Thursday, April 1, 2010
Would the Founders Love ObamaCare?
The resistance to ObamaCare is about a lot more than the 10th Amendment.
By DANIEL HENNINGER
The left-wing critics are right: The rage is not about health care. They are also right that similar complaints about big government were heard during the New Deal and the Great Society, and the sky didn't fall.
But what if this time the sky is falling—on them.
What if after more than a century of growth in the national government, starting with the Progressive Era, the American people are starting to push back. Not just the tea partiers or the 13 state attorneys general seeking protection under the 10th Amendment and the Commerce Clause. But something bigger than that.
Daniel Henninger discusses the widespread anxiety over the size of government.
Podcast: Listen to the audio of Wonder Land here.
The Democratic left, its pundits and academics criticizing the legal challenges to ObamaCare seem to be arguing that their version of our political structure is too big to change.
That's not true. The American people can and do change the nation's collective mind on the ordering of our political system. The civil rights years of the 1960s is the most well-known modern example. (The idea that resistance to Mr. Obama's health plan is rooted in racist resentment of equal rights is beyond the pale, even by current standards of political punditry.)
Powerful political forces suddenly seem to be in motion across the U.S. What they have in common is anxiety over what government has become in the first decade of the 21st century.
The tea party movement is getting the most attention because it is the most vulnerable to the standard tool kit of mockery and ridicule. It is more difficult to mock the legitimacy of Scott Brown's overthrow of the Kennedy legacy, the election results in Virginia and New Jersey, an economic discomfort that is both generalized and specific to the disintegration of state and federal fiscs, and indeed the array of state attorneys general who filed a constitutional complaint against the new health-care law. What's going on may be getting past the reach of mere mockery.
Constitutional professors quoted in the press and across the Web explain that much about the federal government's modern authority is "settled" law. Even so, many of these legal commentators are quite close to arguing that the national government's economic and political powers are now limitless and unfettered. I wonder if Justice Kennedy believes that.
Or as David Kopel asked on the Volokh Conspiracy blog: "Is the tax power infinite?"
In a country that holds elections, that question is both legal and political. The political issue rumbling toward both the Supreme Court and the electorate is whether Washington's size and power has finally grown beyond the comfort zone of the American people. That is what lies beneath the chatter about federalism and the 10th Amendment.
Liberals will argue that government today is doing good. But government now is also unprecedentedly large and unprecedentedly expensive. Even if every challenge to ObamaCare loses in court, these anxieties will last and keep coming back to the same question: Does the Democratic left think the national government's powers are infinite?
No one in the Obama White House, asked that in public on Sunday morning, would simply say yes, no matter that the evidence of this government's actions the past year indicate they do. In his "Today Show" interview this week, Mr. Obama with his characteristic empathy acknowledged there are "folks who have legitimate concerns . . . that the federal government may be taking on too much."
My reading of the American public is that they have moved past "concerns." Somewhere inside the programmatic details of ObamaCare and the methods that the president, Speaker Pelosi and Sen. Reid used to pass it, something went terribly wrong. Just as something has gone terribly wrong inside the governments of states like California, New York, New Jersey, Michigan and Massachusetts.
The 10th Amendment tumult does not mean anyone is going to secede. It doesn't mean "nullification" is coming back. We are not going to refight the Civil War or the Voting Rights Act. Richard Russell isn't rising from his Georgia grave.
It means that the current edition of the Democratic Party has disconnected itself from the average American's sense of political modesty. The party's members and theorists now defend expanding government authority with the same arrogance that brought Progressive Era reforms down upon untethered industrial interests.
In such times, this country has an honored tradition of changing direction. That time may be arriving.
Faced with corporate writedowns in response to the reality of Congress's new health plan, an apoplectic Congressman Henry Waxman commanded his economic vassals to appear before him in Washington.
Faced with a challenge to his vision last week, President Obama laughingly replied to these people: "Go for it."
They will.
As to the condescension and sniffing left-wing elitism this opposition seems to bring forth from Manhattan media castles, one must say it does recall another, earlier ancien regime.
Origin and Rise of Compulsory Medicine
Origin and Rise of Compulsory Medicine
[Excerpted from chapter 2 of Compulsory Medical Care and the Welfare State (1950)]
Obligatory health insurance started moderately enough — in Prussia. Compulsion under a law of 1845 was left in the hands of municipal administrations, with no government subsidy involved and no contributions from employers. The antisocialist law of 1878 suppressed many of labor's voluntary associations for sickness benefits. The next step was the governmentalization of the associations' functions.
Bismarck's Objectives
It was no mere accident that the ideological forefathers of Nazism, Adolf Wagner and Eugen Dühring, happened to be the "brain trusters" behind Bismarck's "nationalistic socialism to end international socialism," using his own terms. When, on January 1, 1884, his compulsory sickness scheme went into operation it literally started a new era — a new age in the history of welfarism.
Bismarck's role in modern history is rarely spoken of nowadays. Undoubtedly, his political and administrative "genius" has shaped history down to our times. His revolutionary innovation in welfare policy was preceded five years before, in 1879, by the imposition of a protective tariff that started Europe's internecine commercial warfare which endures to this day. And it was followed by the introduction in 1889 of universal military service covering even the middle-aged manhood. This started a rearmament race leading into total wars with the objective of annihilating entire nations.
The shrewd Iron Chancellor — the dictator in constitutional disguise, quoting M.J. Bonn's epigram[1] — meant to kill several birds with one stone when he embarked on his program of appeasing labor. The reason, announced in the November 17, 1881, message of Kaiser Wilhelm I, to offer something positive to labor, not merely the repression of socialists by police force, may have been born of genuine worry over the unrest of the working classes due to the long depression that had engulfed Europe since 1875. But the true motive has been pointed out in the penetrating Bismarck biography (Vol. III, pp. 370–71) of Erich Eyck:
To his mind the State, by aiding the workers, should not only fulfill the duty ordered by religion, but it should obtain in particular a claim on their thankfulness, a gratitude that was to be shown by loyalty to the government and by loyal progovernment votes in elections.
In other words, it was the old-fashioned attempt of the monarchy to ally itself with the plebs against the "aristocracy" in between the two. However, the social-insurance legislation did not stop the Marxists from returning in increasing parliamentary strength. The attempt to subdue the socialist movement by appeasement ended in a political fiasco.
Prince Bismarck found other satisfaction. The state socialism of His Highness was directed against the business interests and the Liberal (free-trade) Party. The latter had accepted the principle that workers should be forced to insure themselves but stood for their freedom to choose their own, nongovernmentalized agencies.
What was even worse from the militarist point of view, the Liberals were blocking time and again the chancellor's requests for armaments. The Reich he created had almost no revenues of its own other than from import duties and excises. It had to rely on contributions from the states, which were available only through unpleasant parliamentary procedures. The new social-insurance organizations were to place their resources at the federal government's disposal, saving Bismarck the embarrassment of going, when need arose, with his hat in hand to a reluctant Reichstag.
Above all, the new system was an offshoot of his economic and political philosophy. Bismarck was a tradition-bound reactionary, altogether resentful of modern industrial development, although he himself owned a small paper mill. As did many of the ultraconservative contemporaries of his junker class, he trusted agriculture and handicraft but frowned on large-scale industrial enterprise and on trade unionism. To check both, if they had to be tolerated, was one of his goals. Governmentalizing, and thereby controlling through an appropriate bureaucratic apparatus, the providing of medical, accident, and old age care and of death (burial) benefits seemed an obvious way to put the reins on laissez-faire capitalism as well as on labor.
