January 2012

Egyptian Military Seeks to Reverse Economic Reforms

by Hans Bader on February 21, 2011 · 1 comment

in Deregulate to Stimulate, Economy, International, Property Rights

The military government that replaced Egyptian ruler Hosni Mubarak is now moving to reverse recent reforms that gave Egypt solid economic growth in the last several years. It wants to curb free-market competition with military-run enterprises that dominate parts of Egypt’s economy.

As The New York Times reported on Friday, economists say the military “has already begun taking steps to protect the privileges of its gated economy, discouraging changes that some argue are crucial if Egypt is to emerge as a more stable, prosperous country.”

Field Marshal Mohamed Hussein Tantawi, the minister of defense and military production who now leads the council of officers ruling Egypt, has been a strong advocate of government control of prices and production. He has consistently opposed steps to open up the economy. . . already there are signs that the military is purging from the cabinet and ruling party advocates of market-oriented economic changes, like selling off state-owned companies and reducing barriers to trade. . . the military-led government also struck at advocates of economic openness, including the former finance minister Youssef Boutros-Ghali, who was forced from his job, and the former trade minister Rachid Mohamed Rachid.

The young protesters who helped bring down the Mubarak government are short-sightedly not criticizing these measures. Indeed, the Times reports that “some of the young revolutionaries at the vanguard of the revolt identify themselves as leftists or socialists.”

Egypt’s economy had long been a moribund socialist backwater after much of the economy was nationalized by the founder of Egypt’s ruling party, Gamal Abdel Nasser. His successors Sadat and Mubarak had largely continued those policies. But in the last five years, Mubarak finally embarked on serious economic reform, resulting in sustained economic growth. The reforms made property rights more secure, and made it easier to start a business — although much of Egyptian industry remained government-owned.

Ironically enough, this economic liberalization made possible the recent demands for political liberalization that contributed to Mubarak’s ouster, by giving Egyptians access to cell phones, the Internet, and other means of mass communication, and increasing their political consciousness. As Marshall Stocker noted:

Egypt today evidences Milton Friedman’s ‘Capitalism and Freedom’ thesis that a large measure of political freedom only comes when economic freedom exists. The World Bank’s 2006 “Ease of Doing Business index” scored Egypt 165 of 175, among the worst countries for business. After several years of economic liberalization, Egypt is 94 of 183 this year, more economically free than Brazil, India and Russia. The number of days it takes to start a business legally has dropped 85%. It now takes me 10, not the 500 days it took Mr. de Soto in 2004. The World Bank says that property registration now takes 72 days, down from 193, and now costs 90% less.  Economic liberalization permitted Egyptians to afford the tools of freedom: cell phones, satellite TV, Facebook and Twitter. Economic liberalization facilitated this revolution.

The economic regression occurring in Egypt is mirrored in more backward Yemen, where the longtime ruler of Yemen, one of the world’s poorest countries, has sought to shore up his popular support in the face of mass unrest by promising rigid “price controls” and an expansion of welfare to cover 500,000 more people. President Ali Abdullah Saleh has promised to expand his bureaucracy to hire more “college graduates,” and is increasing the pay of government employees. These measures will wreak havoc with his country’s finances, resulting in massive deficit spending. They will further stifle his country’s slow-growing economy, which has failed to keep pace with rapid population increases. Yemen’s lousy economy has helped make it a fertile ground for Al Qaeda recruiters.

In Libya, the viciously bloody and oppressive longtime dictator Muammar Qaddafi is shoring up his support base in the face of public protests by promising to double public-employee pay, even though public employees are much richer than the average Libyan. Egypt recently increased government employee pay by 15 percent to buttress their loyalty, a decision sure to increase its budget deficit and aggravate its economic problems.

We wrote earlier about how ethanol subsidies and mandates were fueling Islamic extremism and contributing to unrest in Egypt’s slums by driving up wheat prices, and thus shifting the locus of opposition to the Mubarak government away from Egypt’s small pro-democracy movements towards the anti-American Muslim Brotherhood, which is popular in the slums because of its relief efforts there.

Image credit: Muhammad Ghafari via Wikimedia Commons.

Obama Fans the Flames in Wisconsin, Seeking to Block State Budget Reforms

by Hans Bader on February 21, 2011

in Economy, Employment, Labor

State employees are paid better than people in the private sector. But government-employee unions refuse to make sacrifices to help close huge state budget deficits. Democratic legislators allied with those unions shut down the Wisconsin State Senate last week, fleeing the state to Illinois in order to block a quorum. Meanwhile, “over 1,000 teachers” called “in sick to force the closure of schools in Madison, Wisconsin” for another day, in a massive shutdown of Wisconsin schools.

