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The Journal Led Astray by Same-Sex Marriage

Roger Pilon

The Wall Street Journal ran a long and thoughtful but fundamentally mistaken editorial today urging the Supreme Court not to pre-empt the evolving cultural debate over same-sex marriage once it hears oral argument on the issue over the next two days. Stepping back from most of the more technical issues before the Court, the editorial sets its focus from the start by saying that the two cases before the Court, Hollingsworth v. Perry and U.S. v. Windsor, “are less about the institution of marriage than the sanctity of democratic institutions and the proper role of the courts.” And it concludes:

The Supreme Court does not have a good record legislating cultural change. A ruling on behalf of same-sex marriage could enshrine Hollingsworth and Windsor with Roe v. Wade, the 1973 abortion decision that imposed a judicial diktat even as laws in many states were liberalizing.

That is certainly true of Roe, and for good reason. But those reasons clearly distinguish Roe from the cases now before the Court. In fact, if politics is the issue, a far better analogy with the present cases is the Court’s 1967 decision in Loving v. Virginia, which found Virginia’s anti-miscegenation law, and those of 15 other states, unconstitutional under the Equal Protection Clause of the 14th Amendment. There, too, we had a controversial decision, handed down at the height of our civil-rights strife. But it did not lead to the unending controversy that has followed Roe, even though it was the Court, not state legislatures, that finally brought an end to laws banning inter-racial marriage.

One reason that Loving did not play out as has Roe is because the nation was more clearly moving in the direction of accepting interracial marriage than abortion, much as today we see a similar movement regarding same-sex marriage. Ironically, in invoking political considerations by way of urging “judicial restraint,” the Journal is asking the Court to consider matters that are not, strictly speaking, the proper business of the courts.

The Wall Street Journal gets its equal protection analysis exactly backwards.”

But there are also clear substantive differences between today’s cases and Roe, which go even further to making Loving a far better analogy. In particular, as in Griswold (1965), upholding the right to sell and use contraceptives, and Lawrence (2003), upholding the right to engage in homosexual sodomy, the statute under challenge in Loving, like that in Hollingsworth, had nothing to do with protecting anyone’s rights. Enacted under the state’s police power, it sought simply to protect “morals” — the morals of a portion of the community — but at the expense of the plaintiffs’ rights. In Roe, by contrast, that was hardly the case. Indeed, the very question before the Court was whether the Texas statute was designed to protect rights, the rights of an unborn child. That’s why Roe, unlike those other decisions, is still controversial and still vexing the nation.

Moreover, Roe, unlike Hollingsworth or the other cases, did not involve a straightforward up-or-down rights question. Rather, as in such contexts as nuisance and risk, where a line must be drawn between competing right claims, Roe, too, raised the question of where to draw the line between the claims of the child and those of the mother; or, to put it in police-power terms, at what point in the nine-month gestation period does abortion become murder? And on that question, reasonable people can reasonably disagree, which is why in Roe, unlike in the other cases, we had a genuine legal question of “evolving social values” that should properly have been left to the people to decide, state-by-state, since the general police power belongs to the states, not to the federal government. (I have discussed this issue more fully, interestingly, in the Wall Street Journal.)

Unfortunately, the Journal draws none of those distinctions. And when the editorial turns to the equal protection arguments, it simply follows the Court’s seriously mistaken jurisprudence, starting with the idea that the Court, depending on the issue before it, should indulge different “levels” of scrutiny, and continuing with the idea that equal protection is about “classes” to be differently protected — “strict scrutiny” for laws implicating race, “intermediate scrutiny” for laws implicating gender, “rational basis scrutiny” (perhaps) for laws implication sexual orientation, and so forth:

The Court has not used the equal protection clause to create a new category of people who need extra legal defenses in three decades, largely because doing so disrupts the ebb and flow of the ordinary political process. Such caution is prudent, especially here. Homosexuals are not disenfranchised like blacks in the mid-20th century, as the very progress of the gay rights movement shows.

That gets equal protection analysis exactly backwards. It presumes that the government may act — the political process may ebb and flow — unless there is some reason why some special class of people needs special protection. In truth, principled equal protection starts at precisely the other end, not with government’s power but with the individual’s right — with the idea that we’re all equally free. And it continues by recognizing that because government belongs to all of us, it must treat us all equally — unless there is some serious, compelling reason to do otherwise, to draw distinctions among us. That gets the presumptions and the burdens right. The presumption is on the side of liberty. The burden is on government to justify restricting that liberty. It is a mere historical accident that courts have taken a class-based approach to equal protection. It is no part of the principle of the matter.

All of which can be seen when the Journal continues:

The Court ought to conclude on the merits that marriage as historically understood does have a “rational basis.” This version of the equal protection test properly defers to the deliberative judgment of voters and their elected representatives. Traditional marriage laws may support legitimate goals like promoting intact, reasonably stable wedlock between mothers and fathers for children, or simply stem from a desire to not experiment with a core unit of civil society.

The question, however, if equal protection analysis is done properly, is not whether marriage has a rational basis but whether government discrimination against some of those who want to marry has a rational basis. Once the presumption is properly reversed and the matter properly put, the question then becomes, what is a “rational basis” for the government’s so discriminating? Unfortunately, under the Court’s modern equal protection jurisprudence, unless a plaintiff is seen as a member of a “protected class,” any “conceivable reason” will do — like those just mentioned, purporting to support traditional marriage (and exclude same-sex marriage). Regrettably, the history of such “rational basis” review — of judicial deference “to the deliberative judgment of voters and their elected representatives” — is one of majoritarian and, more realistically, special-interest tyranny, conjoined with ever diminishing liberty in countless areas of life.

It is troubling that the same-sex marriage issue has led the Journal to subscribe to the mistaken jurisprudence that it so often rightly and powerfully condemns in those other areas, as when economic liberties are in the government’s crosshairs. Liberty is of a piece. The simple presumption of our Constitution is liberty, with government authorized and empowered to protect it, and obligated to offer compelling reasons for restricting it when that should be necessary. In recognizing rights, the Court is not “creating” them. It’s simply acknowledging that they were always there, even if we haven’t always lived up to our principles and recognized them, as clearly we have not. That’s not judicial activism. It’s simply the Court engaged in making explicit what was always implicit, even if we haven’t seen the matter clearly until now.

Roger Pilon is Vice President for Legal Affairs at the Cato Institute.


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How Government Steals Your Savings

Richard W. Rahn

There has been global outrage about the proposal from the Cyprus government to have a significant one-time tax on those who have deposits in Cypriot banks. It has been correctly called a theft of private capital. What many fail to realize is that from the beginning, governments have been engaged in this type of theft, including the U.S. government.

As the debt crisis deepens, governments are likely to increasingly engage in various forms of capital expropriation despite the fact that such activities are economically destructive and morally offensive. The U.S. government is now doing precisely what the Cypriot government is proposing, but only with a lighter and more subtle touch. If you have a savings account, a CD or money market fund, there is a good chance that you are receiving less than 1 percent interest on the money, thanks to the Federal Reserve, while government-caused inflation is running at roughly 2 percent. Thus, you are, in effect, suffering a 1 percent expropriation of your savings each year — without Congress ever having voted for such expropriation. It gets worse. The Internal Revenue Service taxes you on all the interest you receive as income, even though what you are actually receiving is only a partial return of your capital investment.