The Spread of the Idea
This approach conformed to the paternalistic makeup of his mind — as it conforms to the paternalism of modern dictators and of humanitarian social workers. It is no mere accident if pseudoliberals bubble over with praise of the archreactionary Prussian junker's medical security legislation.[2] It was especially palatable to the bureaucracy of the Habsburg Monarchy.
The West resisted at first. It still was imbued with the 19th-century tradition of individual freedom and responsibility. But even before World War I its resistance began to soften under the fascination of the power emanating from Wilhelminian Germany and under the German propaganda that labor's patriotism has to be bought by social concessions. Shortly before or during that war, Britain, Norway, Iceland, Russia, etc., introduced modified replicas of the German compulsory panel system, followed by more countries after 1918. A dead and defeated Bismarck proved to have a wider spiritual influence than the living and victorious one ever enjoyed.
The triumphant march of authoritarian medicine received a fresh boost at the outset of the Great Depression when, among others, France, after a decade of political oratory and wrangling on the subject, instituted a system of its own. It was modeled on the German but with significant modifications.
However, 1943–1946 was the most crucial time since 1881–1884 in the Western history of compulsory health service. It was the hour of the liberation from Nazi occupation, with the parliamentary systems of the liberated nations in a semichaotic condition, and with Communists either in cabinet posts or having decisive influence in public affairs. As a result, far-reaching legislation was hurried through, which under normal conditions would have run into serious obstacles.
In France, in November 1944, a new social security law of communistic coloring was voted in a virtually empty Chamber of Deputies. Left-wing rule in Belgium was responsible for its sickness scheme of 1944. It was also under abnormal wartime and postwar conditions that Italy and Holland "reformed" their sickness plans. New plans were put into operation or the old ones were revamped thoroughly in Australia, Argentina, Brazil, Chile, Spain, the Russian satellite countries, Costa Rica, Ecuador, and of course in Britain. Legislation has been passed, but is not as yet in effect in three Canadian provinces and in Sweden.
Hitler, the Humanitarian
It is a fact, and a very remarkable one, that the great demagogues of our age appear to be greatly worried about the health of their subjects. No one was more so than Adolf Hitler. His racism was the last word in "biological" demagoguery, unless the new antihereditary biology of the Soviets exceeds it, an expression of the identical nationalistic purpose. In terms of political results, it was a most effective demagoguery due to its emphasis on health and virility. As a committee report on health insurance of the Canadian House of Commons put it (March 16, 1943): "During the early years of Hitler's regime, the government's medical program was looked upon by many observers as one of the greatest props of the totalitarian state."
Before coming to power, the Nazis were violently critical of the social-insurance setup, considering it a weapon in the hands of their enemies, the Social Democrats. They objected especially to the extravagance and corruption in compulsory medicine and to its alleged effect in "softening" German manhood. Thereby they earned the applause of doctors as well as of businessmen and the approval of the disgruntled middle classes.
They promised thoroughgoing reform and drove their opposition home so forcefully that Chancellor Brüning was constrained to introduce in 1931–1932 several measures affecting the medical care system which were most unpopular with labor. A three-day waiting period before cash benefits became available was made mandatory. A small tax ("deductible") on prescriptions and a levy of fifty Pfennigs on each quarterly sickness ticket of the patient were imposed. This charge of twenty cents in American money per quarter, imposed on patients many of whom were unemployed, resulted at once in cutting the number of applications by about one-quarter! But these "deflationary" measures, together with the liquidation of the totally bankrupt unemployment insurance, also had the consequence of arousing an ill-feeling among the workers which had no small influence in bringing down the house of the Weimar Republic. Brüning took the blame; Hitler got the credit.
Once in power, the latter soon reversed his strategy. The ill-famed Dr. [Robert] Ley, boss of the Nazi labor front, did not fail to see that the social-insurance system could be used for Nazi politics as a means of popular demagoguery; as a bastion of bureaucratic power; as an instrument of regimentation, and as a reservoir from which to draw jobs for political favorites and loanable funds for rearmament. Brüning's extra tax on panel patients was cut in half. By 1935, with Hitlerian full employment under way, the few pennies of extra tax represented a purely nominal charge. The sting was taken out of it.
The führer gained in popularity by reducing to negligible proportions an unpopular measure which he himself had instigated. He lost no time in making a positive contribution of his own to the organization of compulsory medicine by extending it in 1939 to small business (handicraft), by tightening it in Austria (1938), and by establishing compulsory healthcare in occupied Holland (1941). One of his last "social" measures, in March 1945, was to have workers in certain irregular types of employment included. But his attempt to abolish the autonomy of the panels and to regiment them by centralization had been checked by the concerted resistance of the medical profession, the panel bureaucracy, and public opinion. Similar abortive attempts at complete bureaucratization of the panels were made under the Kaiser in 1909 and in the Weimar Republic's revolutionary days in 1919. The same goal is on the Social Democratic Party's agenda again in 1949.
Forcing French Labor Into Scheme
The original schemes of compulsory medicine have been imposed on the respective countries without the consent and often against the very vocal resistance of those who were supposed to benefit. That was the case in Germany and also in France. The following is a good summary of what happened there:
Social insurance was introduced in France on a really universal scale by the Law of April 5, 1928, which later was amended by the Law of April 30, 1930. At that time it was believed that this was the crowning piece of work completing the entire edifice of French social legislation. Its application nevertheless met with strong opposition culminating in strikes and violent labor disturbances in several industrial districts, particularly in the Northern Roubaix-Tourcoing region. Labor resented the 4 per cent tax imposed upon wages, and the immediate hardship outweighed in its eyes the possibility of future benefits. Not only did the communists immediately seize upon this occasion to foment strikes by interpreting the new measure as being purely and simply a tax on payrolls, but even the socialists joined the opposition, arguing with a certain degree of justification that the increased price of finished products resulted in all-round higher cost of living, superimposed upon the reduction of salaries.
It is of interest to note in connection with the early strikes that the textile consortium of Roubaix-Tourcoing offered to pay the employees' share of the tax for all operatives employed for over one year. Strangely enough, this proposal met with especially violent labor opposition in spite of its obvious justification by the greater skill and experience of steadily employed workers, compensating employers for the supplementary charge which they offered to undertake. The efforts of M. Laval were at that time successful in bringing about a compromise solution.
The law met, moreover, with much less spectacular but perhaps even greater difficulties from passive resistance. In 1933, for instance, it was not applied to some 3,470,000 workers, mostly operating for small concerns having not more than five employees. Excessive bureaucracy, opposition of labor and carelessness were principally blamed. Enterprises complying with the law were soon menaced by sharper competition from the non-observers. These were later converted to a more conciliatory attitude by stricter control and penalties.[3]
Just as the German workers did half a century earlier, the French resisted being forced into a humanitarian scheme. Their trade unions recognized that they would have to pay the price themselves in the form of contributions and increased costs of living. But the real reason for opposition was political rather than economic. They understood that a tremendous power position and a new bastion of bureaucracy were being built up at their expense. Accordingly, they made an about-face in 1944–1945 when the scheme was to be reformed, i.e., expanded under a procommunist regime. By that time the trade unions were to be vested with the power which before they had so energetically opposed.
