Some Hypocrisies Are Not Hypocrisies

VICTOR DAVIS HANSON

The Usual Apology

I think the standard explanation of the trashing accorded the foolish Gov. Mark Sanford (who in embarrassing, and by now truly surreal, fashion confessed, and confessed, and confessed to an affair with an Argentinean girlfriend) and the tsk-tsk treatment of former senator and presidential candidate John Edwards -who, in grotesque fashion, fathered a child with his mistress, lied about it on serial occasion while he tried to gain political mileage from his ill wife, all as he concocted an alibi that his aide, not he, had really impregnated Rielle Hunter-is that Sanford suffered from the addition wage of hypocrisy.

That is, self-proclaimed moralists like the late Henry Hyde, Newt Gingrich, Larry Craig, Mark Foley, John Ensign and other conservatives raised the sexual morality bar high on others, and then proved they could not meet it themselves-while libertine Democrats like a Bill Clinton, Barney Frank, or Jesse Jackson never claimed to judge others’ sexual mores. Therefore their behavior is not at odds with their rhetoric. So despite their public status, the ’sin’ in their case remains more a ‘private’ manner.

Really?

But there are some problems with this facile analysis. While it is true that Americans seem to detest hypocrisy more than sin, there is something more to this strange unevenness in attitudes toward conservative and liberal transgression. Feminists have long argued that serial womanizing is a sort of moral cheapening of their gender. The supposed male power broker uses rank, money, and privilege to sexually exploit the vulnerable, gullible, younger (fill in the blanks) female. A lot of Foucouldian gibberish is thrown in about power and control-as in mandarin males exploiting victimized female subordinates in supposedly consensual relationships.

Womanizing Feminists

So why then do professed feminists largely ignore an Eliot Spitzer, Bill Clinton or Ted Kennedy, who did not suffer an addition wage of hypocrisy? Monicagate, after all, was a classic feminist cause célèbre: Monica was younger, supposedly naïve, a subordinate, without power and a voice, a victim drawn into an asymmetrical relationship with her “boss”, who used his superior position to cajole the younger woman into exploitive sexual services. But, of course, feminists were largely quiet-although not entirely quiet as many prominent commentators trashed Monica, as they had Paula Jones, as they had Clinton’s harem, as a sort of trashy vixen, whose sluttishness (see David Letterman on such usage) endangered the political capital of a feminist supporter of everything from abortion to gay rights.

Another exegesis goes something like this: “Well, you conservatives suffer the additional wage of hypocrisy on matters sexual since you yourselves are so moralistic; while we liberals get hit hard on matters of high living and privilege given our professed egalitarianism. So it evens out.” But is that second half of the equation true?

Taxes for Thee, not Me

I don’t think so. Very few in the media ran with the Timothy Geithner messy story. The problem was not just that he took quite embarrassing unlawful deductions, but actually pocketed the very FICA allowances provided him by the IMF to address his exposure to self-employment payroll taxes.

In addition, Geithner was to oversee, as Treasury Secretary, the Internal Revenue Service, which, given its limited resources, must rely on the goodwill and honest voluntary compliance of the American tax payer. Furthermore, Geithner was part of a new administration whose trademark theme was that an under-taxed elite, in near unpatriotic and greedy fashion, had made out like bandits in the Bush years. Thus, those over the sinister $250,000 threshold owed the rest of us overdue money as a sort of financial penance. I could ditto the cases of Daschle, Solis, and Richardson as well, but leave you with Charles Rangel and Chris Dodd- champions of the people and enemies of privilege, who in the most tawdry fashion sold influence for things like lower interest on loans and possible gifts to their eponymous centers.

Goristics

But perhaps the most glaring example is the strange case of former Senator and Vice President Al Gore. He was canonized with various awards including, but not limited to the Nobel Prize, on the basis that his disinterested global campaign to raise concern about global warming had given us all an eleventh hour reprieve from ruining the planet.

Remember the Gore themes: we are destroying the planet by gratuitous use of fossil fuels. Each of us must know his own “carbon footprint,” and adjust accordingly. But then we learned, in addition to the movies and books, Gore had created a carbon-exchange company, a modern version of medieval penance, in which for a fee Gore’s people would evaluate one’s environmental sins, and suggest how one could get right with the gods of the environment.

And on and on it went until in just a few years Gore’s net worth went from $2 million to nearly $100 million. But the additional rub was that Gore lived in an energy-gobbling big house, flew in carbon-polluting private jets, and seemed to benefit financially from the very policies he was lobbying governments to embrace. None of these facts had any effect on the media, the Nobel Prize committees, or his general public stature. Today he remains a liberal icon, not a hypocrite who seemed to live the carbon high-life he demonized so publicly.

So, then, what accounts for the hypocrisies?

Is there some generic, overarching explanation that accounts for the lopsided charge of hypocrisy?

I think we must go back to the nature of the liberal, egalitarian mind that professes the greater care for the welfare of the commons. In contrast, the conservative, the Republican, the libertarian, in dog-eat-dog fashion believes that life is sort of a tragic free-for-all, and to the victor goes the spoils, who then by his own sense of right must help the poorer and less well off. The latter are less sensitive, less caring, more goal orientated; the former are mellower, more sharing, and pit the power of ideas, morality, and fairness against the overwhelming power of money and influence.