The IRS also taxes capital gains that are nothing more than changes in the price level owing to government-caused inflation. Again, this is a non-legislated expropriation of capital. The IRS does index income-tax brackets, Social Security payments and other entitlements for inflation, so it clearly recognizes that the current dollar does not have the same purchasing power as a dollar saved years ago — yet it taxes the inflationary portion of the gain as if it were income, which it is clearly not. Such activities undermine capital formation and, hence, economic growth, job creation, the rule of law and civil society. I often wonder if Treasury and IRS officials who impose such rules, which again are not required by the tax law, are economically ignorant, or mean-spirited and amoral.

As the debt crisis deepens, governments are likely to increasingly engage in various forms of capital expropriation despite the fact that such activities are economically destructive and morally offensive.”

There are a number of actions governments take to expropriate capital without explicitly saying so. Some on the left have asserted that IRA accounts are “unfair” because they favor “the rich.” They have proposed retroactive limits on amounts in IRAs, and/or taxing them — both of which result in a taking of capital. A few years ago, Argentina took over private retirement accounts under the excuse that these funds would be safer if they were managed by government. The government has managed to squander much of what it seized, lied about the true level of inflation, and imposed currency and price controls. All of these acts were, in effect, an expropriation of the people’s savings. Many governments at one time or another have engaged in one or more of these actions to fund their own overspending.

It is not hard to imagine the Obama administration demanding that all retirement accounts include a certain portion of government bonds, in the name of “safety.” The real goal, of course, would to be to artificially increase the demand for government bonds, thus assisting the Fed in holding down interest rates to below inflation levels as a backdoor way of expropriating the people’s savings.

Many people who realize the danger of holding savings, money market and retirement accounts that are invested in government bonds are moving to corporate stocks and gold. Even though both of these assets are likely to be safer than government bonds, holders of these assets will be subject to a tax on their capital, particularly when inflation returns, because taxpayers are required by the IRS to pay taxes on imaginary “capital gains” caused by inflation.

When it comes to trying to raid the people’s pocketbooks, there is almost no limit to what governments will do — and not just authoritarian or totalitarian regimes. On April 5, 1933, President Franklin D. Roosevelt issued an executive order making it a criminal penalty — with a $10,000 fine and up to 10 years in prison — to hold gold coins, gold bullion or gold certificates. The people were required to give their gold to the federal government in exchange for paper money at a rate of $20.67 per ounce of gold. In January 1934, Roosevelt, again by executive order, set the price of gold at $35 per ounce. The result was that the government, in effect, expropriated 41 percent of the value of the gold from its owners — including legal tender U.S. gold coins. (Note: Inflation was less than 2 percent from 1933 to 1934.) There is perhaps nothing to prohibit President Obama from issuing a similar executive order, particularly given the Roosevelt precedent.

The only protection the people have against abuse by their governments is through the legislative process and, at times, the courts. For instance, a law denying the ability of government to tax inflationary gains on savings or assets of any type and to prohibit the government from again seizing gold or silver coins or bullion would provide some additional, but not full, protection against capital expropriation. I expect such a law could pass the current U.S. House of Representatives, but maybe not the Senate if the president said he was opposed to it. Nevertheless, the attempt should be made to protect savers, the economy and civil liberties.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.


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Federalism Is Beside the Point in Gay Marriage Lawsuits

Ilya Shapiro

Some libertarians are conflicted over what the U.S. Supreme Court should do when presented with challenges to state laws that don’t allow for same-sex marriage. While consenting adults should be allowed to do whatever they want if it doesn’t harm others, isn’t family law a core function of state sovereignty with which the federal government—including the judiciary—shouldn’t interfere?

That intuition isn’t surprising, because libertarians generally like federalism. Particularly in this age of an over weaning federal government and unaccountable executive branch, we pound our pocket Constitutions and demand respect for the Commerce Clause, the 10th Amendment, and other structural protections for liberty.

Indeed, federalism “is more than an exercise in setting the boundary between different institutions of government for their own integrity,” wrote Justice Anthony Kennedy for aunanimous Supreme Court in the 2011 case of United States v. Bond (which is returning to the Court this fall). “By denying any one government complete jurisdiction over all the concerns of public life,”Kennedy continued, “federalism protects the liberty of the individual from arbitrary power.” If the federal government acts outside the scope of its delegated and carefully enumerated powers, then it’s no better than an armed mob.

Some libertarians are conflicted over what the U.S. Supreme Court should do when presented with challenges to state laws that don’t allow for same-sex marriage.”

I’ve therefore been proud to file federalism-based briefs on the Cato Institute’s behalf on issues ranging from the civil commitment of sex offenders to Obamacare’s individual mandate to the Voting Rights Act. I yield to no one in fighting to keep the federal government within its constitutional bounds.

And yet all thatfederalism talk is an irrelevant red herring when it comes to gay marriage because there’s no claim here that the federal government is exceeding its lawful authority. Instead, in Hollingsworth v. Perry, the plaintiffs argue that California’s Proposition 8 improperly denies them the fundamental right to marry under the 14th Amendment.

In other words, Perry involves claims that a state government is violating individual constitutional rights, not that the federal government is exercising powers it doesn’t have.

The lawsuit isn’t some novel invention designed to avoid implicating the Constitution’s structural provisions, but the sort of thing that libertarians get behind without controversy in areas ranging from gun rights to property rights to the right to be free from unreasonable search and seizure. And just as there wasn’t federalism problem when the Supreme Court struck down Chicago’s gun ban in McDonald v.Chicago, there would be no federalism problem if it now struck down California’s ban on same-sex marriage.

Now, I don’t mean to suggest that Perry is a slam-dunkcase that the plaintiffs will easily win. What I’m simply saying is that the case turns on whether treating couples differently on the basis of sexual orientation is constitutionally valid.Perry asks whether theDue Process or Equal Protection Clauses of the Fourteenth Amendment protect the claimed right to marry someone of the same sex. (Full disclosure: Catofiled a brief, which I signed, arguing that the Equal Protection Clause does indeed require states to allow same-sex couples to marry—though in my ideal world the government would get out of the marriage-licensing business altogether.)

Let me state the background principle: If a state law violates a constitutionally protected right, the federal judiciary has the constitutional authority to strike down that law. Indeed, if federal courts decline to do so—if they engage injudicial “abdication” or “pacifism”—they fail their constitutional duty. Of course, if the state action doesn’t rise to the level of constitutional injury,then courts should rule for the state.

And so if it’s unconstitutional for California to discriminate based on sexual orientation when doling out marriage licenses, then a ruling against Prop 8 would simply vindicate individual constitutional rights. If, however, there’s a compelling reason for making the distinction—because, say, it promotes child-rearing— then California can keep doing what it’s doing. Either way, California’s power to regulate marriage isn’t implicated—just like its power over criminal law wasn’t in doubt in 2011 when the Court found the state’s ban on violent video games to violate the First Amendment.

In sum, those who argue that federal courts have no business policing state marriage laws are forgetting that the Civil War Amendments, particularly the 14th, fundamentally changed—perfected—our federalism. Since 1868, when states violate individual rights, they have to answer to federal courts.

Ilya Shapiro is a senior fellow in constitutional studies at the Cato Institute and editor-in-chief of the Cato Supreme Court Review.


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Death, Misery and Debt: Iraq’s Unintended Conquest of America

Doug Bandow

Secretary of State John Kerry made a surprise visit to Baghdad to ask the Iraqi government to stop helping Iran support Syria’s Bashar Assad. Kerry received an embarrassing rebuff—so much for the Bush administration’s celebrated victory over Saddam Hussein.