Nothing Measured, Everything Gained
Nothing Measured, Everything Gained
One hundred and sixty years ago, historian Thomas Carlyle educed "the dismal science" epithet to describe economics. How ironically appropriate, considering how thoroughly dismal Carlyle was.[1]
But that doesn't mean Carlyle's pithy observation lacks truth. Economics can be a dismal science, and never more so than when practiced under the aegis of macroeconomics, which Merriam-Webster defines as "a study of economics in terms of whole systems especially with reference to general levels of output and income and to the interrelations among sectors of the economy."
The definition alone suggests manipulation and charlatanry, particularly if one is prescriptively inclined — and most who study macroeconomics are prescriptively inclined, and therein lies the dismal problem.
The aggregate economy involves so many interrelations, permutations, combinations, interpolations, extrapolations, and other "ations" of inputs and outputs and wants and desires that arriving at a meaningful measure of an entire system or a general level of anything is as likely as Hollywood accurately depicting an entrepreneur.
Nevertheless, that irritating fact fails to deter the prescribing economists from prescribing. Perhaps it is hubris that overrides their intellectual sense of the possible. Peter Klein suggests as much in his November 2006 Mises Daily posting, "Why Intellectuals Still Support Socialism," when he refers to Dwight Lee's cogent observation on the academic propensity to pry and provoke. Says Lee,
Like every other group, academics like to exert influence and feel important. Few scholars in the social sciences and humanities are content just to observe, describe, and explain society; most want to improve society and are naive enough to believe that they could do so if only they had sufficient influence. The existence of a huge government offers academics the real possibility of living out their reformist fantasies.[2]
The government is huge, to be sure, and alluring. Klein also reveals, in the same posting, a couple enlightening numbers on economists and their relationship with government:
The US federal government employs at least 3,000 economists — about 15% of all members of the American Economic Association. The Federal Reserve System itself employs several hundred. There are also advisory posts, affiliations with important government agencies, memberships of federally appointed commissions, and other career-enhancing activities.
Bureaucrats don't employ so many economists and number manipulators just to inform and explain; that would be purely descriptive, and there's no glory in that. No, bureaucrats want action, and they want the numbers (bogus or otherwise) and theories (bogus or otherwise) to support whatever prescription they believe will cure whatever they believe ails us.
The process can get minutely granular. On December 1, 2009, Bloomberg.com posted a hagiography on the Director of the Office of Management and Budget, Peter Orszag, providing an insightful example of a prescriptive macro-economist in action at a mini-me macro level:
Orszag put behavioral economics to work at the OMB. In October, he dipped into his own bank account to buy pedometers, betting that measuring steps could improve physical fitness on the cheap. The almost 300 staffers who took the challenge walked 26,000 miles during the inaugural month.
And therefore what? Bloomberg fails to mention that if Orszag had gathered information on miles walked in the previous months, at least, then the 26,000 could have a modicum of meaning. Bloomberg also failed to say whether Orszag calculated BMI on each pedometer recipient to produce a group-average BMI. Did he simply eyeball the joint and notice most were fat?
Not that it matters — delving into the perceived problem would have been a dismal waste of time anyway. It's impossible to capture all the individual motives that produce an overweight, underweight, or fit society, even in such a small sample. To produce a one-size-fits-all remedy — in this case, pedometers — for a meaningless average of inchoate data is an even greater waste of time. Orszag is putatively a brilliant economist, and yet I would bet Segways to pedometers he wasted roughly $3,000 (a low-end pedometer costs around $10 on Amazon.com) on his prescription.
Now imagine many putatively "brilliant" economists, all inflated with a similar I-know-best arrogance, inspecting an array of gross statistics to arrive at similar feckless prescriptions. One can only imagine the unintended consequences.
Actually, one need not imagine, if one has a sufficient short-term memory to remember the grossly misnamed stimulus package — an $800-billion, decidedly nonstimulative political-kickback fund to sundry government entities covering the country.
Take even a greater heap of inchoate macro statistics, apply it to an economy the size of the United Kingdom's, and you get US-government-sponsored healthcare reform. If Orszag's personal foray into healthcare was a surefire loser, as I suspect it was, one can only imagine how the government's foray into national healthcare will end.
This concept of economists taking an end number and then gavaging everyone with an impotent elixir can be traced back to 1932, when the Commerce Department hired economist Simon Kuznets to produce an end measure of the economy. Kuznets's passion was collecting and organizing the national-income accounts of the United States. On that front, Kuznets helped the Commerce Department standardize the measurement of gross national product (GNP, yesterday's GDP), but even he seemed to vacillate on whether he was truly performing God's work. In fact, he disapproved of using GNP as a general indicator of national welfare:
The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above.
The abuses of national income estimates arise largely from a failure to take into account the precise definition of income and the methods of its evaluation which the estimator assumes in arriving at his final figures.[3]
No matter, we continue to search for the statistical El Dorado to this day. In the November 2009 edition of the Atlantic, sometimes-libertarian-leaning Megan McArdle addressed the need to build on Kuznets's work and develop more encompassing, meaningful measures of national welfare. McArdle dexterously addressed the shortcomings of the GDP measures in her quest to improve upon it.
GDP does not, and cannot, reflect the waste of enormous effort, and precious natural resources, that went into building something that suddenly no one wants. Moreover, it misses many other aspects of our existence.… GDP can record how much money we spend on health care or education; it cannot tell us whether the services we are buying are any good.
McArdle continued by offering possible replacements for GDP, but she failed to offer the best possible solution — defenestrate GDP and every notion of a national-welfare measure, and then do nothing. Sir John Cowperthwaite, financial secretary of Hong Kong from 1961 to 1971, proved that doing nothing was the best economic course.
Cowperthwaite first ventured into Hong Kong in 1941, joining the colonial administrative service after studying economics at Cambridge. Returning to Hong Kong in 1945, he was asked to find ways the government could boost Hong Kong's post-war economy, but Cowperthwaite found the economy was recovering nicely without government intervention. Fortunately for Hong Kong, Cowperthwaite was insufficiently bureaucratic and sufficiently rational to make positive noninterventionism the central pillar of his economic policy as financial secretary.
Marian Tupy, a policy analyst with the Center for Global Liberty and Prosperity, recounted a conversation with Cowperthwaite that summarizes his noninterventionist philosophy:
Of all the policies that we discussed, one stands out in my mind — if for no other reason than because it is so thoroughly counterintuitive. I asked him to name the one reform that he was most proud of. "I abolished the collection of statistics," he replied. Sir John believed that statistics are dangerous, because they enable social engineers of all stripes to justify state intervention in the economy.
When the motherland occasionally overreached, the results were predictably negative. To wit, Cowperthwaite was required to hold the colony's credit balances in sterling. The mandate proved costly when the weakening British economy — shaped by interventionist, high-tax policies contradictory to his own — forced the devaluation of the pound in 1967, resulting in a £30-million loss to Hong Kong's reserves.
The relatively unfettered Hong Kong economy was sufficiently robust to roll with the punch. In its annual report for 1971, the year Cowperthwaite retired, the local government boasted that Hong Kong had become a "stable and increasingly affluent society comparable with the developed world in nearly every respect."
Cowperthwaite was the rare exception — the nonintervening bureaucrat. He has proven that economics need not be a dismal science. To the contrary, Cowperthwaite, along with many Austrian School economists, has proven that economics is only a dismal science when interventionist economists insist on making it one.