Presto!-the beleaguered, more moral liberal must be given greater leeway, even can employ sometimes questionable means, since his ends are the more exalted. Yes, Al Gore gets to fly private, and have a few extra rooms in his mansion, but he is in pain, sacrificing on the planet’s behalf, and needs a more ample footprint than the rest of us to save us from ourselves.

Who cares if George Bush’s Texas ranch house has a lighter footprint than Gore’s mansion, given that Bush thwarted Kyoto and Gore promoted it? Yes, Timothy Geithner skipped a few thousands in taxes, but who wouldn’t if you were trying to reformulate an entire tax code to level the playing field? Yes, Bill slipped up with Monica, but Monicas come and go-a woman’s right to chose, however, simply does not and cannot. Yes, Eliot Spitzer had a bothersome desire for young prostitutes, but he was a crusader against Wall Street greed. And yes, the previously mentioned John Edwards was campaigning to the left of Clinton and Obama, and thus his ‘problems’ deserved some sort of reflection and gestation, given his voice on the behalf of the poor.

In contrast, Mark Sanford would cut needed entitlements, let the wealthy off, hurt gays and harm a woman’s right to choose, and, thank god, his self-interested morality drew in a well-earned nemesis.

Ends and Means

I am not suggesting that liberal adulterers are not ostracized or Democratic tax cheats are not condemned, but rather not to the same degree, given their egalitarian fides, as others. Charles Rangel’s financial ethics seem comparable to those of Tom DeLay’s, but not their respective fates. The sordid network of John Murtha, I think, will prove not that much cleaner than Duke Cunningham.

We see the same phenomenon in matters of war and peace: Iraq under Bush devolved into a hopeless quagmire, given the strutting Texan’s bellicosity; Iraq under Obama in a hundred days has blossomed as a bright light of democracy in the Middle East, given Obama’s concern for global humanity. Renditions, tribunals, wiretaps, intercepts, and Predator attacks are either assaults on the Constitution or tragically necessary protocols to keep us safe-depending on the mentality of those who administer them.

Imagine

Public speech is the same: Imagine the following what ifs: A Justice Alito: “I do not think a Latina can be as wise a judge as a good old fashioned white male.” = career over. John McCain: “The people of inner-Chicago cling to their churches, pack their handguns, and are xenophobic to the Latino population.” = career over. Don Imus’s slur that cost him his job is not synonymous with David Letterman’s slur about an underage Palin girl being raped in a baseball dugout that cost Letterman nothing.

Thugs too

At the extremes we always rightly deplore the murderous fascist like Franco or Pinochet, but cannot quite admit that peasant-clad Mao was the largest mass-murderer of the 20^th century, or that over his long career a Castro killed and jailed more than was true in Pinochet’s Chile. And our enemies know that: a Chavez or Ahmadinejad or Castro simply dons some sort of anti-tie outfit, gets a little scruffy looking, mouths some recycled American campus platitudes, and, presto, taps into the Che-effect—and can almost pass as a nationalistic, authentic liberationist and anti-colonialist, rightly at war with capitalism and corporations, in a way a creepy right-wing sun-glassed Greek colonel of the 1960s or South American caudillo with epaulletes does not.

Oh, Well…so what?

The difference between a Nixon and Reagan was that Nixon was obsessed by the asymmetry, and in near paranoid fashion thought the Kennedys, the New York Times, the universities, all applied standards to himself that they did not to themselves. And this was so unfair! Reagan grinned and accepted it, laughed it off, and went forward.

Not long ago a friend revealed a bit of Palin derangement syndrome. I thought it was sort of silly and smiled. But, finally, to stop the rant, I meekly suggested, “At least I bet she knows there was not TV in 1929 and that Hoover, not FDR, was president.” At that jab, the person, veins bulging, flushed and flashed, “You’re sick, if you can’t see Biden has more brains in his little finger than that Palin.”

Biden, you see, cares for us, and so make chronic slips in a busy stressful schedule to help the helpless; Palin is an ignoramus, one that shows her ignorance hourly in red pumps and small-town Pennys’ outfits. Of course, she must be a right- wing nut that kills animals and visits trailer parks. She has no margin of error, Biden has no error at all—it’s “just good ol’ Joe at it again”, unlike “It came from Wasilla.”

So, yes, hypocrisy we do not like–or rather sort of, sometimes, kind of do not like.

Roger L. Simon: Is Obama “Objectively Pro-Fascist?”

Roger writes, “I don’t know much about Honduras, but I do know something about Iran”:

And Obama’s bizarre behavior, taking days to come to the conclusion any decent person knew immediately, indeed other world leaders like Merkel and Sarkozy had demonstrated as much - that there were very clear good and evil sides in the Iranian election, even though the good wasn’t perfect. (Is it ever?) So when I heard that our President had joined Chavez and Castro in condemnation of the supposed coup in Honduras, this time with immediacy, I felt a tightening in the gut. Chavez particularly was on the side of Ahmadinejad in the recent Iranian brutality.

This was a side I didn’t want to be on, didn’t want our country on. I heard many suspicious things about Zelaya, the booted Honduran president, including allegations of drug ties. Also, he was running for succor to the UN, the very organization just weeks ago I had personally seen embrace Ahmadinejad in Geneva. So when I read this message from a Honduran on The Corner, I wasn’t surprised.

Obama has strange friends. He equivocates and equalizes in disturbing ways. Is he “objectively pro-fascist” as George Orwell memorably wrote in his famous essay “Pacifism and the War”?