This time ten years ago the grand Iraqi cakewalk had begun. American military forces were racing toward victory. The world was going to be transformed.

But not in the way President George W. Bush and his top officials imagined. Invading Iraq turned out to be one of Washington’s greatest strategic mistakes.

U.S. policy in the Middle East long has been marked by myopic, counter-productive meddling. Six decades ago the U.S. and British governments organized a coup ousting Iran’s democratically elected Prime Minister Mohammad Mosaddegh. Left in charge was Mohammad Reza Shah Pahlavi.

The Shah was a corrupt dictator who for 26 years suppressed the democratic opposition and brutalized political opponents. Washington was happy, but the Iranian people felt otherwise, forcing him to flee in 1979.

America will pay for its Iraq mistake for years, perhaps decades, to come.”

Islamic fundamentalists led by the Ayatollah Khomeini won control in Tehran.  In response, Washington backed Iraq’s Hussein in his subsequent aggression against Iran. That experience helped convince him that the U.S. would not block his 1990 invasion of Kuwait.

But the U.S. then attacked Iraq to liberate Kuwait. Washington left American troops in Saudi Arabia, antagonizing the likes of Osama bin Laden, who viewed Washington’s presence as desecrating sacred lands.

Although the September 11 atrocities were orchestrated by Afghanistan-based al-Qaeda, neoconservatives and uber-hawks around President George W. Bush used the outrage to advance their objective of removing Hussein. Invading Iraq was presented as a panacea for almost every international ill: terrorism, the Israel-Palestinian conflict, Persian Gulf instability, dictatorship, proliferation, high oil prices. The war would be a cakewalk, the peace a veritable feast.

Administration officials warned of mushroom clouds and suggested Baghdad’s complicity with 9/11 while systematically pressuring intelligence officers, distorting information, and hiding evidence which contradicted their lurid claims. Britain’s famed “Downing Street Memo” explained that “the intelligence and facts were being fixed around the policy” decision to attack Iraq.

The war became a weapon in the increasingly partisan red team-blue team political struggle at home. Backing the administration’s war was a patriotic test: critics were smeared as traitors and friends of Saddam. David Frum, later purged by the Right for his own ideological heresies, took to the pages of National Review to denounce “unpatriotic conservatives” who failed to follow an American variant of the Fuhrerprinzip.

My association with the Right ran back through President Ronald Reagan, whom I served as a Special Assistant, and to college. Yet one conservative publication stopped running my articles against the proposed war—and everything else. A Right-leaning web publication stripped anti-war commentary from my electronic archives. Colleagues became vociferous critics. My email in-box filled with frenzied denunciations: I was a traitor, an idiot, or both.

The post-war planning was as inadequate as the war’s justification. The occupation, like the war, turned into an ideological exercise. Those familiar with Iraq were excluded from planning because they lacked the proper political and partisan bona fides.

Top administration officials knew little of the nation they were invading. Iraqi exiles who met with the president reported that he did not know the difference between Shiites and Sunnis. A friend involved in intelligence-gathering for the State Department said policy-makers were not aware of the role played by Ayatollah Ali al-Sistani, Iraq’s most important Shia cleric.

Washington’s social engineers expected to make exile and convicted bank fraudster Ahmed Chalabi, who last lived in Iraq in 1956, the new president. Not coincidentally, Chalabi fed U.S. authorities fake intelligence through the operative “Curveball.”

Iraqis were treated like a back-drop as Washington’s famed Sofa Samurai and Think Tank Warriors magically remade the world. One anonymous Bush aide derided the “reality-based community” and insisted that the administration would make new realities for others to study.

The Bush administration sent 20-somethings vetted for their position on abortion to draft Baghdad’s traffic codes and other laws. Washington insisted that the new constitution include protection for Western ideals, such as women’s equality. The new Iraqi government was expected to provide America with bases from which it could station troops and attack other Arab nations, such as Iran. Even on leaving the Bush administration treated the locals like puppets to be managed: the new embassy compound was almost as large as Vatican City. American foreign policy was hubris on steroids.

Alas, the “mission accomplished” fantasy didn’t last. The administration found that Iraqis were unwilling to allow the U.S. to dictate their new rulers. Liberation loosed intolerance and violence in the divided nation, an artifact of British boundary-drawing. The administration created a new ally of Iran in Baghdad and a new terrorist organization in Iraq. Indeed, observed Jessica Stern of Harvard’s School of Public Health, “Iraq acted as a laboratory for terrorists to hone and perfect their techniques.” Washington strained relations with allies while earning an international reputation for lawlessness and incompetence.

Saddam Hussein, a moral monster, was thankfully gone, but at high cost: 4488 dead Americans, 318 dead allied soldiers, as many as 3,400 dead U.S. contractors, and 35,000 injured Americans, many grievously. Another 200,000 of those who served in Iraq may suffer from Post-Traumatic Stress Disorder.

The direct cost of the war was $1.7 trillion, according to the Cost of War Project at Brown University’s Watson Institute for International Studies, with another $490 billion owed in veterans’ benefits. But total costs ultimately could run $3 to $4 trillion, once all long-term expenses, such as caring for war veterans, which typically peak three to four decades out, are included, according to economists Joe Stiglitz and Linda Bilmes. Toss in interest payments for the debt accumulated to pay for the war and the Watson Institute figures the final total will be $6 trillion.

Iraqis paid a much higher price. The conflict turned their country into a battlefield subsequently ravaged by looting and civil war. Estimates of the civilian dead ranged upwards to more than a million. The latter, based on respected survey methods, nevertheless has been criticized as excessive. But even the low-end figures are sobering. The Iraq Body Count, which relies on published death accounts, figures between 130,000 and 144,000 killed. However, the website’s exactitude, with numbers “derived from over 31,500 deadly incidents analyzed for information including time and location, perpetrators and weapons used,” undercounts the total. The Watson Institute warned that this estimate “is low, perhaps very low.” Both the Institute and IBC suggest doubling the figures for a more accurate civilian death toll.

While American forces are not directly responsible for most of these deaths, Washington needlessly triggered the Iraqi conflict. Nor are the forgoing the only casualties. The IBC estimates 40,000 combatants of all nationalities also were killed. Moreover, hundreds of thousands of Iraqi civilians have been injured. IBC lists 135,000, but noted that “official Iraqi figures are consistently higher.” The Iraqi Human Rights Ministry figures 250,000.

Iraqi society suffered grievously in other ways. The civilian infrastructure, including medical, educational, and other essential services, was wrecked, with predictable human consequences. Crime exploded, with religious minorities especially vulnerable to robbery, extortion, and kidnapping. Ethnic cleansing became the norm, and the systematic destruction of mixed neighborhoods was as important as the U.S. troop “surge” in eventually reducing the violence ravaging Iraqi society. As many as five million Iraqis were driven from their homes, many to Kurdistan and perhaps two million overseas. As many as half of Iraq’s Christians were pushed into exile.

Alas, elections did not beget liberty. Iraqi writer Ahmad Saadawi complained that “the Iraqi elite has failed to establish a political system capable of withstanding and resolving sectarian differences under a democratic framework. It has failed to fortify the state and its institutions against the rampant corruption that has become an Iraqi specialty.”