The Fallacy of Central Planning
The Fallacy of Central Planning
[Excerpted from chapter 1 in Central Planning and Neomercantilism (ed. Shoeck, 1964).]
The whole concept of planning seems to depend on some form of determinism. This determinism is implicit in the behavioral approach to psychology and is illustrated in experiments on animals. The famous work of Pavlov in Russia has obviously influenced the entire communist concept of planning, the conviction being that the same principles which are applied to the lives of animals can be applied to the lives of men.
It is sometimes asserted that the time will come when the conditioning of people will be so fully developed that they will do automatically what they are supposed to do. People will then act as harmoniously as the plan determines that they act. In the utopia of central planning, thus so confidently sketched, nothing will be left to chance decision, and men will be treated with the same stimulus-and-response pattern that now obtains with plants and animals.
All of this sounds lovely, but it has at the heart of it a deep logical problem. There is no point in making plans unless causal determinism is true; yet, if causal determinism is true, the very basis of central planning is destroyed, because the government planner is himself determined. By a strange lapse of logic, the believer in causal determinism always excludes himself from the system which he is putting into effect. Since most believers in planning operate at the supposedly practical level, they tend to ignore these intellectual difficulties. But, provided planners for others try to be consistent, they are bound to be in trouble.
If we accept the philosophy of determinism, then the planner himself is not free, and does not really plan, but only illustrates the causal determinism of which his action is a part. All that the planner can possibly do is to say that he is doing exactly what conditions force him to do, with no decision of his own, but, of course, no planner will actually settle for this in practice. He believes, for some unstated reason, that he is an exception to the rule he needs.
Lenin's way out of the difficulty is by his conviction that a few men, the vanguard, are, in fact, exceptions. But, if there are exceptions at all, the law of determinism is not a law, because it lacks universality.
The chief reason why we do not normally see this glaring inconsistency is that we emphasize nonhuman situations. The psychologist and the animals are so far apart in their levels of being that the system seems to work. The botanist may reasonably be supposed to plan the growth of the tree, since his personal decision is outside the system of botanical life, but once the determinist system is applied to human thoughts and actions, including moral actions, the situation is radically altered.
The social worker, unless he is unusually sophisticated in the philosophical sense, tends to favor a determinist philosophy. This is so because he can plan a project, like that of slum clearance, and his belief in determinism gives him assurance that his experience will work effectively in altering the course of other human lives. If human actions follow inevitably from prior physical and social conditions, as he tends to suppose, then all that he needs to do is to arrange the conditions and await results. But this simple philosophy is shattered once the planner begins to see that, according to his own philosophy, the very effort to plan was, itself, determined by prior conditions.
The upshot is that, if his philosophy is true, the planner does not plan at all, but he is merely the passive performer of deeds which are materially necessitated. Either there is the reality of choice, in which case planning can never be complete, and the planner must face the fact that he cannot manipulate men's lives in the same way that he manipulates animal behavior, or there is no reality of choice, in which case the planner is himself a pawn. In either case strict planning is impossible. This is a serious dilemma from which, strictly speaking, there is no logical escape. A system which leads to such a dilemma is necessarily suspect, for the chief method of philosophy is that of testing any proposition by noting where it leads. This is the method demonstrated in all of the Socratic dialogues of Plato.
The logical problem is the problem of consistency. Because this is a free country, a man who wants to believe in determinism is free to do so, but what he is not free to do is to eliminate himself from the doctrine he proposes. We can honor a believer in the manipulation of other men's lives, provided that he has the intellectual honesty to admit that what he calls his plan is itself not of his choosing. The philosophical issue is not determinism, therefore, but logical consistency.[1]
IV
The dangers of planning, which planners often ignore, because they seem academic or overcomplicated, are ethical as well as logical. The chief ethical problem involved in planning is that which Berdyaev has termed the dehumanization of man.[2]
The sober truth is that, in central planning, men are pawns. As planning becomes more central and more nearly complete, there is a strong tendency to forget that the ultimate units of any society are persons and that the order exists for their sakes. Unless this is kept in the consciousness of planners, the entire situation becomes impersonal; individual decisions on the part of the people really count for nothing.
A development in this direction seems to be intrinsic to an ever-growing bureaucracy. It is almost impossible, for example, to have any large-scale planning without some illustration of Parkinson's law. Bureaucratic control always has a tendency to increase, with the consequent loss of initiative on the part of the people. The danger comes subtly and appears even in the most beneficent of enterprises.
Nearly all people believe in urban renewal, which has been going on in one form or another for at least two thousand years, but the tendency now is for this to take on all of the dangers of bigness, so that within a year or two an urban-renewal office may have a flock of employees, many of whom are engaged in servicing one another, and whose attitude toward the public is highly impersonal. It is an easy step for such an office to become the commander instead of the servant of the people.
The moral paradox of planning follows naturally from the fact that in human life there are many valid principles, rather than one. If it were possible, in handling a moral problem, to find out what the principle is and to follow it, the answer would be essentially simple. But this is seldom the case. The hard truth is that we have to be loyal to many ideals at once, and that some of these are inevitably in conflict with one another.
In the example of urban renewal, it is a good principle to get rid of slums, but it is also a good principle to let people live where they want to live; yet in many situations one of these principles, when applied, eliminates the operation of the other. The ultimate gains of urban renewal may be very great, but the temporary hardship may be terrible. Thus, in Providence, Rhode Island, some of the colored families have been forcibly moved as many as four times. It is not surprising if they think of themselves as pawns in the bureaucratic game.
It is suggested, sometimes, that the moral problem of planning can be handled, or at least minimized, by limiting central planning to public affairs, while the individual is allowed to do what he will with his own private life. One might suppose, on this basis, that each man has the right to sell his labor in any market in which he can be hired, but already this breaks down in many states, because men are not allowed to take certain employments if they have personal objections to joining the unions.
One might suppose that manufacturers would have the right, in their own private businesses, to set prices as they like and take the consequent risk, but the government brings to bear all of its vast resources to compel submission to the will of the administration. There is great value in a plan to keep prices from becoming higher, but the price of compulsion may be an inordinate increase in central power which eventually cannot be challenged successfully by anybody.
It would be gratifying if we could make a clean distinction between public and private life, and we sometimes sound in our conversations as though this were possible, but the distinction is, increasingly, a blurred one. For example, is the putting up of an advertising billboard a public or a private matter? It is, of course, both. Should billboards be allowed in a good society? There are no neat methods of solving problems of this character such as the methods which can be used with slide rules.
The blurring of the line between "public" and "private" has been brilliantly discussed by Harlan Cleveland in the introduction to The Ethics of Bigness: Scientific, Academic, Religious, Political, and Military. Here the former assistant secretary of state is able to show, on the one hand, that private business today always has a public aspect and that government always has a private aspect. Mr. Cleveland quotes Frank Stanton, president of the Columbia Broadcasting System, as saying: "We are responsible for what appears on CBS. We accept that responsibility … we are only obligated to do one thing, and that is to be responsible to the American people."
On the other hand, our government farms out many of its tasks, especially in the defense department, and allows these to be conducted by private enterprise, yet without private risk-taking. One of the strangest developments of our planning of life is that the government today tends to be the initiative-taker and to provide an increasing number of industrial firms with the chief security they have. It is obvious that there are dangers in this, as well as gains.