Obama is fanning the flames, reports The Washington Post:

President Obama thrust himself and his political operation this week into Wisconsin’s broiling budget battle, mobilizing opposition Thursday to a Republican bill that would curb public-worker benefits and planning similar protests in other state capitals. . . .The president’s political machine worked in close coordination Thursday with state and national union officials to get thousands of protesters to gather in Madison and to plan similar demonstrations in other state capitals.

Wisconsin’s governor has been vitriolically attacked by state employees for seeking to limit their pay and collective-bargaining privileges. Some of these protesters are wielding signs bearing the words uttered by John Wilkes Booth as he assassinated Abraham Lincoln, “sic semper tyrannis.” Others are putting crosshairs on pictures of his face, along with the word “reload.” Others are branding him as “Hitler,” or comparing him to the fascist dictator Mussolini and Egypt’s recently ousted ruler Mubarak. So much for the short-lived era of civility that Obama and his supporters preached without practicing.

To shut down the Wisconsin State Senate, all the Democratic senators fled to a hotel in Illinois, which has a sympathetic Democratic governor. (Illinois Governor Pat Quinn just signed into law a 67 percent increase in income taxes, after a campaign in which he promised the state’s well-paid workers no layoffs and two-years of cost-of-living increases. Never mind that Illinois already has more government employees per person than neighboring Indiana.)

States are required by their constitutions to balance their budgets. The federal government doesn’t have to. So it’s easy for Obama, who has the ability to run up record deficits to hire tens of thousands of new federal employees, to fault cash-strapped state governments for trying to reduce the entitlements and collective bargaining rights of their employees. As Victor Davis Hanson notes, “what distinguishes Obama’s homespun platitudes about public-sector jobs from state governors’ more honest worries is just that ability. . .But pass a law that the U.S. must balance its books like the states must,” and President Obama might change his tune.

(Obama ran up the largest deficit in history in 2010, running up more debt in just one month than Bush did in the entire year of 2007. Obama’s recent budget proposal increases spending over the next two years while pretending to cut it, drawing criticism even from the liberal Washington Post.)

Even with budget cuts, government employees in Wisconsin would still live far better than the taxpayers who pay their salary. Wisconsin’s governor “would require many state workers to contribute 5.8 percent of their salary toward their pensions (up from 5 percent) and pay 12.6 percent of their insurance premiums — still much less than the average Wisconsinite pays for insurance through work.” As the Washington Examiner’s David Freddoso notes, “I defy anyone to find a private sector workplace where you can contribute only 6 percent for a generous defined benefit retirement plan, and have your employer pick up the tab for 88 percent of your health insurance. It just doesn’t exist. What we’re seeing is a protest based on disrespect for the taxpayers who are picking up the tab, most of whom do not make as much as the members of the teacher’s union.”

The public-sector unionization that Obama so prizes is something America just can’t afford.  As The Washington Post’s Charles Lane notes:

The truth of the matter is that ‘collective bargaining’ in the public sector is too often a parody of the real thing. For years, public-employee unions have used their dues money to help elect pliant politicians — usually Democrats — who, in turn, award the unions what they want at contract time. The taxpaying public’s only role in this costly cycle is to foot the bill. It’s not democracy when citizens lose control over the pay and benefits of the people who work for them. It’s not progressive when employee compensation takes finite resources away from Medicaid, parks, roads and libraries. And it’s not collective bargaining when union representatives sit on both sides of the table.

Obama Instigating Disruptive Wisconsin Protests to Protect Union Privileges

by Hans Bader on February 18, 2011 · 5 comments

in Economy, Employment, Labor

In the Washington Examiner today, I discuss how Obama and his allies are helping orchestrate the disruptive Wisconsin protests that have shut down many of its schools. The Democrats in the Wisconsin State Senate have fled the state to deprive the legislature of a quorum needed to pass fiscal reforms backed by Wisconsin’s conservative governor that would reduce the privileges of the state’s public-employee unions.