Prime Minister Nouri al-Maliki is no Saddam Hussein, but he isn’t a Thomas Jefferson either. His government has taken an authoritarian path, with the country’s Sunni vice president sentenced to death in absentia and currently in exile in Turkey. Other leading Sunni politicians are living among fellow Sunnis for protection.

American forces witnessed evidence of Iraqi prison torture before withdrawing. Amnesty International recently reported: “Torture and other abuse of detainees has been one of the most persistent and widespread features of Iraq’s human rights landscape.” Sunni protests are increasing and repression is likely to grow as sectarian violence again rises.  Indeed, Maliki reportedly plans to postpone local elections in the Sunni-majority provinces of Anbar and Ninevah.

Al-Qaeda in Iraq has revived, and is blamed for several recent bombings. In fact, the Jamestown Foundation warned that “the Iraqi al-Qaeda affiliate Islamic State of Iraq (ISI) has maintained a steady rate of attacks over the last few months.” According to the Wall Street Journal the CIA is “ramping up support to elite Iraqi antiterrorism units,” which not so reassuringly report directly to Maliki.

Finally, as Secretary Kerry discovered, Baghdad is going its own way internationally. The Shia rulers of Iraq have more in common with officials in Iran than in America, whether Republican or Democrat. Iraq’s antagonism toward Kuwait did not disappear with Hussein’s ouster. Baghdad’s dominant Shiites prefer Syria’s Assad over his largely Sunni opponents.

America will pay for its Iraq mistake for years, perhaps decades, to come. Yet the most fervent neoconservative war-makers are like the French Bourban royalty who when restored to power in 1815 were said to “have learned nothing and forgotten nothing.” The tenth anniversary of the invasion has brought forth many mea culpas, but mostly from outsiders who clambered aboard the neocon bandwagon.

In contrast, former Vice President Richard Cheney—the man who had “other priorities” when his government called on him to serve in war—said he would “do it [again] in a minute.” Sen. John McCain used Defense Secretary Chuck Hagel’s confirmation hearing to insist that he had been right about the conflict.

Hoover Institution’s Fouad Ajami admitted that not everything had worked out in Iraq and blamed … Barack Obama for not offering “meaningful protection for the fledgling new order in Baghdad.”  National Review’s editors also acknowledged problems, but similarly emphasized that it was all … the president’s fault.

National Review explained: “Shamefully, [President Obama] had no interest in building on [the situation bequeathed him] or even maintaining it. The administration failed to secure an agreement with the Iraqis to maintain a U.S. troop presence. As soon as we left, Prime Minister Nouri al-Maliki let loose with his worst instincts. He has ruled as an authoritarian and Shia sectarian and has allied himself with Iran. In our absence, al-Qaeda in Iraq has begun to make a comeback.”

Iraqis still are assumed to be irrelevant ciphers, malleable clay to be casually molded by an assertive American government. Yet the Obama administration actually followed the timetable and agreement reached by its predecessor. Prime Minister Maliki rejected administration proposals for a continued U.S. presence; Shia activists and the Iraqi public pressed for America’s withdrawal.

Even had Washington succeeded in browbeating Baghdad into accepting a continuing occupation, the Iraqi people would have been hostile. U.S. forces likely would have become targets of the violence now being employed against Iraqis. Nor would the presence of a few thousand American soldiers have transformed Maliki into a Western democrat or won his support for U.S. objectives. Ajami acknowledged that Maliki has been erecting “a dictatorship bent on marginalizing the country’s Kurds and Sunni Arabs and even those among the Shiites who questioned his writ.” That would be Maliki’s objective even in the presence of the U.S. American forces, which would have ended up buttressing, not liberalizing, his authoritarian regime.

After Baghdad rejected his plea for assistance against Syria, Secretary Kerry was reduced to whining that members of Congress “are increasingly watching what Iraq is doing.” But they will watch in vain. Occupiers rarely win people’s gratitude. The Wall Street Journal editorialists similarly complained that Baghdad “is looking out for its own interests, with little concern for how they square with America’s.” However, that is what naturally happens when nations’ interests diverge.

Yet even now many of the Iraq War’s architects are clamoring for more wars.

America needs peace. War should be a true last resort, not just another policy option for frustrated social engineers and impatient internationalists. Wars are sometimes tragically necessary. But not in Iraq.

After the Spanish-American War, William Graham Sumner wrote an essay with the ironic title: “The Conquest of the United States by Spain.” So too can we speak of Iraq’s conquest of America. The result has been death, misery, and debt. Individual liberty and limited government have been sacrificed. America’s reputation has been sullied.

Americans should hold accountable those responsible. And say no to similar misadventures in the future. Declared former Defense Secretary Robert Gates: “any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined,’ as General MacArthur so delicately put it.” Hopefully Gates’ successors will feel the same way. If so, the Iraq War will yield at least one positive legacy.

Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, includingThe Politics of Plunder: Misgovernment in Washington (Transaction).


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Hyperinflation? No. Inflation? Yes.

Steve H. Hanke

While inflation seems to be on everyone’s mind these days, misconceptions abound. Indeed, few concepts in economics are as misunderstood as inflation. This month I take a look at some common questions about inflation, and a few that I wish more people were asking.

Until we return to a stable, rule-bound international monetary system, inflation will continue to be source of anxiety in economies and asset markets around the world.”

Is hyperinflation coming to the U.S.?
No. Hyperinflation arises only under the most extreme conditions, such as war, political mismanagement, or the transition from a command economy to a market-based economy. If you compare the U.S. to countries that have experienced hyperinflation– think Iran, North Korea, Zimbabwe, and the former Yugoslavia, for example — the U.S. doesn’t even come close. Hyperinflation begins when a country experiences an inflation rate of greater than 50% percent per month — which comes out to about 13,000% per year. Although it experienced elevated inflation around the time of the Revolution and the Civil War, the United States has never passed this magic mark. At present, the U.S. inflation rate, measured by the consumer price index (CPI), is less than 2% per year. So, to say that the U.S. is on its way to hyperinflation is just nonsense.

But what about Quantitative Easing? Won’t that cause high inflation?
No, at least not under the current QE program. What many people fail to understand is that the money created by the Fed, through programs like Quantitative Easing, is what’s known as “state money” (monetary base). In the U.S., this makes up only 15% of the money supply, broadly measured. The remainder is made up of “bank money” — the allimportant portion of the money supply produced by banks, through deposit creation.

So, while the Fed has more than tripled the supply of state money since the collapse of Lehman Brothers, in September 2008, this component of the money supply is still paltry compared to the total money supply. In fact, when measured broadly, using a Divisia M4 metric, the U.S. money supply is actually 6% below trend (see the accompanying chart).

There are a number of factors that affect the growth of money, but there are two main factors that have hamperedbroad money growth in the United States since the financial crisis. Not surprisingly, they are both government created.The first is the squeeze that has been put on the banks, as a result of Dodd-Frank and Basel III capital-asset ratio hikes. By requiring banks to hold more capital per dollar of assets (read: loans), the regulators have put a constraint on bank’s balance sheets, which limits their ability to lend. In consequence, money supply growth has been slower than it would have otherwise been.

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The other factor is the credit crunch created by the Fed’s zero-interest-rate policy. This has dried up the interbank lending market, because banks have little financial incentive to lend to each other. Without a well-functioning interbank lending market to ensure balance sheet liquidity, banks have been unwilling to scale up or even retain their forward loan commitments.