I give you Eric Arthur Blair. Make of it what you will. For me, the word “pacifism” could be replaced by some coinage (it’s too late here in LA for me to come up with one, if I could anyway) that encapsulates Obamaism in its supposedly even-handed international policy: “Pacifism is objectively pro-Fascist. This is elementary common sense. If you hamper the war effort of one side you automatically help that of the other.”

Obama objectively pro-fascist? That language may work for Mr. Blair, but don’t try it at the former home of Mr. Mencken (whom one could make a somewhat similar case for, truth be told).

Meanwhile, a new ad from OurCountryPAC.org and found via Breitbart.tv attempts to square the circle — with a comparison that would have been perfectly acceptable to describe an American president for much of the decade before — to pick a date entirely at random — this past November, but will also make the Sunpapers less than happy:

embedded by Embedded Video

YouTube Direkt

Update: As will the latest edition of Chris Muir’s Day By Day cartoon:

Barry Goldwater’s Revenge: The Libertarian Shift Among American Republicans

As the Tea Party movement continues and many Americans grow more concerned by government expansion, the interest and support for Libertarian style Republicanism is knocking loudly at the front door of conservatism. The GOP would be wise to answer.

Consider this report from The New Ledger:

“Part of what is harming the Republican party these days is the disillusionment of the Republican base, and many of the members of the base are small-government activists who feel as if the party has abandoned their pet issue. Getting those people back would help tremendously in the revival of the Republican party, and a more libertarian turn to Republican politics would serve to re-energize the small-government base.”

I know what you’re thinking. That’s just an isolated incident, right? What about the poll from Right Wing News today that says a majority of conservatives would vote for an atheist president?

6) Would you vote for an atheist for President?

Yes: 67.2% (41 votes)
No: 32.8% (20 votes

That doesn’t mean there isn’t room under the tent for conservative Christians, it means the opposite actually. Atheists, Agnostics and religious conservatives can co-exist under the same tent because they’re united by conservatism, not their religious views.

Eric Dondero, the editor of Libertarian Republican, has reported booming traffic at his website and was recently mentioned by Jonah Goldberg at National Review.

There are other signs too. Ron Paul (ever the Libertarian) still has many supporters who are happy that Dr. Paul’s “Audit The Federal Reserve” bill is gaining steam.

“Paul, as of Tuesday, has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010.”

“Paul attracted just 18 co-sponsors when he authored a similar bill, which died, in 1983. While the impact Fed policies have on inflation is once again a concern, fears about loose monetary policy and excessive federal spending appear even more widespread in 2009.”

Finally if there’s any doubt left in your mind, Greg Gutfeld host of the FOX News program Red Eye, was recently interviewed by the ultimate authority on Libertarianism, Reason Magazine.

The money quote? 2:51

“I became a Conservative by being around Liberals and I became a Libertarian by being around Conservatives.”

Click the image below to watch the video:

Coca and cocaine in the Andes

Mixed signals among the coca bushes

An apparent fall in cocaine production conceals the remarkable resilience of an illegal industry

A YEAR ago when the United Nations’ annual survey showed a rise of 27% in the area planted with coca in Colombia in 2007, the government expressed “serious doubts” about the reliability of the estimate. On June 19th Colombian officials were so proud of the UN’s finding of an 18% decrease last year that they rushed to announce it five days ahead of its scheduled release. Although cultivation of coca, the hardy shrub from which cocaine is refined, is reported to have increased in Peru and Bolivia (see chart), the UN claims that lower yields mean that 28% less cocaine was produced in Colombia. Taken together with an estimated fall of 19% in opium-poppy cultivation in Afghanistan, the UN’s Office on Drugs and Crime (UNODC) calls the results “encouraging”.

That is surely welcome for UNODC, especially because it comes as the agency’s worldwide policy of drug prohibition, reaffirmed at a ministerial meeting in April, is being increasingly questioned in Latin America and beyond (see article). In fact, there may be less to the headline figures than meets the eye.

Two things seem to lie behind the fall in coca cultivation in Colombia. Aldo Lale-Demoz, the UNODC’s man in Bogotá, says the main factor is a greater stress on manual eradication, where workers physically yank up the coca, bush by bush, often in small plots on steep Andean mountainsides. This is more effective than aerial spraying, in which planes dump weedkiller, killing a harvest (and nearby food crops) but not the shrubs. On taking office in 2002, Álvaro Uribe, Colombia’s president, launched a massive programme of aerial spraying. Last year the government still sprayed 133,000 hectares (330,000 acres), though this was 13% less than in 2007. But it also manually eradicated 95,634 hectares, a rise of 43% compared with 2007.

A second factor, according to Ricardo Vargas, a drug-policy analyst, was the success of the security forces in reducing the FARC guerrillas, disrupting their control of territory and their drug-production operation. This allowed the government to get eradication teams into the eastern province of Meta, where coca has long been widely grown, and to pull up half of the crop there.

Progress in Colombia is partly offset by developments further south. Peru’s steady upward trend in coca cultivation continued, even though President Alan García’s government manually eradicated 10,143 hectares last year. Output is rising fast in the Apurímac and Ene valleys, which not coincidentally are home to part of the remnants of the Maoist Shining Path guerrillas, who terrorised Peru in the 1980s and 1990s. Nearly 40 soldiers and police have been killed in the area since the government began an attempt to regain control last September. In the Huallaga valley further north, where the Shining Path is also present, the government has pressed ahead with forced eradication, but in the Apurímac and Ene it feared social unrest.