As The Wall Street Journal notes, those reforms would not only reduce gold-plated employee benefits, but also curb the entrenched power of liberal lawmakers by ending the practice of automatically withdrawing money from public-employee paychecks to finance the government-employee unions, which make almost all of their political donations to liberals:

Unions are treating these reforms as Armageddon because they’ve owned the Wisconsin legislature for years and the changes would reduce their dominance. Under Governor Walker’s proposal, the government also would no longer collect union dues from paychecks and then send that money to the unions. Instead, unions would be responsible for their own collection regimes. The bill would also require unions to be recertified annually by a majority of all members. Imagine that: More accountability inside unions.

As David Freddoso notes at the Washington Examiner, Wisconsin government employees are better paid than the state’s taxpayers. At the Daily Caller, CEI’s Ryan Young notes that there are political risks to well-paid public-employees effectively shutting down the government to preserve their perks. On the other hand, liberal bloggers and most liberal journalists seem to be backing the protesters, despite their inflammatory rhetoric (like depicting the governor as Hitler or invoking the words of Lincoln’s assassin) and defiance of a democratically-elected governor and legislature. One exception is The Washington Post‘s Charles Lane, who worries about steadily-rising government-employee pay crowding out other needs, and says that “it’s not progressive when employee compensation takes finite resources away from Medicaid, parks, roads and libraries.”

Are the Wisconsin Protests Backfiring?

by Ryan Young on February 18, 2011 · 2 comments

in Economy, Employment, Labor

Protests in Wisconsin over public sector compensation cuts have been the big story this week. Over at The Daily Caller, I explain why some of the tactics that union members and supporters are using are actually backfiring.

The teacher sickout is classic bad PR. The parents who have to find and pay for last-minute daycare are now less likely to side with teachers’ unions, not more.

The saturation coverage is doing far more damage. Millions of people are learning about the sweetheart salary and benefit deals that many public sector union members get. Even if Gov. Walker’s cuts pass, the protesting workers will still be much better paid than their non-union counterparts. Both are better compensated than most private sector workers.

Read the whole thing here.

Image credit: WxMom’s flickr photostream.

CEI Weekly: Senate Committee Holds Hearing on Green Jobs

by Nicole Ciandella on February 18, 2011 · 2 comments

in Features

CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.

CEI Weekly
February 18, 2011

>>Featured Story

On February 15th, the Senate Environment and Public Works Committee held a hearing on the value of government subsidies and mandates for fostering “green” industries. CEI Senior Fellow Chris Horner submitted written testimony for the record. Horner argued that Congress should be wary of bankrolling green jobs, since politically-attractive industries today may soon be rendered obsolete by the inventions of tomorrow. Read Horner’s full testimony here.

>>Shaping the Debate


TSA Union Power Grab
Iain Murray and Dennis Grabowski’s op-ed in The Washington Times

Memo to Col. West: Beware of Glass-Steagall
John Berlau’s post in The National Review Online

Deceptive Obama Budget Still Bloated
Iain Murray’s citation in The Orange County Register

Gingrich’s Energy Polices Rile Conservative Critics
Myron Ebell’s citation in The New York Times Blogs

Alcohol Industry Balks at Counting Calories
Michelle Minton’s citation in The Pittsburgh Post-Gazette

Obama, Climate Crank
Chris Horner’s op-ed in The Daily Caller

S&M Brands v. Caldwell
CEI’s citation in Point of Law

>>Best of the Blogs


US Continues to Ignore Staunch Trade Partner and Ally Comubia—and Possible Consequences
By Fran Smith

Michigan May Fire Salvo Against Regressive Debit Card Price Controls
By John Berlau

Mubarak’s Exit Lifts U.S. Stocks
By Kat Ciano

Florida Governor Rick Scott Wisely Rejects High-Speed Rail
By Marc Scribner

>> CEI Podcast

February 17, 2011: May the Best Bulb Win

Brian McGraw, a Policy Analyst for CEI’s Center for Energy & Environment, talks about the coming incandescent light bulb ban, who it benefits (bulb manufacturers), and who it hurts (consumers who no longer have a choice). Brian also touches on the important distinction between pro-business and pro-market thought. Pro-business thinkers would tend to support an incandescent ban, given what it could do for bulb manufacturer’s bottom lines. Pro-market thinkers prefer an open, competitive market process where consumers decide which type of bulb is best, not lobbyists and politicians.

Eliminate the Cap on H-1B Visas

by Ryan Young on February 18, 2011 · 1 comment

in Economy, Employment

My colleague Alex Nowrasteh has an op-ed in Investor’s Business Daily where he makes the case for liberalizing the H-1B visa for skilled immigrants.