V
The greatest assistance which the concept of planning now needs is the assistance which can be given from the clarification of our philosophy. We need to remember that, though external influences determine some of the conditions of a man's life, they do not determine his response. It is simply not true that man is a cog in a mechanism. Our strongest reason for knowing this is the empirical reason of our own consciousness, whereas all the arguments for mechanistic determinism are dogmatic speculations. When a man faces the fact that he is a man, and neither a machine merely nor an animal merely, he can hardly avoid coming to the famous conclusion about responsibility reached by Jean Paul Sartre:
The essential consequence is that man, being condemned to be free, carries the weight of the whole world on his shoulders; he is responsible for the world and for himself as a way of being. We are taking the word responsibility in its ordinary sense as consciousness (of) being the incontestable author of an event or of an object.[3]
Unless there is a deep and genuine sense in which men are free, all talk of responsibility is nonsense, but even the complete system of planning involves responsibility, for the planner professes to be responsible for his own decisions. This he cannot be if it is not possible to act otherwise than the way in which he does act. The best that we can do, then, in our philosophical contribution to the problem, is to insist, first, on consistency, and second, to face resolutely what it means to be a person. If mankind is made up of a multitude of persons, each valuable in his own right, manipulation is never justified. The world of persons is always a world which lacks the fundamental simplicity that would be required for total planning.
Too often, when we speak of planning, we really think more in terms of the hive than in terms of the human community. It has been commonplace for social philosophy to look on animal society, and especially the society of ants and bees, as models for human society. If we want a society that is entirely orderly, the hive will undoubtedly be our ideal. In it, there is no revolt, no editorial criticism, no waste or competition, no individual initiative. The hive presents a completely cooperative economy in which there is no evidence of resistance and no individuation.
It is important to realize that our tendency to idealize the hive is a good example of what Professor Lovejoy has called "metaphysical pathos" or sheer sentimentality. The hive is harmonious, but at a tremendous price. Plato was right in the Republic in pointing out that one cannot have a good social order without a division of labor, but in the life of the hive the division of labor which makes things go smoothly is created to an absolute degree.[4] Each member of the ideal community is reduced to a single function, and thus denied any conception of wholeness. The queen cannot feed herself and does no work, since she is limited to the procreative function. She does not even care for her own children. The greater part of this ideal community is made up of unprocreative females who build, nurse, get food, and fight enemies. The drones exist only as suitors to the queen.[5]
The result of such a division of labor is, of course, a clear smoothness of operation, but we must face the fact that it is not really a society at all, since it is merely an association of helpless pawns. The hive is really something like an organism in which the individual bees correspond to cells in a body rather than to true individuals. We understand the hive far better than was formerly possible, because a number of scientists are making careful studies of the life of bees.
The upshot is that the hive becomes less and less a valid ideal. We see one of the major dangers of central planning when we realize that it tries to do by intelligent effort what the bees do instinctively. The concept of the hive is almost as far removed from the ethical ideal for man as can be imagined.
Insofar as a person is truly a philosopher, he does not give up a position merely because it has difficulties, but will look resolutely at the alternative difficulties before he makes his decision. Almost never do we find a perfect situation in which the ideals are singular and clear, but we must settle on some kind of solution which gives us as few of the evils as may be had. Our cherished hope is that it may be possible to move beyond both the evils of the thesis and the evils of the antithesis into a third way which is better than the usually recognized alternatives. This is our ideal hope in regard to planning.
However vivid the dangers of planning may be, we must not accept the alternative of haphazard living. On the other hand, we must not accept total planning, because it would destroy what is most precious in human life, especially its individuation. The third way, the synthesis which we seek, is bound to be one in which we hold the principle of order and the principle of liberty in mutual tension, never abandoning either one. The tension may seem unfortunate, but it is good to remind ourselves that music cannot be played except on tight strings.
The good life will always be a life which is essentially risky, for we shall never have security. We shall never have complete order, and we shall never have complete freedom. This is so because we are men. Most of the dangers that we have mentioned are the dangers that are inherent in being persons.
The level of the personal is a unique level, utterly different from the merely animal or the mechanical. It is a level in which there is the possibility of greatness and also the possibility of baseness. It is a level in which a man is tempted to manipulate his fellows and yet can realize, when he thinks seriously, that he ought not to do so. It is a level in which beings can plan, but never one in which they can plan completely.
The ideal we seek is bound to be a compromise, because life itself has contrasting features that must be considered and included in any solution. Human life cannot be absolutely free, but our test of the value of a system is whether it helps men to be free. Only that planning is defensible which meets this standard.
The panda has two faces
Schumpeter
The panda has two faces
Doing business in China is no stroll in the people’s park—and never will be
GOOGLE and Rio Tinto are the chalk and cheese of the business world: the former a bits-and-bites wunderkind born in 1998, the latter a grizzled mining company that has been around since 1873. But over the past few months they have both found themselves in trouble with the Chinese authorities.
To avoid censorship, Google has closed its Chinese search engine and diverted traffic from the country to its site in Hong Kong. Rio Tinto has seen four of its employees sentenced to lengthy prison terms for taking bribes from Chinese firms. Google and Rio are only the most recent of a long line of Western companies to have been bruised by China. Unilever suffered for years because it was forced into shotgun marriages with unsatisfactory Chinese partners. The government has prevented Coca-Cola from buying a local juice-maker out of seemingly spurious concerns about competition. A recent survey by the American Chamber of Commerce in China found that a high proportion of American firms doing business in the country feel that they are the victims of discriminatory or inconsistent treatment.
The most obvious reason for this is that the ruling Communist Party is a nightmare to deal with—all smiles one moment and snarls the next. The party has been wooing foreign investors for decades with access to cheap labour and a huge market, not to mention fancy office parks and world-class infrastructure: since the mid-1990s Shanghai has built a second international airport, a new subway, inner and outer ring roads, two elevated freeways and a light-rail system.
But at the same time the Chinese want their pound of flesh. The party regards foreign investment as a mechanism for acquiring foreign know-how rather than just jobs and capital; hence the insistence on joint ventures. It also regards economic growth as a tool for entrenching its own power; hence the application of the iron fist whenever business threatens to get out of control.
These political difficulties are piled on top of cultural difficulties. The Chinese emphasis on personal connections (guanxi) makes it hard to distinguish between business-as-usual and corruption. And the weakness of the legal system means that companies operate in a confusing half-light. Transparency International’s most recent Corruption Perceptions Index ranks China 79th out of 180 countries.
Corruption, legal caprice and the government’s determination to control and exploit foreign firms all seem to have played a part in Rio’s troubles. Although the trial of Rio’s employees hinged on the bribes they confessed to taking, the government’s decision to arrest them in the first place came hot on the heels of Rio’s decision to pull out of a deal with one Chinese state-controlled firm, and amid tense negotiations over the price of iron ore with others. The government has done nothing to bring the Chinese bribe-payers to book. In the case of Google, the government not only insisted on censoring search results, but was also thought to be behind attempts to hack into dissidents’ correspondence on the company’s webmail service.
All very messy. Yet the only thing more dangerous than dealing with China is not dealing with it. China is already well on the way to becoming the world’s biggest market for anything you can think of. It has 400m internet-users compared with America’s 240m and India’s 80m. Last year car sales in China surpassed those in the United States. And the Chinese market is only going to get bigger. China’s economy is growing at 10% a year at a time when the developed world looks set for a period of prolonged lethargy. No wonder more than 300,000 foreign firms have invested in the Middle Kingdom.