Cultivation has also risen in Bolivia, but not by much, despite the government’s expulsion last year of America’s Drug Enforcement Administration (DEA), whose agents it accused of meddling. Bolivia’s president, Evo Morales, who doubles as the leader of the coca-growers’ union, insists that he is opposed to cocaine, though not to coca (which is traditionally chewed by Andean Indians). Both drug seizures and the number of anti-drug operations by Bolivia’s police have increased under Mr Morales, though from a low base. The police recently destroyed a huge Colombian-run cocaine laboratory. But the lab’s existence seemed to confirm the worries of American officials that despite these efforts the government’s friendliness to coca growers helps the drug traffickers.

The apparent fall in coca production comes amid signs that Mexico’s crackdown against drug gangs has had an effect in the United States, the biggest retail market for cocaine. America’s DEA reports that the average purity of the cocaine it seized on the streets fell from 67% in January 2007 to 44% in December 2008, while the average retail price doubled to $200 per gram of pure cocaine. However, there have been several upward spikes in the retail price over the past two decades that have bucked but not broken a long-term falling trend. The retail price has recently also risen in Europe.

But it would be wildly premature to conclude from this year’s figures that the Andean coca industry is in retreat. To sustain the fall in coca cultivation in Colombia requires the rule of law to take deeper root in rural areas, for eradication to be backed by offers of “alternative livelihoods” for coca farmers, as well as for demand for cocaine to continue to fall, says Sandeep Chawla, the UNODC’s director of policy and public affairs.

In Meta Colombia’s government has been quick to offer alternatives to coca. In Peru’s Huallaga valley over the past two decades the authorities have helped thousands of farmers to replace 81,000 hectares of coca with alternatives such as coffee, cacao, rubber and oil palm. This success, says Rómulo Pizarro, who heads Peru’s anti-drug agency, is because the farmers, different levels of government and foreign donors all worked together. Last month ministers unveiled a $115m plan to improve social provision and roads in the Apurímac and Ene valleys. But local mayors say that is not enough to counter the lure of drug trafficking. Experience shows that alternative development works only where it goes hand in hand with security and transport links to markets.

The problem is that the drug industry reacts to eradication programmes by pushing into new territory. The UN says that 59% of the coca it detected in Colombia last year was in areas where the crop had never before been planted. Now coca is springing up in several far-flung parts of Peru, including some national parks in the jungle. Adam Isacson, who follows Colombia for the Center for International Policy, a think-tank in Washington, DC, says that coca cultivation could well rise this year, because the FARC has regained control of some areas and because farmers lost their life savings in the collapse of financial pyramid schemes late last year. This week seven police died in a FARC ambush.

Estimates of drug production are far from foolproof. The UN derives its data from satellite photography, taken in December each year, backed up by field visits to sample sites. This methodology is more thorough than that used by America’s Central Intelligence Agency, which provides the United States’ government’s estimates of drug production. But coca growers adapt to eradication by switching to smaller plots that are harder to spot.

Another doubt concerns how much cocaine is manufactured each year. Just as wine vintages vary, so the weather can affect the number of harvests a coca plant yields and the alkaloid content of the leaves. And the effectiveness (or lack of it) of law enforcement can determine how much is processed. By interviewing some coca farmers, the UN concluded that yields fell in Colombia this year. This leads it to estimate that cocaine production last year totalled just 845 tonnes (down from 994 tonnes last year).

Mr Chawla concedes that this is an “uncertain measure”. There is much anecdotal evidence pointing to rising productivity. Eradication teams in Colombia talk of finding high-density coca fields in new areas, and more use of fertiliser by growers. Yields in the Apurímac and Ene valleys, where cultivation is expanding, are among the highest in the Andes.

All this counsels against reading too much into this year’s figures. Broadly speaking, the picture is one of a remarkable resilience in coca and cocaine production, despite enormous and hugely expensive efforts by governments to stamp it out. That resilience comes at a high cost in lives and environmental destruction.

TEA WITH THE ECONOMIST

Limiting migration

People protectionism

Rich countries respond to the economic downturn by trying to limit the flow of migrants

IN THE boom years, migrants picked fruit in southern California's orange groves, worked on construction sites in Spain and Ireland, designed software in Silicon Valley and toiled in factories all over the rich world. Many will continue to do so, despite the economic downturn. But as unemployment rises in most rich countries, attitudes towards migrants are hardening.

Attacks on Romanians in Northern Ireland and on Indian students in Australia are the most visible and disturbing manifestations of growing xenophobia. In response, many governments are also tightening their migration policies, according to a report published by the OECD on Tuesday June 30th. Governments are reducing quotas for foreign workers and imposing tougher entry requirements on them in an effort to control the flow. Some are even paying existing migrants to go home.

Several countries have cut the numbers of people allowed to enter through official programmes. Spain let in 15,731 foreign recruits under its “contingente” scheme in 2008, but slashed the quota to a tiny 901 this year. The Italian government has announced that no non-seasonal workers will be admitted in 2009, whereas 70,000 were officially admitted in 2008. South Korea welcomed 72,000 migrants under its Employment Permit Scheme last year, but this year's limit is set at 17,000. And Australia, which had earlier said that 133,500 skilled migrants could enter the country this year, has now lowered the limit to 108,100.