The end result is a loose state money/tight bank money monetary mix. And since bank money makes up 85% of the total, the money supply in the U.S. is still, on balance, tight and below trend. That said, the broad Divisia M4 measure of the money supply has started to show signs of life in recent months.

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How Can The Fed Avoid Inflation Going Forward?
The Fed should start paying attention to the dollar. While operating under a regime of inflation targeting and a floating U.S. dollar exchange rate, Chairman Bernanke has seen fit to ignore fluctuations in the value of the dollar. Indeed, changes in the dollar’s exchange value do not appear as one of the six metrics on “Bernanke’s Dashboard” — the one the chairman uses to gauge the appropriateness of monetary policy. Perhaps this explains why Bernanke has been dismissive of questions suggesting that changes in the dollar’s exchange value influence either commodity prices or more broad gauges of inflation.

The relationship between the dollar’s value and inflation has been abundantly clear for the last decade. As Nobelist Robert Mundell has convincingly argued, changes in exchange rates transmit inflation (or deflation) into economies, and they can do so rapidly. This relationship was particularly pronounced during the financial crisis (see the accompanying chart).

Indeed, from 2007-09, the monthly year-over-year percent changes in the consumer price index and in the USD/EUR exchange rate have a correlation of 0.75. As can be seen in the chart, there is a roughly two-month lag between changes in the USD/EUR exchange rate and in the CPI; when we factor in this lag, the correlation strengthens to 0.94.

By ignoring this, Bernanke was “flying blind” in the initial months of the crisis. In consequence, the Fed failed to stabilize the USD/EUR exchange rate, which swung dramatically in the months surrounding the collapse of Lehman Brothers.

Accordingly, the Fed acted too slowly in cutting the federal funds rate to stabilize inflation, which swung from an alarming rate of over 5% (year-over-year), to a negative (deflationary) rate in a matter of a few short months. If Bernanke had been monitoring the USD/EUR exchange rate, he would have realized that he was engaging in an ultra-tight monetary policy in the early months of the financial crisis. He would have known then to act much sooner than December 2008 — almost two months after the Lehman bankruptcy. Perhaps if he had tried to stabilize the value of the greenback, the bankruptcy may never have occurred in the first place.

How Does the Value of the Dollar Influence Inflation?
One important way the dollar’s value affects inflation is through commodity prices. With few exceptions, when the dollar weakens against the euro, commodity prices soar, and when the dollar soars against the euro, commodity prices plunge. As every commodity trader knows, when the value of the dollar falls, the nominal dollar prices of internationally traded commodities — like gold, rice, corn and oil — must increase because more dollars are required to purchase the same quantity of any commodity. The linkage between the dollar-euro exchange rate and commodity prices is depicted in the accompanying chart.

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During the 2002–July 2008 period, the dollar declined steeply against the euro, and commodity prices surged. When the dollar subsequently rebounded, after Lehman Brothers collapsed, commodity prices tumbled. And again, following the first quarter of 2009, the renewed decline in the dollar’s exchange rate brought with it another surge in commodity prices.

We can see the consequences of this relationship in the lead-up to the 2008 financial crisis. During the five years preceding the Lehman Brothers’ collapse, the Fed’s favorite inflation target — the consumer price index, absent food and energy prices — was increasing at a regular, modest rate. But, this was an illusion. As can be seen in the accompanying chart, a weakening dollar drove up asset prices in the equities, commodities, and, of course, housing markets.

Unbeknownst to the Fed, abrupt shifts in major relative prices were underfoot. For example, housing prices — measured by the Case-Shiller home price index — were surging, increasing by 45% from the first quarter in 2003 until their peak in the first quarter of 2006. Share prices were also on a tear, increasing by 66% from the first quarter of 2003 until they peaked in the first quarter of 2008.

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The most dramatic price increases were in the commodities, however. Measured by the Commodity Research Bureau’s spot index, commodity prices increased by 92% from the first quarter of 2003 to their pre-Lehman Brothers peak in the second quarter of 2008.

The dramatic jump in commodity prices was due, in large part, to the fact that a weak dollar accompanied the Fed’s ultra-low interest rates. Measured by the Federal Reserve’s Trade-Weighted Exchange Index for major currencies, the greenback fell in value by 30.5% from 2003 to mid-July 2008.

For any economist worth his salt, these relative price changes should have set off alarm bells. Unfortunately, the Fed’s CPI inflation metric signaled “no problems”.

How Does the Dollar’s Value Affect the Global Economy?
The dollar has become a staple currency for the invoicing of exports, and as a transaction currency in foreign exchange markets. For example, Australia, Korea, Thailand, and Malaysia all have over 70% of their exports invoiced in dollars, even though only 25% of their trade is with the United States. Indeed, in most countries, the share of exports invoiced in dollars is larger than the share of actual exports to the United Sates. Clearly, the dollar has become the “vehicle” currency in international trade.

Thus, the dollar dominates the international markets. But, what does this mean when the value of the dollar fluctuates? Well, because of this “dollar standard”, producer prices around the world all move in the opposite direction of the value of the dollar (see the accompanying chart).

Indeed, since 2000, decreases in the value of the dollar have been clearly linked to increases in producer prices around the world. Given the recent loose talk of currency wars, it is little wonder that finance ministers in countries like China and Brazil are worried about a depreciating dollar affecting their producer prices, causing inflationary pressures.

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That said, the United States can only expect to stay insulated from elevated inflation in emerging markets for so long. Indeed, while the U.S. money supply remains under trend, leaving inflation in check (for now), we may see inflationary pressures begin to surface before long. That is, unless the greenback continues to finds renewed strength — which has been evident in recent months.

What Can Be Done?
When it comes to exchange rates, stability might not be everything, but everything is nothing without stability. The world’s two most important currencies — the dollar and the euro — should, via formal agreement, trade in a zone ($1.20 – $1.40 to the euro, for example). The European Central Bank would be obliged to maintain this zone of stability by defending a weak dollar (by purchasing dollars). Likewise, the Fed would be obliged to defend a weak euro (by purchasing euros).

The East Asian dollar bloc, which was torpedoed during the 2003 Dubai Summit, should be resurrected — with the yuan and other Asian currencies tightly linked to the greenback. As for other countries (Brazil and Venezuela, for example), they should adopt currency boards, linked to either the dollar or euro. Or, they could simply “dollarize”, by adopting a foreign currency (like the dollar, for example) as their own.

Until we return to a stable, rule-bound international monetary system, inflation will continue to be source of anxiety in economies and asset markets around the world.

Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the Cato Institute in Washington, D.C.


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Dictator Who Likes Basketball, Not Reform

Doug Bandow

Gone is the “Dear Leader” and sophisticated fashionista Kim Jong-il, with his platform shoes, bouffant hair, and oversize sun glasses. However, his son and “Great Successor” Kim Jong-un is fast becoming an international sensation, along with his wife, Ri Sol-ju, and U.S. basketball legend Dennis Rodman.

Kim has broken the mold of his two totalitarian predecessors, attending prep school in Switzerland, following American basketball, enjoying Disney characters and showcasing his attractive young wife carrying a designer purse. All of this has given rise to speculation that Kim is a closet reformer.

The communist monarch recently hung out with Rodman, who lauded the “epic feast” organized by his “friend,” who was an “awesome guy.” Rodman also called Kim’s father and grandfather, whose victims could fill the heavens, “great leaders.”

