes; thank you, Wendell Cox) in the 1990s. Not relative decline but absolute decline.

As a group the areas with new (post-WWII) metros (San Francisco, Washington, DC, Atlanta and Miami) lost even more transit users than the group of 20.

There are a hundred ways to lay out the evidence and many have for many years. But it makes no difference. It's all part of "Smart Growth", this country's last bastion of Industrial Policy.

Ron Utt surveys the wastefulness of transit spending here.

The AP reports that the barrel price of crude oil fell by over $1.30 on the New York exchange, late yesterday, a significant drop.

As we wrote yesterday, recent price gains, especially in futures, have been in risk premiums. Small changes in the future outlook--say the chance of Russia's Yukos being forced to curtail production dropping slightly or a quiet spell in terror activity--can thus have great leverage on the price as buyers and sellers adjust their expectations.

In other words, expect some price volatility, but with a downward trend as sales move past the summer season. And if the Yukos matter is resolved in a way that maintains continuity of production or if terror in the Middle East winds down to lower levels, prices will fall even further.

The 9/11 Commission?s report has created a sense of urgency in Washington, reports the New York Times, and the Hill is scrambling to enact the Commission?s proposals and reforms, with one exception. Unsurprisingly, Congress is loathe to reform itself:

The Senate leadership has yet to identify members of a select working group who are supposed to map a plan for streamlining Congressional oversight. The Republican chairmen of the House and Senate armed services committees?two panels that might have to relinquish significant power?have not offered their views. The bulk of the study to this point has been on how organizations outside Congress can be improved.

In fact, nine separate congressional panels will hold hearings on the report this month.

Congress?s reluctance isn?t really surprising because reforming congressional oversight of homeland security will necessarily invade turf and upset today?s balance of power between committees, which will obviously face much resistance. It?s worth noting, as well, that homeland security is a well-funded department and with such wealth comes power, especially (and unfortunately) in Congress.

Heritage?s James Carafano has argues that consolidated oversight of homeland security is long overdue, as current oversight is ?fragmented and incoherent.? For example, ?From January to June 2004, Department [of Homeland Security] representatives testified before a staggering 126 hearings.? But that?s not all: ?A typical day for the Department includes at least a dozen meetings or briefings to legislators and staff.?

This great wasting of Department official?s time isn?t the worst of it, though, writes Carafano. Muddled oversight ?exacerbates the challenge of building a comprehensive, focused national security regime.? And this has tangibly impacted our nation?s security already.

Is the highway lobby in the driver's seat? Andrew Gillies, reporting for Forbes, seems to think so. Gillies reports that a $299 billion highway spending proposal may have the President's tentative approval, despite an earlier veto threat on any bill costing more than $247 billion.

American Road and Transportation Builders Association, a highway lobby group, is ecstatic: "We did a pretty good job of framing the overall debate and elevating Congress' awareness on the need for significantly growing highway and transit investment," said a spokesman. ARTBA members stand to earn billions from a deal.

Still, nothing's been signed yet, and there's ample time for any compromise to fall apart.

As Alison Fraser and Jonathan Swanson write in a paper released today, "President Bush should set an upper limit on exploding pork-barrel spending in the highway program by standing by his promise to veto any transportation bill much exceeding $256 billion."

We continue to pay close attention to the price of oil, as do many others, for the effect that it has on inflation and economic growth. While prices at the pumps have declined lately, crude on the wholesale market remains unusually expensive. Most analysts attribute this sustained increase to several factors, including rising demand (driven by economic growth in China), tight supply (reportedly, OPEC has little spare capacity for the short-term), government shenanigans in Russia, and the threat of terror, reflected in the market by a "terror premium" that may be as much as $10 per barrel.

Federal Reserve Chairman Alan Greenspan has expressed his belief that this premium may be "transitory" and that prices will return to near-normal levels over the next several months. Certainly, waning summer demand in the Northern hemisphere should ease the market's tightness to some extent over the next month or two, and this in itself may deflate the risk that an act of terrorism would cut supply to the extent that prices spike in response.