Many rich countries maintain lists of occupations for which there is a shortage of domestic workers, giving foreigners with the appropriate skills preferential treatment. Several countries have reduced the scope of such lists drastically. In Spain, for example, the list issued in October 2008 had nearly a third less professions listed than the previous version.

Some countries have made it harder for employers to hire foreigners by making them jump through more hoops than before. In Britain, for example, employers hoping to hire certain kinds of skilled foreigners face tougher rules about where job advertisements must be placed. In America, the “Employ American Workers Act” attached to the fiscal stimulus bill, puts stricter conditions than before on any company that receives government bail-out money and wants to hire skilled foreigners under the country's H-1B visa programme. As a result, some American banks and other financial-services firms have rescinded job offers to foreign-born graduates of American universities and postgraduate programmes. Some of those who have the paperwork allowing them to work are finding it harder than ever to renew their permits.

Some countries are getting creative in their attempts to reduce not just fresh flows of migrants, but also the stock of migrants already present, by encouraging people to go home. Some migrants to Spain from outside the EU, for example, became eligible in November last year for a portion of their Spanish benefits if they returned home and promised not to return for three years. The Czech government is promising to provide the air-fare and €500 ($704) to workers who have been laid off. About 1,100, mostly contract labourers from Mongolia, had accepted by the end of March.

Given that many more locals find themselves without jobs in the downturn, it may seem sensible to limit immigration. It is hardly surprising that Spain, where unemployment is 18%, is looking particularly hard for ways to stop migrant flows. But the OECD's analysis points to several problems with this. Lessons from the 1970s, when the recession that followed the oil-price spikes led Germany, France, and Belgium to clamp down on immigration, suggest that such anti-migrant rules can persist even when they have outlived their use.

In general, given the politics, it is much easier to tighten controls, as countries are doing now, than to loosen them when the economy starts growing again. There are also genuine shortages of workers in some professions, such as medicine and certain technical jobs such as engineering, which locals cannot easily and quickly retrain for. Clamping down on the total flow of migrants, therefore, risks making such shortages worse.

In addition, some measures to limit official migration, such as making it harder for temporary work-permit holders to renew their permission to stay, risk pushing people into staying on illegally. Paying someone to go back home for three years, for example, would be counterproductive if the economy rebounds by the end of 2010 and such workers are in demand once again. When the world economy emerges from the doldrums, some countries that have passed legislation restricting the ability of local companies to hire foreigners may find themselves lacking the flexibility that migrants bring. Migrant workers, for example, accounted for over two-fifths of employment growth between 2003 and 2007 in Austria, Denmark, Italy and Spain, and 71% in the same period in Britain.

MarketWatch Hot Stocks: Energy Rises

Economic Data Cheer Investors

PETER A. MCKAY GEOFFREY ROGOW

Signs of stabilization in the factory and housing sectors helped rally stocks on Wednesday.

The Dow Jones Industrial Average was recently up about 110 points, or 1.3%, at 8557. The Nasdaq Composite Index rose 1.3%. The S&P 500 was up 1.1%, helped by gains in every sector. The Russell 2000 was up 2.1%.

Market Data Center >

Journal Community Event

Ask the Fund Manager: On July 6 and 7, Journal Community will host Eric Cinnamond, manager of the Intrepid Small Cap Fund. He will answer questions about investing and his fund's strategy. Send questions now to moderator@wsj.com.

New readings on manufacturing and housing cheered traders. The Institute for Supply Management said its index of manufacturing activity moved to 44.8 in June from 42.8 in May. That reading was in line with the 45 reading expected by economists and signals a slowing rate of contraction.

Also, a gauge of future U.S. housing-market activity rose for the fourth straight month in May, marking its longest stretch of growth since October 2004. The National Association of Realtors said its index of pending sales increased 0.1% in May to 90.7.

Weighing against those reports, private-sector jobs in the U.S. fell 473,000 in June, according to a national employment report published on Wednesday by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

"The ADP report was disgusting, but we're pretty happy with the ISM data," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams. "It looked like that figure bottomed at 41 and is going in the right direction."

Further helping stocks, Mr. Rovelli noted there was "an underwritten support" for the market due to the beginning of the second half of the year. It's expected that money managers will push back into the market in the initial days of the quarter, leading into the second-quarter earnings reports.

Still, volume was light. Only 300 million shares changed hands on the New York Stock Exchange floor as of 11:30 a.m.

Overseas, the China Federation of Logistics & Purchasing said its purchasing managers' index, a measure of regional manufacturing activity, rose for a fourth straight month. China's Shanghai Composite Index climbed 1.7% on the news, crossing the 3000 mark for the first time in more than a year.

The improved readings from the global manufacturing sector rekindled hopes for an uptick in global demand for raw materials. The Dow Jones-UBS Commodity Index was up 1.2%. Oil futures turned lower, falling 26 cents to $69.48 a barrel in New York after U.S. inventory data showed a build in gasoline stockpiles. Crude prices have gained 58% this year.

Strategist Carmine Grigoli, of Mizuho Securities, said oil is clearly being driven in large part by speculation. But for now, he's not too worried about its gains sparking a premature round of inflation that could choke off consumer spending.

"You have to look at it on a longer-term basis," with crude still down more than 50% from its records last summer, Mr. Grigoli said. "Even with what's going on there, I think the [market] can remain in its recent trading range until we start to get second-quarter earnings in a few weeks."

The Chicago Board Options Exchange's Volatility Index was off almost 5% to 25.11, again retreating below its close of 25.66 immediately before the collapse of Lehman Brothers last September.