It increasingly looks like any change will occur despite, not because, of the Great Successor.”

Alas, a European education doesn’t guarantee democratic tendencies. China’s Chou Enlai studied in Paris, as did the genocidal Pol Pot. London-trained ophthalmologist Syrian Bashar al-Assad is killing his people.

Maybe the trappings of the West aren’t enough. But Kim Jong-un apparently has become a father, preempting Britain’s Prince William. Surely that will make Kim a liberal free-thinker.

The South Korean media is reporting that Ri gave birth last month. There was no public announcement, however, suggesting that the baby was a girl. Alas, Kim appears to be a male chauvinist, just like most everyone surrounding him. Although Kim’s aunt, Kim Kyong-hui — Kim Jong-il’s favorite sister — remains a power in the regime, the leadership otherwise is male. Maybe Kim Jong-un isn’t a secret liberal after all.

But then, his behavior tells us that. Economic reform is an obvious necessity and he has talked about raising living standards amid rumors of changes in both agricultural and industrial policy. However, so far economic reform appears to be more talk than reality, with the regime simply swapping deck chairs on the Titanic. Rather than reduce Pyongyang’s almost total control, his government has shifted responsibility for lucrative business operations back from the military to the party and focused on making deals with China.

The only significant political change has been his government’s reassertion of party domination over the military. The “awesome” Kim has not backed away from his father’s “military first” policy when it comes to resources: North Koreans may be hungry, but Pyongyang found money for a nuclear test this year and two rocket launches in 2012.

It isn’t easy to measure domestic repression except through the reports of refugees, and there are fewer of them because Pyongyang has tightened border controls. Now few North Koreans have a chance to even risk a rush to freedom.

Finally, the government formally headed by Kim (whether he is really in charge, part of a collective leadership, or more of a figurehead is not obvious) has continued with the North’s long-time policy of brinkmanship and provocation. The North Korean military command threatened to respond to new U.N. sanctions by canceling the 1953 ceasefire. The Kim regime explained, “We aim to launch surgical strikes at any time and any target without being bounded by the armistice accord and advance our long-cherished wish for national unification.”

So much for Kim heading a reform parade.

Indeed, the risks of liberalization for not just Kim but the entire elite ruling class are high. The North Korean population has suffered and starved for decades and increasingly knows that the system is a lie. Relax totalitarian controls and a lot of “awesome” people, starting with the Great Successor, might end up adorning lampposts.

Which means not much is likely to change. Pyongyang sees a nuclear arsenal as the way to prevent American-supported regime change and continued repression as the way to prevent a grassroots revolution. Nothing has happened in the 14 months since Kim’s ascension likely to revise that judgment.

This isn’t an argument against any engagement, but against the persistent triumph of hope over experience form of engagement. There is no military option, since the most important objective on the peninsula is to maintain the peace. Isolation has failed and will continue to fail without Chinese support. Official aid and subsidized trade have only underwritten North Korean misbehavior. Years of negotiations have not produced an enforceable nuclear settlement.

The U.S. and the North’s neighbors should be open to any meaningful North Korean overture while preparing for a world in which the DPRK survives and expands its nuclear capabilities. Pyongyang’s unique system of monarchical communism will end some day. But it increasingly looks like any change will occur despite, not because, of the Great Successor.

Kim Jong-un appears to genuinely like basketball. Unfortunately, that does not make him a reformer. He just happens to be a dictator who likes basketball.

Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, includingThe Politics of Plunder: Misgovernment in Washington (Transaction).


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Little Island, Big Problem

Steve H. Hanke

Who’s going to bail out Cyprus: Brussels or Moscow? That’s the multibillion-dollar question. In mid-March, the European Union and the International Monetary Fund proposed a rescue package for the tiny island—to the tune of roughly $20.5 billion. But this bailout proposal was different: $13 billion in aid being offered was conditional upon Cyprus raising the remaining $7.5 billion through a hefty one-time tax on its bank depositors. Not surprisingly, the Cypriots, among others, were not pleased with this idea. And on March 19, to Brussels’s surprise, the Cypriot Parliament overwhelmingly rejected the bailout package. Officials are now scrambling to arrive at a solution before March 26, when Cypriot banks are scheduled to reopen.

To some, the Cyprus crisis may seem like much ado about nothing—surely a tiny country of under a million people couldn’t possibly destabilize an institution as large and established as the European Union, right?

Wrong. For starters, Cyprus’s banking system is actually quite large—more than eight times larger than the Cypriot economy itself. What’s more, if Cyprus does end up partially financing a bailout using depositors’ money, it would set a dangerous precedent and could shatter confidence in an already-fragile European banking system. And if Cyprus’s banks do go bust, it would send shock waves through the markets.

The financial crisis in Cyprus has global ramifications.”

Still, questions linger: why is this crisis happening now? And why did the EU prescribe such a bitter pill for the Cypriot depositors? If we look at who those depositors actually are, a clearer picture begins to emerge. The first thing to note is that European depositors’ money began to flow out of Cyprus’s banks back in 2010, and by now, most European depositors have already left. For European leaders, it was much easier to impose a tax on depositors once their constituents had pulled their money out of the country.

European leaders also waited until someone else showed up to pick up part of the tab for the bailout. It turns out that Russian depositors have been pouring money into Cypriot banks, taking advantage of Cyprus’s lenient money-laundering laws, among other things. Indeed, Russian deposits have more than doubled since the summer of 2010, reaching over $30 billion at the end of last year. But perhaps as much as another $30 billion of the so-called Cypriot deposits are also actually Russian. How can this be? Well, many Russian companies are actually set up as Cypriot parent companies, which in turn own a Russian subsidiary. The bottom line, then, is that Russian deposits (totaling approximately $60 billion) make up more than half of all the deposit money in Cyprus’s banks, as of December 2012.

This is where geopolitics enters the picture. What if Russian President Vladimir Putin decides to come to the rescue? Russia certainly could afford it, and as it turns out, there are a number of things that Cyprus could offer that would be quite attractive to Moscow, including natural gas—and possibly even a Mediterranean naval base.

Given how much Russia has to lose at the hands of the bailout package, it is little wonder that Putin is up in arms about the terms of the EU-IMF bailout. And given how much Cyprus has to lose in the event of a bankruptcy, it is little wonder that the Cypriot finance minister has flown to Moscow to try to cut a deal.

Steve H. Hanke is a professor at The Johns Hopkins University in Baltimore, MD, and a Senior Fellow at the Cato Institute.


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Fixing Egypt’s Subsidy Nightmare

Dalibor Rohac

With gas at $1.73 a gallon, no wonder Cairo’s traffic is a nightmare. And with bread at less than a cent apiece, it’s no surprise that the city’s sidewalks are lined with discarded pitas. By using subsidies, governments in the Middle East and North Africa ensure that everyone, including the poorest, have access to basic consumer goods at an affordable price. But energy and commodity subsidies are becoming an increasingly heavy drain on public resources, while bringing only very small benefits to those in need.

In Egypt, the middle classes, the well-off and big business are the biggest beneficiaries of the subsidy system. A typical better-off Egyptian receives roughly twice the amount in subsidies as a genuinely poor one. At the same time, subsidies to fuels and food account for almost one-third of the total government budget, or over 10 percent of the country’s GDP. Thus the subsidy issue is the key to solving Egypt’s public-finance problems.