How can these companies boost their chances of riding the Chinese wave rather than being dragged down by the undertow? The fact that some of the world’s best companies have struggled in China suggests that there are no easy answers. But several decades of corporate agonies suggest two clear rules for doing business in the country.
Just add butter
The first is that companies need to show an almost exaggerated respect for China’s traditions: the Chinese are simultaneously immensely proud of their history and highly suspicious of foreigners who, in their view, have repeatedly mistreated them. This means making a long-term bet on the country. P&G took three years to become profitable in China. L’Oreal took nine. KFC spent ten years perfecting its business model before becoming the powerhouse that it now is, with restaurants in 450 cities. It also means investing heavily in politicking. Stanley Wong, head of Standard Chartered’s Chinese operations, reckons that multinationals’ senior representatives in China must spend 30-40% of their time buttering up officials and regulators.
The second rule is that companies should never abandon their principles for short-term gains. Freedom of information is so central to Google’s identity that it was right to declare it sacrosanct and repudiate its previous willingness to negotiate it away for commercial advantage. Although the Chinese government may not accept such intransigence, as in Google’s case, the odds are better if firms slavishly follow the first rule.
That is a price worth paying. There is growing evidence that the Chinese market is living up to its promise. The American Chamber reported in 2008 that three-quarters of the companies that it surveyed were finally making money in China, and almost half were enjoying margins that are higher than the global average, up from 13% a decade before. But there is equally no doubt that the Chinese will remain tough customers. They have profited mightily from their ability to squeeze concessions from Western firms. And the financial crisis has boosted their confidence in their way of doing things. There will be plenty more cases like Google and Rio Tinto in the years to come.
Hope at last
America's economy
Hope at last
The world’s biggest economy has begun a much-needed transition. Barack Obama could do more to help
GREAT storms and floods have a way of altering landscapes. Once the waters recede, some of the changes are obvious: uprooted trees, damaged property, wrecked roads. Later come further changes, as people seek to avoid a repeat, erecting new flood walls or rebuilding elsewhere.
As in the physical world, so in the economic one. The financial deluge that broke over America has passed and the recession it caused, the worst since the 1930s, is ebbing. This year the American economy is expected to grow by around 3%, after shrinking by 2.4% in 2009. Rainbow-spotters hope that employment is at last beginning to grow again. And the economy emerging from recession is not the same as the one that went in. There is obvious damage: high unemployment, millions of foreclosed homes and a huge hole in the public finances. Less obviously, a “rebalancing” is under way: from consumption, housing and debt to exports, investment and saving. As our special report this week argues, this is enormously promising for America and the world; but it is far from assured. A lot depends on politicians—and not just the ones in Washington.
America has relied for decades on its consumers’ willingness to spend, borne up by borrowing and the false comfort of bubbles in asset prices. Now Americans are saving more and borrowing less because the collapse in home prices has eviscerated their wealth. Bankers and regulators who once celebrated the democratisation of credit now ration it. Businesses from General Electric to Citigroup that prospered from the consumption culture are rethinking—and often shrinking—their loan books. Property developers are building smaller, simpler houses. The country’s geography is changing. Recession has slowed the rush to sun and sprawl. People are moving out of Florida and into North Dakota. Foreclosures and costlier commutes have laid low the distant suburbs, or exurbs.
Dearer, scarcer credit is not the only reason. Energy, though not as frighteningly expensive as in 2008, is also no longer cheap. Americans are choosing cars over light trucks, utilities are being told to use more renewable fuel, and domestic deposits of oil and gas locked deep beneath the sea or in dense rock are suddenly profitable to extract. If these trends continue (admittedly, a big if), America could import barely half as much oil in 2025 as seemed likely just five years ago.
United States of exports
With consumers forced to live within their means, American firms will have to sell more to the rest of the world. That may seem a tall order, but with a competitive dollar and favourable growth in other countries, exports in which America already excels, such as high-value manufacturing and services, should do well. The result will be a more balanced American economy and, by extension, a healthier global economy.
Or so it should be. But the smoothness of this transition cannot be taken for granted. Policy decisions both inside and outside America will determine whether this rebalancing is painful or easy. Put crudely, if Americans save more and spend less while other big countries do the opposite, the world economy will prosper. If Americans become thriftier while foreigners fail to spend more, it will stagnate.
The world’s surplus economies have been propelled by American consumers’ appetite for everything from cars and electronics to furniture and clothing. If the United States is going to save and export more, countries in emerging Asia will have to rely more on their own shoppers and on each other. That means changing a mindset that equates economic health with bulging trade surpluses, and also ushering in a plethora of microeconomic reforms to boost Asian workers’ incomes and encourage consumption. It is now in everybody’s interest to push China to overhaul its health care, pensions and corporate governance.
And, yes, a stronger yuan would also speed up global rebalancing. Yet it is also dangerous for America to make a fetish of China’s currency (see article). Slapping bilateral tariffs on China, which some Democrats want to do to punish it for the low yuan, would hardly help rebalance anything: America would merely import stuff from elsewhere. And the cost in terms of beggar-thy-neighbour protectionism and diplomatic poison would be dire. Far better for Mr Obama to seek a multilateral solution while focusing on rebalancing at home.
How to become thriftier without anybody minding
From that perspective the macroeconomic imperative in Washington is clear: a credible medium-term plan to reduce the deficit. That would avoid premature and dangerous tightening while calming bond markets enough to hold down long-term interest rates. The combination of tight fiscal policy and low interest rates is usually a recipe for a weaker currency.
Plenty of microeconomic reforms could also help with rebalancing. America taxes income and investment too much and consumption too little. So far Mr Obama’s policies have mostly worsened the tilt. Health-care reform applies for the first time a payroll tax (for Medicare) to investment income. His administration has rejected a tax linked to the carbon content of fuel. It has also increased the subsidies, guarantees and preferences for mortgages that helped inflate the housing bubble. The federal government now stands behind 60% of residential mortgages and seems open to the idea of creating a permanently expanded backstop.
Rather than reinforce these biases, Mr Obama should remove them. Getting rid of the tax concessions for housing would help both control the deficit and speed up rebalancing. Housing assistance should be aimed at homeowners who cannot easily move to jobs in brighter parts of the country because their homes are worth less than their mortgages. By helping people reduce their mortgage debts, Mr Obama has taken a step in the right direction.
The world’s biggest economy has begun a long overdue rebalancing. American consumption and borrowing can no longer be the engine of either America’s economy or the world’s. That is the hope. The fear is that politicians everywhere are incapable of dealing with the consequences.
The PIIGS that won't fly
Europe's economic woes
The PIIGS that won't fly
A guide to the euro-zone's most troubled economies
Mar 31st 2010 | From The Economist online
AT A summit in Brussels on March 25-26th, leaders of the 16 member countries of the euro area finally agreed on a last-resort financial rescue mechanism for Greece, whose massive stock of public debt and yawning budget deficit have fuelled fears that it may default. The markets’ reaction to the deal was lukewarm, suggesting that investors have yet to be convinced that Greece will be able to continue to service its debts. Yet beyond Greece there are questions over several other euro-area countries: the five so-called PIIGS, which face many of the same economic challenges as well as the ability to cause headaches in Brussels (and Berlin). The interactive graphic below tells the story; click on the map for country-specific information and charts.