Strategist Howard Simons, of Bianco Research in Chicago, welcomed the recent retreat in the VIX but took it with a grain of salt, considering that it is still high in historic terms. Even in September 2008, he noted, the index was priced at a level to reflect the nine months or so that the U.S. had already endured. At that point, the VIX was already about double its level when housing prices peaked in 2006, as measured by S&P/Case-Shiller data.

"Investors are still paying a lot for insurance on their portfolios," in the form of options that work as hedges on actual shares investors own, said Mr. Simons. "That's probably not such a bad idea at this point, though. We've still got a long way to go in this recovery."

The dollar strengthened against the Japanese yen but weakened versus the euro. Treasury prices were also mixed. The two-year note was up 3/32 to yield 1.069%. The 10-year note slipped 7/32 to yield 3.564%.

The Supreme Court Says No To Quotas

Residents in a burning building want competent firefighters. They don't care about the race of those whose job it is to save them.

ABIGAIL THERNSTROM

The Supreme Court's decision in Ricci v. DeStefano is very good news. The court said clearly and decisively that employment law only rarely permits quotas to remedy racial imbalance.

Most racial preferences -- for example, in college admissions -- are shrouded in secrecy and dishonesty. Not here. In 2003, after 58 whites, 23 blacks and 19 Hispanics took tests to determine who would qualify as captains and lieutenants, no blacks and two Hispanics ended up eligible for promotion. The city's civil service board refused to certify the results, denying promotions to all who had earned them. As the chairman of the New Haven Board of Fire Commissioners had earlier told the firefighters, many of whom were Italian, some men would not be hired because "they just have too many vowels in their name[s]."

Seventeen white candidates and one Hispanic sued, claiming a violation of their legal and constitutional rights. They struck out in the district court and the Second Circuit Court of Appeals.

Judge Janet Bond Arterton, who wrote the district court opinion, cavalierly dispensed with a trial on the facts, issuing instead a summary judgment. In the Second Circuit, Judge Sonia Sotomayor joined two colleagues in a panel decision affirming the district court's decision; the substance of their opinion was confined to one paragraph.

Speaking for a 5-4 majority of the Supreme Court, Justice Anthony Kennedy did acknowledge an internal contradiction in employment discrimination law. Title VII of the 1964 Civil Rights Act prohibited intentional discrimination on the basis of "race, color, religion, sex, or national origin." Yet another law, in 1991 -- which built upon a 1971 Supreme Court decision -- banned employment tests that had a disparate impact on the hiring of racial minorities, unless the tests were shown to be job-related and a business necessity.

But the court said that New Haven had violated Title VII of the 1964 Civil Rights Act. It was not even a close call in the view of the majority.

The Supreme Court has made an elegant start at cleaning up the mess of employment discrimination law, in part by insisting on a critical point. "The purpose of Title VII is to promote hiring on the basis of job qualifications, rather than on the basis of race or color," Justice Kennedy said. The goal was to create a workplace environment free of discrimination, "where race is not a barrier to opportunity." And yet "the City made its employment decision because of race. The city rejected the test results solely because the higher scoring candidates were white."

Justice Samuel Alito's concurring opinion noted that New Haven never made any credible effort to determine whether the firefighters' promotional exam was a legitimate test of job-related skills; the decision to discard the test results was nakedly political. The tests, in fact, had been scrupulously designed and scrubbed of all possible racial bias.

Incredibly, Justice Ruth Bader Ginsburg, writing in dissent, agreed with the willfully blind conclusion of the district court -- which had reasoned that New Haven's assessment "was race-neutral" on the grounds that "all the test results were discarded, no one was promoted." The panel on the Second Circuit effectively agreed with this nonsense.

Yet another Second Circuit judge, José Cabranes, properly posed the broad constitutional question at issue: "Does the Equal Protection Clause prohibit a municipal employer from discarding examination results on the ground that 'too many' applicants of one race received high scores and in the hope that a future test would yield more high-scoring applicants of other races? Does such a practice constitute an unconstitutional racial quota or set-aside?"

Unfortunately, only Supreme Court Justice Antonin Scalia addressed this issue -- and only briefly. "The war between disparate impact and equal protection will be waged sooner or later, and it behooves us to begin thinking about how -- and on what terms -- to make peace between them," he concluded.

All racial classifications are highly suspect under the 14th Amendment. The Constitution protects individuals from discrimination -- without respect to race. Distributing benefits and burdens on the basis of color was supposed to be the ugly mind-set the leaders of the civil rights movement struggled so heroically to change. We have not escaped such race-thinking yet, but this decision is an important step in the right direction.

Here we should listen to Frank Ricci, the lead plaintiff. He appeared at a hearing held by the Civil Service Board before the test results were released. "The people who passed should be promoted," he said. "When your life's on the line, second best may not be good enough." Residents in a burning building want competent firefighters. They don't care about the race of those whose job it is to save them.

Ms. Thernstrom, author of the just published "Voting Rights -- and Wrongs: The Elusive Quest for Racially Fair Elections" (AEI), is vice-chair of the U.S. Commission on Civil Rights and an adjunct scholar at the American Enterprise Institute.

Parsing the Health Reform Arguments

Some of the shibboleths we've heard in recent weeks don't make much sense.

GEORGE NEWMAN

The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:

- "The American people overwhelmingly favor reform."

If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.

- "The cost of health care rises two to three times as fast as inflation."