Yet reform is a daunting task. For Egyptians, subsidized commodities are an essential part of the perceived social contract between the citizens and the state. Egyptians have traditionally had little say in public affairs and could never expect much from their government (other than taxes, onerous bureaucracy and a constant hassle). When President Sadat attempted to cut bread subsidies in 1977, violent nationwide riots ensued. The same thing happened thirty years later, following a hike in food prices in 2008.

Making subsidy reforms popular will require compensating the losers—not only the poorest segments of the population.”

So far, attempts to address the subsidy problem have been shambolic. In October 2012, Prime Minister Hisham Kandil announced that the government was planning a gradual reform of energy subsidies. The proposal suggests setting a cap on how much cheap fuel and cooking gas each household can purchase, with each Egyptian household to have access to only two cylinders of fully subsidized butane (used for cooking); further consumption would be subsidized only partially to discourage pervasive leakage to the black market.

The proposed reform helps address one of the problems: subsidized commodities are available to everyone, regardless of their income or wealth. Wealthier Egyptians buy more cooking gas, gasoline or electricity than poorer ones. Thus the bulk of the spending on subsidies ends up benefiting the rich.

At the same time, a cap on purchases won’t solve the deeper problem with subsidies. As anyone who has received an unwanted yet expensive Christmas present from a distant uncle can attest, transfers of commodities are a clumsy way of making people better off. “If only he gave me cash!” tends to be a common reaction, especially when the gift comes without a return receipt.

Similarly, receiving cheap commodities instead of cash, Egyptians often end up with an abundance of goods they either don’t need or don’t value much, resulting in waste and black markets. Imposing a cap or trying to direct the subsidies at poorer families does not change the fact that it is much cheaper to help people by giving them money than by handing out stuff.

Egyptian policymakers need to study other countries that tried to deal with the subsidy problem in the past. In the 1990s, various Arab countries, including Jordan, Yemen, and Tunisia, reformed their food-subsidy programs. Jordan started by first limiting the availability of ration coupons to low-income groups and then by gradually replacing them with cash transfers. By 1999, food subsidies had been replaced by payments from the National Aid Fund.

Policymakers in Yemen followed a similar route and brought down a food-subsidy budget that accounted for 7 percent of GDP in 1996 to zero within three years. However, targeting cash at needy people has proven to be much more difficult than in Jordan, which may explain the return of the subsidy problem in the 2000s.

Finally, Tunisians tried something different. Instead of replacing subsidies with cash transfers, they eliminated subsidies on higher-quality goods that were consumed mostly by the middle classes and the rich, while keeping subsidies on inferior products bought mostly by poor people.

The best option is to simply turn the subsidy system into a temporary stream of unconditional cash transfers to every Egyptian, eliminating the distortions of in-kind redistribution, such as the bloated network of various middlemen, licensed bakers, gas distributors and flour dealers. That has the potential to demonstrate the benefits of cash redistribution and create a wide constituency for future reforms.

Egypt finds itself in a tough place. The military has a firm hold on power. The radical Islamists are challenging the Muslim Brotherhood’s dominance in the political arena. The country is in a state of latent civil unrest. It is no wonder few Egyptian politicians are willing to entertain radical reform. Yet that is exactly what is needed to get the Egyptian economy back on track.

Making subsidy reforms popular will require compensating the losers—not only the poorest segments of the population. After all, the poorest are not necessarily the ones who are most likely to show up in Tahrir Square. While broad compensation would limit immediate fiscal gains from reform, it could be executed rapidly, without first instituting a complex system of means testing.

Very often, economists advising governments recommend carefully timed and gradual reforms, since they create few painful dislocations in the economy. But such an approach ignores the political reality of the country. A plan by Egypt’s government that extends over many years will not be seen as credible if the government has only a tenuous political mandate and faces deep domestic divisions.

This does not mean that the government can’t do anything. By putting in place a reform that is swift and encompassing and makes nearly everyone better off, Egyptian political elites would not only do a service to the Egyptian people—they would also strengthen their own bargaining position in the competition for political power.

Dalibor Rohac is a policy analyst at the Cato Institute in Washington, D.C.


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Obamacare: More Vulnerable than Supporters Care to Admit

Michael F. Cannon

Three years ago today, the House of Representatives passed the Patient Protection and Affordable Care Act, ensuring that President Obama’s signature domestic initiative would become law. Yet “Obamacare” faced intense public opposition from the start, and its numbers have not improved with time.

Since taking control of the House in 2011, Republicans have voted 33 times to repeal some or all of the law. House Speaker John Boehner (R-OH) promises to hold another repeal vote in the coming months. House Budget Committee Chairman Paul Ryan (R-WI) again included repeal in his latest budget blueprint. Freshman Sen. Ted Cruz (R-TX) is leading the charge for defunding and repealing the law in the Senate. Supporters deride these efforts as futile. After all, Democrats control both the Senate and the White House.

Even so, this law remains more vulnerable than supporters care to admit. Later this year, discontent with the law could push even vulnerable Democratic senators to call for repeal or major revisions, rather than watch their careers go down with Obamacare.

This year, millions of Americans will experience sticker shock when they see how Obamacare will impact their health insurance premiums in 2014. Sticker shock is what caused seniors to rebel against the Medicare Catastrophic Act of 1988. Congress repealed that law in 1989.

Neutral observers and even supporters of the law project some individuals and small businesses will see their premiums double. A survey of insurers reports some consumers will see their premiums triple. Supporters believe tax credits and subsidies will leave consumers numb to these higher premiums. But the American Academy of Actuaries estimates millions of Americans — including 80 percent of twentysomethings and a third of those 30 and older who purchase their own coverage — will pay more even after the subsidies. The insurance industry has launched a public relations effort to convey these premium hikes are the law’s fault, not theirs. Even supporters like Democratic strategist Donna Brazile have experienced a rude awakening.

Nor will consumers be happy when they go to purchase their mandatory insurance later this year.

In theory, Obamacare creates a new entitlement program where tens of millions of Americans can choose a taxpayer-subsidized health plan through the website of a government agency called an “exchange.”

Earlier this month, however, HHS admitted it is developing contingency plans because exchanges may not be functional by the October 1 deadline. One HHS official told an industry gathering, “We are under 200 days from open enrollment, and I’m pretty nervous.” He added: “The time for debating … is it a world-class user experience, that’s what we used to talk about two years ago. Let’s just make sure it’s not a third-world experience.” At a minimum, that argues for delaying implementation.

Even supporters complain the process of applying for subsidized coverage, which includes a 15-page application, is “enormously time consuming and complex.” The media report the process “could be as daunting as doing your taxes” and “run[s] counter to the vision of simplicity promoted by administration officials.” The resulting chaos and frustration would only add to public discontent.

In “50 Vetoes,” a study released today by the Cato Institute, I explain the administration is so afraid of a sticker-shock fueled backlash that it is preparing to spend more than $600 billion that Congress never authorized to numb consumers to the costs of this law. Along the way, the administration will impose roughly $100 billion in illegal taxes on employers and individuals (including some legal immigrants below the poverty level), and deny millions of individuals the right to purchase low-cost “catastrophic plans.”

To cement the law’s Medicaid expansion in place, the administration is also violating the Supreme Court’s ruling in NFIB v. Sebelius. The Court prohibited the federal government from coercing states into implementing the expansion. Yet HHS is still threatening every state with the loss of all federal Medicaid funds if they fail to implement parts of the expansion. These are not the actions of an administration that feels its health care law is secure.