While oil prices are unusually high, it bears mention that they are not at "record high" levels, which many in the media have reported. Their error here is simple: oil is near its record price in nominal dollars, but not in real, or inflation-adjusted, dollars. Sure, a 50-cent Coke would be a deal today, but would it have been in 1950? Adjusting for inflation, that's nearly $4 in today's money, no bargain.

CNN explains what simple inflation-adjustment means in terms of prices:

Allowing for inflation, prices are near the level hit during the 1973 oil embargo and just over half those during the oil price shock that followed the 1979 Iranian revolution.

So, are we anywhere near "record high" prices?

The Associated Press looks into the winners and losers from this past weekend's WTO trade deal. The article is what we, unfortunately, have come to expect, a 'he said, she said' piece over whether farmers in the United States stand to benefit or lose from the deal.

That much should be clear from the lede: "Bush administration officials said Monday they expect U.S. farmers would gain more in export income than the farmers could lose in domestic subsidies under a new framework for World Trade Organization negotiations. Critics said the officials are wrong."

Excuse that the AP doesn't actually quote anyone who says, in any direct way, that the Administration's claim is 'wrong.'

Excuse also the omission that of the fact that U.S. farmers are the most efficient i the world, which may bring big dividends with increased accessed to foreign markets.

What galls us is something else entirely.

If the AP wants to report on the benefits of a trade deal, it ignores the group that stands to gain the most: consumers. With freer trade, consumers will likely enjoy lower prices and a greater variety of goods from which to choose. And as taxpayers, consumers will save some of the money that is now spent as farm subsidies and export subsidies. Whereas farmers are but a small part of the U.S. economy, we are all consumers and we all stand to benefit.

Shouldn't that count for something?

Kakha Bendukidze, economy minister of Georgia, is well on his way to making the country a free-market mecca, reports the Economist.

First there's privatization:

If you want to buy a dysfunctional boiler house, an international airport, a tea plantation, an oil terminal, a proctology clinic, a vineyard, a telephone company, a film studio, a lost-property office or a beekeepers' regulatory board, then call Kakha Bendukidze, Georgia's new economy minister. His privatisation drive has made him a keen seller of all the above. And for the right price he will throw in the Tbilisi State Concert Hall and the Georgian National Mint as well.

Then taxes:

Next year?if not sooner?he will cut the rate of income tax from 20% to 12%, payroll taxes from 33% to 20%, value-added tax from 20% to 18%, and abolish 12 kinds of tax altogether.

And industrial policy:

As to where investors should put their money, ?I don't know and I don't care,? he says, and continues: ?I have shut down the department of industrial policy. I am shutting down the national investment agency. I don't want the national innovation agency.?

And finally, his own Ministry of the Economy:

He plans, as his crowning achievement, to abolish his own ministry in 2007. ?In a normal country, you don't need a ministry of the economy,? he says. ?And in three years we can make the backbone of a normal country.?

We wish Minister Bendukidze and his countrymen the best luck, not that they'll need it. After all, with economic freedom comes economic growth. If Bendukidze is able to carry through his reform program, we will be interested to see how Georgia turns out, economically, in 5 years or a decade. Considering Georgia's internal and geopolitical problems, sustained growth would be a major achievement. Then again, there's a lot of room for improvement.

Reuters reports on a scoop from Jane's Defense Weekly that North Korea has at its disposal two new missile systems:

In an article due to appear Wednesday, Jane's said the two new systems appeared to be based on a decommissioned Soviet submarine-launched ballistic missile, the R-27.
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Jane's said the new land-based system had an estimated range of 2,500 to 4,000 km (1,560 to 2,500 miles), and the sea-based system, launchable from a submarine or a ship, had a range of at least 2,500 km.

The technology for the missiles reportedly comes from Russian sources and decommissioned submarines sold for scrap.