That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.

Corbis

- "Health care represents a rising proportion of our income."

That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?

- "Shifting funds from health care to education would make for a better society."

These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.

- "Forty-five million people in the U.S. are uninsured."

Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?

- "The cost of treating the 45 million uninsured is shifted to the rest of us."

So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.

- "A universal plan will reduce the cost of health care."

Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?

- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."

This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?

- "If you like your current plan you can keep it."

In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.

- "Congress will be strictly neutral between the public and private plans."

Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."

- "Decisions will still be made by doctors and patients and the system won't be politicized."

Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.

- "We need a public plan to keep the private plans honest."

The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.

Mr. Newman is an economist and retired business executive.

Charts Show USD Could Resume Its Downtrend

How Dysfunction Helps the GOP

The party says its own mistakes prove government can't work.

By THOMAS FRANK

'Remember the $400 hammer? How 'bout that $600 toilet seat?" asks a Conservatives for Patients' Rights TV commercial criticizing President Barack Obama's health-care plan. "Seems when Congress gets involved, things just cost more."

As it happens, I do remember the incident of the $436 hammer, the one that made headlines back in 1984. And while it may "seem" in hazy retrospect as though it showed how "things just cost more" once those silly liberals in Congress get started, what the hammer episode actually illustrated was a very different sort of ripoff. The institution that paid so very much for that hammer was President Ronald Reagan's Pentagon. A private-sector contractor was the party that was pleased to take the Pentagon's money. And it was a liberal Democrat in the House of Representatives, also known as "Congress," who publicized the pricey hardware to the skies.

But so what? Myth is so much more satisfying than history, and with myth the competence of Washington actors from 25 years ago doesn't matter any more. Nor does it matter which arm of the federal colossus did what. Republican or Democrat, White House or Congress, they're all part of a monolithic, undifferentiated "government" that acts according to a money-burning logic all its own.

The myth has been getting a lot of play from conservatives in recent weeks as the debate over health care has heated up. The message, as always, is that government can't do anything right.

Where the conservative mythologists show their hand is when they use their own monumental screw-ups, committed during conservatism's long years in charge of the government, to prove that government in general is a futile proceeding, and that Democratic health-care plans, in particular, can't possibly succeed.

We heard this bizarre reasoning during last year's campaign season. "Unless you're pleased with the way the federal government has been running anything lately," Gov. Sarah Palin declared last October, when the federal government had been answering to her fellow Republican for nearly eight years, "I don't think that it's going to be real pleasing for Americans to consider health care being taken over by the feds."

Among former President George W. Bush's gravest and most characteristic blunders, of course, was his administration's response to Hurricane Katrina, when the nation learned the true price of government by crony and contractor. But for conservatives, that is too nuanced a view. The real lesson to learn from Katrina as we debate health care is simply that government can never work. "The federal government would run a health care system -- or a public plan option -- with the compassion of the IRS, the efficiency of the post office, and the incompetence of Katrina," carps the official summary of the Republicans' Patients' Choice Act.

I've always thought that P.J. O'Rourke was only half joking when he wrote, years ago, that "Republicans are the party that says government doesn't work, and then they get elected and prove it." Conservatives grasp the grand strategic sweep of politics better than liberals, and consequently they have always seemed to understand that what they do when they're in charge can help to reinforce the myths that put them there.

A government that works, some conservatives fear, is dangerous stuff. It gives people ideas. Universal health care isn't just a bad idea for their buddies in the insurance business; it's a gateway drug to broader state involvement in the economy and hence a possible doomsday scenario for conservatism itself. As two fellows of the Ethics and Public Policy Center fretted in the Weekly Standard in May, "health care is the key to public enmeshment in ballooning welfare states, and passage of ObamaCare would deal a heavy blow to the conservative enterprise in American politics."

On the other hand, government fails constantly when conservatives run it because making it work would be, for many of those conservatives, to traduce the very laws of nature. Besides, as we can now see, bungling Katrina recovery or Pentagon procurement pays conservatives huge dividends. It gives them potent ammunition to use when the liberals have returned and are proposing another one of their grand schemes to reform health care.

This is the perverse incentive that is slowly remaking the GOP into the Snafu Party. And in those commercials and those proclamations we should also discern a warning: That even if Democrats manage to set up a solid health-care program, conservatives will do their best, once they have regained power, to drop it down the same chute they did the Federal Emergency Management Agency.

Maybe they will appoint a tobacco lobbyist to run the thing. Maybe they will starve it for funds. Or antagonize its work force. And as it collapses they will hand themselves their greatest propaganda victory of all. They will survey the ruins and chide, "You didn't really think government could work, did you?"

3rd-Quarter Trading off to Strong Start

Dow Rose 838.08 in Quarter

Investors Still Wary as Blue Chips Gain 11% and Credit Markets Thaw

TOM LAURICELLA

Stocks have just posted their best quarter since 2003, but many investors remain wary.

The broad stock market goes into midyear holding onto the bulk of a powerful rally that left the Dow Jones Industrial Average up 29% from the 12-year low hit on March 9 and gave the index its first quarterly gain in over a year and a half. Yet it spent only one day during the quarter in positive territory for the year.

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See the complete Markets Quarterly Review report.

The Dow closed the second quarter at 8447, up 11%, or 838.08 points, for the last three months but down 3.8% for the year. It remains down 40% from its all-time high on Oct. 9, 2007.