Japan’s $15 Trillion Not Enough
Japan’s $15 Trillion Not Enough to Make It a Buy: William Pesek
Commentary by William Pesek
April 1 (Bloomberg) -- Here we go again.
Every few years, investors get all enthusiastic about Japan. This time the recovery is for real, they argue. This time real change is afoot. This time buy yen-denominated assets and don’t look back, they conclude.
The end result tends to be disappointment. This latest episode of euphoria is likely to be more of the same.
It brings to mind Charles Schulz’s “Peanuts” cartoon: Charlie Brown, Lucy and the football. Time and time again, Lucy convinces Charlie Brown she’ll hold the ball for him to kick only to yank it away at the last second. Every time, he lands flat on his back, pondering his gullibility.
Bullishness on Japan often seems that way. Investors notice business sentiment perking up and unemployment stabilizing and decide -- wrongly -- that the great rally we’ve been waiting for since 1989 is on. This pattern may be playing out yet again.
It’s hardly surprising things feel better. Violent drops in growth tend to be followed by sharp upswings. A multitude of variables, including inventory adjustments, policy measures and what economists call “favorable base effects” explain this. When industrial production collapses by almost 40 percent from peak-to-trough, says Maya Bhandari of Lombard Street Research Ltd. in London, the snapback will be big.
“Looking through these gyrations is vital,” she says.
Worsening Deflation
Investors are cheered that firms including Toshiba Corp. are boosting investment -- and they are buying Japanese stocks. Deflation is far more important, though. As we’ve seen this last decade, sliding prices are a growth killer. They leave executives stingy with wages and drive households to save, rather than consume. The result is a slow ratcheting down of living standards over time.
The real problem is that officials see deflation as the cause of the problems, not a manifestation. You can see that in how quickly Finance Minister Naoto Kan turned on the Bank of Japan, complaining that its 0.1 percent overnight lending rate is too high.
If only Kan understood price declines are less about the supply of yen than weak demand. Wages slid for a 21st month in February, extending their longest losing streak in seven years. As long as workers aren’t reaping the benefits of export-led growth, consumer prices will fall.
The fact Kan’s Democratic Party of Japan is missing that point gets us to the second reason this recovery will fizzle.
Unpopular Leader
An historic election in August thrust Prime Minister Yukio Hatoyama into power. It ended 54 years of virtually uninterrupted rule by the Liberal Democratic Party and promised a new era of enlightened policy making. Eight months later, he is merely another unpopular and distracted Japanese leader.
Not unlike President Barack Obama in the U.S., Hatoyama was elected to govern differently -- to shake up the status quo and take on a ruling elite more interested in their party than their nation’s people.
Instead, he has been neutered by finance scandals. Plans to trim wasteful public works spending and shift government spending away from corporations to households are taking a backseat to political bickering. The buzz has turned to how much longer Hatoyama will be around.
The rise of China, India and South Korea means the world won’t wait for Japan to rethink its rickety model. Japan needs to be 100 percent focused on raising its competitiveness, strengthening its safety social net, increasing productivity, preparing for an aging population, boosting the birthrate and allowing more immigration.
Instilling Confidence
Japan is not about to crash; some $15 trillion of household savings will cushion any fall. Yet tackling these challenges is vital to instilling confidence.
If you want Japan’s aggressive savers to spend more, convince them things will be better over the next 10 years than the last 10. Watching Japan Airlines Corp. go bankrupt, Toyota Motor Corp. crash, Sony Corp. eat Apple Inc.’s dust and China gaining on Japan hardly helps. Nor does talk of a Japanese debt crisis.
Hatoyama’s economic team is focused elsewhere. Kan, the second finance minister in six months, is leaning on the central bank to pump more yen into the economy. The truth is, Japan must find an exit strategy from the 1990s. It hasn’t learned how to live without zero interest rates and the world’s biggest public debt.
Lucy Is Waiting
All this neglect gets us back to Lucy, Charlie Brown and the football. Now that the Nikkei 225 Stock Average is above 11,000 and approaching the levels at which it was trading before the collapse of Lehman Brother Holdings Inc. in September 2008, Japan’s challenges are getting short shrift.
Sure, growth will benefit from improving global conditions and that dynamic could boost the Nikkei a bit. That’s not enough for Japan. It’s been putting off major upgrades for so long that policy makers don’t know where to begin. It means Japan will continue to underperform.
For you would-be Charlie Browns thinking it’s safe to take another kick at Japan’s ball, be warned: Lucy may be waiting to spirit it away yet again.
Obama Drilling Plan May Aid Democrats
Obama Drilling Plan May Aid Democrats on Climate Bill (Update1)
By Jim Efstathiou Jr. and Kim Chipman
April 1 (Bloomberg) -- President Barack Obama’s pledge to expand offshore oil and natural-gas drilling may help Democrats deliver legislation that regulates carbon dioxide emissions before any fuel is produced.
The president wants to permit exploration in parts of the Gulf of Mexico and the Atlantic Ocean not previously offered to companies such as Exxon Mobil Corp., the largest U.S. energy producer. Obama’s offer yesterday doesn’t guarantee access to the new areas and needs support from Congress and the states, said Tom Moskitis, a spokesman for the American Gas Association, a Washington-based trade group whose directors include representatives of Xcel Energy Inc. and El Paso Corp.
Obama had highlighted offshore drilling as a prospect for compromise with Republicans on energy and climate legislation Jan. 27 in his State of the Union address. Now, the administration’s proposal may bring additional lawmakers onboard as efforts are made in the Senate to craft a new version of the stalled measure.
“The cynical view is that this is an attempt to buy a few more votes for a bill that would introduce carbon regulation,” Moskitis said. “I don’t know if I would go that far, but today’s announcement does not guarantee that oil and gas leasing will indeed take place in the new frontier areas on the outer continental shelf.”
The Obama proposal would allow drilling 50 miles off the Virginia coast in what would be the first Atlantic oil and gas sale in more than two decades, and reduce a buffer zone off Florida’s west coast from 235 miles (378 kilometers) to 125 miles. It would cancel future lease sales for Alaska’s Bristol Bay and delay work in other Alaska waters for further study.
Congressional Compromise
Obama’s plan could be reshaped as Senators John Kerry, a Massachusetts Democrat, Lindsey Graham, a South Carolina Republican, and Joseph Lieberman, a Connecticut independent, seek to craft climate legislation after a House-passed approach stalled, said Kevin Book, a Washington-based managing director for Clearview Energy Partners LLC. The compromise, which Kerry said could be introduced the week of April 22, may give states more say over offshore drilling.
“This sets a baseline which is easy to beat,” Book said of Obama’s plan in an interview. “So if Congress comes in with anything above and beyond that baseline, it’s going to generate money and make the climate bill look prettier.”
Obama’s drilling plan drew a mix of reactions among both proponents and opponents of Obama’s energy policies.
‘Not Far Enough’
“Some people are saying we went too far; others are saying we didn’t go far enough,” Carol Browner, Obama’s chief adviser on energy and climate policy, said in an interview yesterday with Bloomberg Television.
House Republican Leader John Boehner of Ohio said “it made no sense” to keep the Pacific Coast, Alaska and parts of the Gulf of Mexico under “lock and key” when gas prices are rising.