Ian Kemp of Jane's comments on North Korea's intentions: "It's pretty certain the North Koreans would not be developing these unless they were intended for weapons of mass destruction warheads, and the nuclear warhead is far and away the most potent of those," he told Reuters.

Kemp also had this to say about how the missiles might be used:

If you can get a missile aboard a warship, in particular aboard a submarine...you can move your submarine to strike at targets such as Hawaii or the United States, just as examples. Whereas it would be much more difficult to actually develop a ground-launched missile to achieve that sort of a range.

We can imagine few better arguments in favor of a national missile defense system, a preliminary version of which is now being deployed.

Baker Spring has spoken about how to address the North Korean missile threat. Of the ten principles he names, this one speaks loudly today:

The current vulnerability of the U.S. and its allies to nuclear attack by means of ballistic missile must end.

Delivery by ballistic missile is the only means by which an enemy could attack the U.S. today without encountering a significant defensive barrier. Consistent with a damage limitation strategy and a military posture that balances offensive and defensive forces, both the U.S. and its allies need to erect a significant defense against ballistic missile attack. Further, both should work to improve their defenses against the other means for delivering nuclear weapons, including terrorists, artillery, aircraft, cruise missiles, and ships.

For background, be sure to read Defending America: Ending America's Vulnerability to Ballistic Missiles.

With all of the dramatic demands for education funding, one might surmise that public schools are starved for cash and that more funding is the key to bolstering educational achievement.

One might be wrong.

If the solution to the problem of U.S. public schools? falling behind were merely to increase funding, the system should already be on the mend. But it isn?t: while spending has increased, educational results haven?t budged.

Consider this table showing increases in states? per-pupil expenditures versus results and the corresponding Wall Street Journal story:

When we cross-referenced spending increases with the National Assessment of Educational Progress reading scores, we found virtually no link between spending and performance.
...
Surely it's telling that, even after jacking up its education spending by 46%, the top-spending District of Columbia improved its scores by no more than Florida, which is at the bottom of the spending chart but has been at the forefront of reforms allowing choice and demanding accountability.

This is not anything new. As far back as 1966, when the government issued the exhaustive ?Coleman? report on the state of education, policymakers had an inkling that the funding/achievement link was tenuous at best. Among the report?s findings,

Per pupil expenditure, books in the library?show virtually no relation to achievement if the ?social? environment of the schools?the educational backgrounds of other students and teachers?is held constant.

Bottom line: A ?No questions asked? approach to school funding, which some propose, is not a credible proposal to improve educational outcomes.

James Carafano writes that the 9/11 Commission?s report should have said more about how successful post-9/11 security measures have been, and Dan Byman writes that it isn?t a matter of dumb luck that the United States hasn?t been attacked since 9/11. Both note that the specific threat warnings of the past few days illustrate how the United States has become more adept at assessing threat and preventing terrorism.

To block a Florida measure to mandate parental notification when minors seek an abortion, the ACLU and Planned Parenthood brought a lawsuit yesterday. At issue is a proposed constitutional amendment which stems from a ruling from Florida?s Supreme Court that a parental notification law violated Florida?s constitution. Research by Michael New for Heritage has found that such restrictions as parental notification can reduce the number of abortions.

Really.

Economist Alex Tabarrok explains what's going on.

A panel created by California governor Arnold Schwarzenegger will soon release a sweeping plan to overhaul California?s bloated state government, reports the LA Times:

It would wipe out more than 100 boards and commissions, consolidate a tangle of state services and give departments fresh mandates in an ambitious bid to make government leaner and improve its performance...

The plan would save an estimated $32 billion over five years. It would be the broadest reform of the state?s government since Ronald Reagan?s tenure as governor.

No surprise, opposition to the changes in the plan?especially spending reductions?are expected to be fierce. Scores of bureaucrats and appointees stand lose their positions, and interest groups are already mobilizing to lobby for their pet interests.