It was the best quarterly performance for the Dow since the fourth quarter of 2003, early in the last bull market. The S&P 500-stock index finished June at 919.32, up 15% for the quarter and up 1.8% for the year.

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Tim Bower

The quarter marked a period of healing for financial markets around the globe. In many parts of the credit markets, which had been the epicenter of the financial crisis, conditions continued to improve. As investors became more comfortable holding riskier assets, they shifted out of U.S. government debt.

Many big banks and brokerage firms were able to tap the capital markets to raise the cash needed to shore up balance sheets. Emerging markets and commodities were big winners on hopes for a global economic recovery. Crude-oil prices posted their biggest quarterly percentage gain since 1990.

But while the waves of fear that had sent stocks to their lows have abated, the focus now is on the market's economic and profit underpinnings. Investors are looking for a better end to the year, and even those expectations are muted.

Bulls and bears alike generally agree that for stocks to post a significant rally during the second half will require convincing evidence not only that the U.S. economy's decline has slowed but that activity will begin to turn higher by year-end. Corporate profits, meanwhile, will need to at least match forecasts for an upswing through the rest of the year to even justify current market values.

"From here it gets more complicated," said Lawrence Glazer, a managing partner at Mayflower Advisors. Caution was evident in the final day of the quarter Tuesday as the Dow fell 82.38 points, or 1%, when news of a moderating decline in home prices was overshadowed by a drop in consumer confidence.

The pain of the bear market lingers. Many investors are keeping an eye peeled for anything that could spark a renewed crisis.

"At current levels, the market is well through pricing even a tepid economic recovery," said Binky Chadha, chief U.S. equity strategist at Deutsche Bank. "Earnings are going to have to deliver."

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Getty Images

A trader at the New York Stock Exchange is all smiles on April 16, just before the Dow industrials closed with a 95.81-point gain.

The S&P 500 is trading at a price-to-earnings multiple of 15.7 times expected 2009 operating earnings, close to the historical average, according to Thomson Reuters. Behind consensus earnings forecasts are expectations for the fourth quarter that have been pushed higher by analysts even as they have cut back third-quarter predictions.

Earnings in the fourth quarter are now expected to soar 181% from a dismal performance a year ago, compared with a 169% increase forecast on April 3. Third-quarter earnings are now predicted to be down 21%, compared with a 17% drop forecast three months ago.

Mr. Chadha said he thinks those expectations will prove too optimistic. His 2009 earnings projections are more than 15% below the consensus, which, based on historical price/earnings ratios, he figures suggests an appropriate range for the S&P 500 of 800 to 1060 for the rest of the year.

When the second quarter began, stocks were three weeks into a rally that would continue almost unabated for another two months. It was driven largely by news that many market participants termed merely "less bad," such as a leveling off of initial jobless claims, rather than showing actual improvement.

Financials were the best performing stocks, despite uncertain near- and long-term profit prospects. Also leading the charge were a group of stocks, energy and materials that historically tend to perform better later in an economic cycle rather than at the beginning of a rebound. This time around they rose on expectations that the global economic recovery will be led by emerging-market economies, where demand for raw materials is high.

The other big winner has been technology stocks, driven in part by the idea that they will benefit from companies around the globe looking to boost productivity. The Nasdaq Composite index rose 20% in the quarter, and is up 16% for 2009.

The rally thus far has been remarkably resilient. Since the March 9 low, the biggest pullback in the Dow during the second quarter was a 3.6% decline in late April.

"Every time you see stocks dip, there's still a percentage of people who are defensively positioned putting money back to work," said Michael Turner, head of global strategy and asset allocation at Aberdeen Asset Management.

Since mid-June, however, the rally has petered out, leading some to question whether it had gone too far too fast. Many say the market needs to wait for fundamentals to catch up with prices.

Peter Scholtz, president of Scholtz & Co., is optimistic. "As we grind through the rest of the year you will start to see signs of a real recovery in the economy," he said, adding, however, that it mightn't be until the end of the year that the news is more uniformly good.

That vacuum could leave the market vulnerable to a more significant pullback of upwards of 10% before the end of the year, Mr. Scholtz said. "But I do think that choppiness will have an upward bias."

He said the market could be surprised by a stronger-than-forecast snapback in corporate profits.

"Profits have been more volatile in the past few years because all the variable costs have been wrung out of the equation," he said. "It's all fixed costs now so when sales go down a little your profits disappear. You witnessed this in the last cycle, and I think we'll see it again this time around."

Charlie Smith, chief investment officer at Fort Pitt Capital Group, also said profits could come in above predictions, pointing to data showing that productivity has risen during this recession, instead of declining as it has historically. In addition, he argues that the reduction in industrial production could be reversed quickly, even in the auto sector. For corporate profits, "I expect the next quarter or so to be pretty good simply as a function of inventories having been knocked to unsustainable levels," he said.

However, he remains nervous about consumer sectors and financials if home prices don't show signs of stabilization.

For many investors, the key to picking up the slack in corporate profits will be the ability of big emerging-market economies, especially in Asia, to stimulate domestic demand and invest in infrastructure.

Barry Knapp, head of U.S. equity portfolio strategy at Barclays Capital, said that from a long-term perspective, that trend will be a driver of stock prices. "But from a cyclical perspective, I think the market got a bit ahead of itself. The fundamentals aren't quite there yet."

Write to Tom Lauricella at tom.lauricella@wsj.com

THE LIBERTARIAN

Wednesday, July 1, 2009