Oil prices have swung from less than $20 a barrel in 2001 to a record $147.27 in July 2008 as investors bet demand growth would outstrip new fields. Crude, which surged 1.7 percent yesterday to a 17-month high, extended the gains, climbing $1.14, or 1.4 percent, to $84.90 at 11:44 a.m. in New York trading.
T. Boone Pickens, the billionaire energy investor, endorsed the offshore drilling plan and cast doubt on how much fuel can be produced in the near term. Pickens said the market’s reaction had little to do with Obama’s announcement.
“Whatever dent it makes will not be for 10 years,” Pickens said in a Bloomberg Television interview broadcast today. “The market does not pay any attention to something 10 years out.”
Republicans, Environmentalists
Representative Joe Barton, a Texas Republican and ranking member of the Energy and Commerce Committee, said the proposal is “a step in the right direction,” and Senator Lisa Murkowski, an Alaska Republican, praised the decision to let companies proceed with existing leases in Alaska’s Chukchi and Beaufort seas.
Environmental groups that usually back the president also split in their reactions.
Obama’s drilling plan threatens “beaches, wildlife and tourism with oil spills and pollution,” Anna Aurilio, director of the Washington office of Environment America, said in a statement.
The Washington-based World Wildlife Fund welcomed the decision to shield Bristol Bay, about 375 miles southwest of Anchorage and home to the world’s largest wild sockeye salmon runs, and urged the administration to declare the area permanently off limits.
‘Meaningful’ Path
Among energy producers, Exxon Mobil said Obama offered a “meaningful” potential path toward adding production, said Cynthia Bergman, a spokeswoman for the Irving, Texas-based producer. “We support measures that align our economic-recovery and energy-security goals,” she said.
Houston-based ConocoPhillips, the third-largest U.S. oil company, expects to be allowed to proceed with exploration on its Chukchi Sea leases off the northwestern Alaska coast, spokesman Charlie Rowton said. The company invested $506 million in February 2008 and its first well is scheduled to be drilled in 2012, he said.
In December, Interior Secretary Ken Salazar conditionally approved Royal Dutch Shell Plc’s plan to drill three exploratory wells in the Chukchi Sea after the company spent $2.1 billion. The Chukchi Sea is estimated to hold 15 billion barrels of recoverable oil and 77 trillion cubic feet of recoverable natural gas reserves.
Gulf Moratorium
Obama needs congressional support to lift the moratorium on drilling close to Florida’s west coast, which is in place until 2022. The administration hasn’t sent language to Congress for the change, Republican members of the House Natural Resources Committee said in a statement.
Obama proposes to change a 2007-2012 offshore plan while devising a new blueprint for drilling through 2017. In announcing the plan at Andrews Air Force Base in Maryland, Obama warned that the U.S. may fall behind nations such as China and Germany in a race to lead in development of clean energy.
“This announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy,” the president said. “The answer is not drilling everywhere all the time.”
The administration didn’t spell out any plan to share revenue from offshore leasing with nearby states. Senator Mary Landrieu, a Louisiana Democrat, is among lawmakers who have said they won’t support climate-change legislation unless it gives states a substantial share of the proceeds from drilling.
State Control
“The governors really do control their coastlines to the point where the federal waters won’t be worth the companies’ time if the states don’t want to go along with it,” Book said.
Salazar said Obama’s plan to study exploration in the Atlantic south of Delaware doesn’t “necessarily mean there will be development there.” Opposition by states from New Jersey to Maine ensures they will be exempt from development plans under the new proposals, he said.
Offshore drilling has been a subject of dispute for years. Obama opposed more drilling as a presidential candidate. In August 2008, he said he would support a proposal for increased exploration as long as it was “careful and responsible.”
Republicans, led by vice presidential nominee Sarah Palin, the former Alaska governor, called for more exploration with chants of “drill, baby, drill.”
Obama’s approach is more “drill where it’s responsible, promote efficiency, invest in clean energy and create jobs,” White House spokesman Bill Burton said yesterday. “I know that doesn’t fit on a t-shirt quite as well, but that’s a lot more about what President Obama thinks is the right direction.”
Jobless Claims in U.S. Decreased
Jobless Claims in U.S. Decreased by 6,000 to 439,000 (Update1)
By Timothy R. Homan
April 1 (Bloomberg) -- Fewer Americans filed claims for jobless benefits last week, bringing the average over the past month to the lowest level since 2008, as the economic recovery prompted companies to retain staff.
Initial jobless applications declined by 6,000 to 439,000 in the week ended March 27, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance was little changed, while those getting extended benefits rose.
Employers are slowing job cuts, a sign of confidence, as the U.S. emerges from the worst recession since the 1930s. Sustained employment gains are needed to boost consumer spending, which accounts for about 70 percent of the economy.
“We are turning a corner in the labor market,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York, who had forecast a decline in the weekly jobless claims. “Businesses are gradually starting to have more confidence in the recovery.”
Economists forecast weekly claims would fall to 440,000, from a previously estimated 442,000 for the week ended March 20, according to the median of 46 projections in a Bloomberg News survey. Estimates ranged from 420,000 to 455,000.
Stock-index futures held gains and Treasury securities declined after the report. Futures on the Standard & Poor’s 500 Index expiring in June rose 0.6 percent to 1,172.7 at 8:46 a.m. in New York. The 10-year Treasury note fell, pushing up the yield to 3.85 percent from 3.83 percent late yesterday.
Job-Cut Announcements
Employers announced fewer job cuts in March than a year earlier, another report showed today. Planned firings fell 55 percent last month to 67,611 from 150,411 a year earlier, according to data collected by the job placement firm Challenger, Gray & Christmas Inc. Announcements increased from February’s three-year low of 42,090.
Companies unexpectedly cut payrolls in March, a report from ADP Employer Services showed yesterday. The 23,000 decline in payrolls was the smallest in two years and followed a revised 24,000 drop the prior month.
The four-week moving average of claims, a less volatile measure than the weekly figures, decreased to 447,250 last week, the lowest level since September 2008, today’s report showed.
Continuing Claims
The number of people continuing to receive jobless benefits decreased by 6,000 in the week ended March 20 to 4.66 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
The number of people who’ve used up their traditional benefits and are now collecting emergency and extended payments climbed by about 264,000 to 6.03 million in the week ended March 13.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended March 20, today’s report showed. Thirteen states and territories had an increase in claims for that same week, while 40 showed a decrease, led by California.
Payrolls declined by 36,000 in February, the Labor Department said on March 5. Economists anticipate employers added about 180,000 jobs in March, according to a Bloomberg survey before tomorrow’ report.
Jobless Rate
The jobless rate in March is projected to hold at 9.7 percent for a third consecutive month, the survey median showed. The unemployment rate has not increased since reaching a 26-year high of 10.1 percent in October.
Caterpillar Inc., the world’s largest maker of construction equipment, said last week it plans to hire 500 workers this year to expand a generator plant in Newberry, South Carolina. “The expansion is likely to take three to four years and could vary based on demand and other factors,” Jim Dugan, a Caterpillar spokesman, said March 17 in an e-mail.
Other companies are still trimming payrolls. J.M. Smucker Co., the maker of jams, Folgers coffee and Jif peanut butter, said last week it is reducing the number of North American manufacturing facilities to 18, from 22. The cuts are estimated to result in a reduction of 700 full-time positions, or 15 percent of the Orrville, Ohio-based company’s workforce.
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