Finally, supporters forget that President Obama and congressional Republicans have already repealed important parts of the law, including Obamacare’s third entitlement program — a long-term care program known as the CLASS Act, repealed as part of the “fiscal cliff” deal. President Obama is already repealing his law one provision at a time.

Obamacare supporters may scoff at repeal. But if vulnerable Democratic senators start hearing from their constituents about the chaos and sticker shock they experience later this year, the scoffing will cease.

Michael F. Cannon is director of health policy studies at the Cato Institute and author of “50 Vetoes: How States Can Stop the Obama Health Law,” published today by the Cato Institute.


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Lessons from Iraq We Haven’t All Heard Before

Benjamin H. Friedman

Because you read stuff like this, you are probably all for learning and reflection about war, but bored to tears by the Lessons of Iraq, especially when they come in a media-driven festival of official reflection centered, for no good reason, on an anniversary. You likely agree that invading Iraq was a mistake, that the Bush Administration sold the war dishonestly, and that more pre-war media skepticism about smoking guns and nexuses would have been useful. If you do not agree with that, you probably never will. So here are some less tired takeaways from the war that might still be usefully debated.

1. Power is perilous. The U.S. invasion of Iraq demonstrates Thucydides famous line: the strong do what they will, and the weak endure what they must. Iraq’s problem was more that it was weak than that it was the great danger the Bush administration saw. Among the nations the United States labeled as threats, Iraq was the easiest to conquer. It lacked nuclear weapons to deter us. American troops were stationed nearby and more were easily added. Of course, it took more than that to cause war, but ease was a necessary condition. There’s a reason no one cares about Bolivian designs on Japanese islands.

The war did prove far more expensive than administration officials predicted. But although they lowballed estimates to maximize support for invasion, they also miscalculated. The costs—human and financial—ultimately endangered Bush’s reelection and lost the Republicans their Congressional majority. It took a lot of failure, but democracy eventually  provided a Kantian check. A true accounting might have prevented Bush from starting the war. It surely would have awoken more Democratic opposition and improved debate.

Here are some less tired takeaways from the war that might still be usefully debated.”

Decision-making in democracies works poorly when a policy’s cost seem low. We do not debate drone strikes in Somalia like we debated health care reform for the same reason you think less about buying a song on iTunes than about buying a car. High costs endanger politicians’ reelection and threaten other programs they defend. Part of the problem is uncertainly, which is not fixable. But there are ways to make war’s known costs more politically important. One partial remedy is to prevent deficits from funding wars—Congress could require they are paid for annually with an offset or tax.

2. Unity is overrated. The fear and presidential support drummed up by the 9/11 attacks also facilitated the war. They quieted the already-withered Congressional willingness to use its war powers and Democrats’ tendency to bash Bush’s proposals.

U.S. leaders always complain about division and partisanship and worry that we are losing faith in government. But the trouble with the Iraq war was the opposite. There was excessive trust and insufficient willingness to bicker about politics beyond the water’s edge.

The media will not save us, by the way. The fourth estate is essentially myth. Especially in national security, where most key information comes from the government, reporters depend on government sources. Journalists are better watchdogs when consensus is lacking. They thrive on division and debate, which generate leaks and news. Media gives power checking power a bigger microphone, but cannot do much checking alone.

3. Planning isn’t power. After the U.S. occupation of Iraq became a bloody mess, Washington’s preferred culprit was shoddy planning. Analysts blamed pre-war U.S. errors: the atrophy of military counterinsurgency capability, deficiencies in interagency coordination, the administration’s failures in pre-war planning, and the resulting bad decisions by the Coalition Provisional Authority.

That theory got a boost from the surge—at least the heroic ballad version that attributes declining violence in Iraq solely to the wisdom of U.S. military commanders and ignores the pacifying attributes of the civil war itself. The result was a tragic overconfidence that the U.S. government, having addressed the problems Iraq revealed, could master counterinsurgency everywhere, even Afghanistan.

paper I co-wrote five years ago attacked that take, arguing that even perfect U.S. plans and organizational charts wouldn’t have stopped violent conflict in Iraq once Saddam fell. People forget that states like Iraq are coercive because they are weak and prone to dissolution. Iraqis had irreconcilable plans, and U.S. diplomats and soldiers, whatever their wisdom and foresight, lacked the power to resolve those conflicts or call the shots, at least not without recourse to mass violence that Americans would not tolerate. Plans cannot create the power to implement them.

4. Counterinsurgency doctrine is a PR gloss. U.S. counterinsurgency doctrine markets war by making it seem like a clean extension of social welfare rather than a messy application of organized violence. As articulated by the counterinsurgency gurus that Fred Kaplan profiles in his latest book, especially General David Petraeus, the doctrine’s main tenet is that outside powers can help governments defeat insurgencies by expanding state services to win their people’s loyalty—heart and minds—and strip the insurgency of support. So counterinsurgency is state-building, the monopolization of violence.

That emphasis gives short shrift to coercion and accommodation. As Paul Staniland explains, state-building traditionally employs mass violence and accommodation with enemies. What the U.S. military did in Iraq, even especially under Petraeus, was closer to those models than the doctrine. Joint Special Operations Command ran a large-scale targeted killing program against insurgent leaders. Our Iraqi allies killed off rivals, tortured others, and resettled large portions of the population. The U.S. authorities helped the Kurds maintain autonomy in Iraq’s north. Bags of U.S. cash helped turn Sunni insurgents into U.S. allies, though not supporters of the central government. Iraq shows that counterinsurgency, far from being synonymous with state-building, can actually involve state-breaking. The doctrine makes even less sense in Afghanistan where experience with central governance is limited.

One reason that counterinsurgency practice and doctrine differ is that doctrine is for domestic sales. As in Vietnam, Americans get the story they want to hear: that the war is not so much war as it is the extension of liberal progressive values by a technocratic elite.

Benjamin H. Friedman is a Research Fellow in Defense and Homeland Security Studies at the Cato Institute in Washington, DC.


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Seoul Threatens Pyongyang with American Force

Doug Bandow

Politics has gone from the sublime to the ridiculous in North Korea. One minute Great Successor Kim Jong-un is cavorting with American basketball great Dennis Rodman and telling President Barack Obama to call. Next the North Korean People… Lees verder

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Dennis Rodman’s Awesome Friend

Doug Bandow

Gone is Dear Leader and sophisticated fashionista Kim Jong-il, with his platform shoes, bouffant hair, and over-size sun glasses. However, son and Great Successor Kim Jong-un, though possessing more mundane sartorial tastes, is proving to… Lees verder

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Our Royal Supreme Court Chains Fourth Amendment

Nat Hentoff

In the 47th paper of “The Federalist,” James Madison grimly warned: “The accumulation of all powers, legislative, executive and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed or e… Lees verder

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Round One Goes to the Budget Hawks

Christopher A. Preble

“The budget hawks have defeated the defense hawks.” So read one analyst’s verdict last Friday on the news that, despite months of dire warnings from the Obama administration and the Pentagon’s allies on Capitol… Lees verder

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With Hugo Chavez Dead, Will Chavismo Also Die?

Doug Bandow

Cancer is a terrible way to die, even for someone as unattractive as Venezuelan President Hugo Chavez. Still, one wonders at those who rushed to offer their condolences. Such as the profoundly naïve Jimmy Carter—who decades ag… Lees verder

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