An oft-neglected point he makes is that if companies can’t legally get the workers they want to come here, they’ll just go abroad to hire them. As with most anything else, prohibiting or limiting immigration comes with unintended, but not unforeseeable consequences.

Read the whole thing here.

Obama’s Budget Philosophy: Life Is Short, Eat Dessert First

by Hans Bader on February 18, 2011

in Economy, Employment, Energy, Politics as Usual, Stimulus to Nowhere

If a motto summed up the Obama administration, it might be, “Life is short. Eat dessert first.” President Obama’s policies are all about self-indulgence in the present, to be paid for with either long-run economic decline, or painful sacrifices by future generations.

His recent budget proposal, which contains a mix of real spending increases and mostly imaginary “cuts,” is a case in point. It pretends to cut spending and the deficit, but its “cuts” are slated to occur largely in the distant future (and thus may never happen), while its increases kick in almost immediately. It is so dishonest that it has drawn criticism from across the political spectrum.

As former congressional economist Chris Edwards notes, although Obama claims it cuts spending:

His new budget proposes slightly more discretionary and entitlement spending for next year than did his last budget!

  • Last year, Obama planned to spend $1.301 trillion on discretionary programs in FY2012, but now he plans to spend $1.340 trillion.
  • Last year, Obama planned to spend $2,107” billion “on entitlement programs in FY2012, but now he plans to spend $2,140” billion.

Similarly, The Wall Street Journal calls the “White House Budget” proposal “cynical and unrealistic,” since it pretends to cut spending over the long run, but openly “increases deficits above the spending baseline for the next two years.”

(Obama made the same kind of deceptive sales pitch for his $800 billion stimulus package, focusing on immediate gratification and ignoring future costs. In pushing the stimulus, he cited Congressional Budget Office claims that it would save jobs in the short run, while ignoring the CBO’s own finding that the stimulus will actually shrink the economy over the long run, by exploding the national debt and crowding out private investment. Obama also made the apocalyptic claim that the stimulus package was necessary to avert “irreversible decline,” but this claim was so incredible that it was not even peddled by his supporters in the media. The stimulus ended up destroying jobs even in the short run by wiping out jobs in the export sector, and subsidizing foreign green jobs .)

The Atlantic’s Megan McArdle, who voted for Obama in 2008, calls Obama’s budget proposal “disastrous.” She notes that his proposed budget includes phony, “sketchily outlined cuts,” and short-term patches that are “stacked to expire just after Obama (in theory) gets reelected.” Moreover, she points out that the supposedly “‘fiscally responsible’ Democrats have given us the largest peacetime deficit in history, one that keeps growing beyond all expectations.”

Her colleague Andrew Sullivan, who was Obama’s chief cheerleader in the blogosphere until now, finally admits the truth about his idol:

this president is too weak, too cautious, too beholden to politics over policy to lead. In this budget, in his refusal to do anything concrete to tackle the looming entitlement debt, in his failure to address the generational injustice, in his blithe indifference to the increasing danger of default, he has betrayed those of us who took him to be a serious president prepared to put the good of the country before his short term political interests. Like his State of the Union, this budget is good short term politics but such a massive pile of fiscal [male bovine excrement; we like to keep this a family blog if we can--ed.] it makes it perfectly clear that Obama is kicking this vital issue down the road.

To all those under 30 who worked so hard to get this man elected, know this: he just screwed you over. He thinks you’re fools. Either the US will go into default because of Obama’s cowardice, or you will be paying far far more for far far less because this president has no courage when it counts. He let you down. On the critical issue of America’s fiscal crisis, he represents no hope and no change. Just the same old Washington politics he once promised to end.

AOL News notes that  for all the talk of cuts, “President Barack Obama’s 2012 budget proposes to spend $3.48 trillion on everything except interest on the national debt. That’s a 7 percent increase over what the government spent in 2010. And keep in mind that in 2010, there was a lot of stimulus money flying out the door.”

Even The Washington Post, which endorsed Obama in 2008 and has not supported a Republican for president since 1952, said Obama’s budget was full of “gimmickry,” and called Obama the “Punter-in-Chief” for failing to address America’s looming budget problems.

Obama would increase wasteful education and transportation spending by billions more. The Washington Post’s Robert Samuelson gave a thumbs down to the Obama administration’s anachronistic focus on rail boondoggles that few people will use. The Cato Institute’s Neal McCluskey debunked the bogus offsets Obama is using to pretend to pay for his budget-busting and wasteful education proposals. We earlier explained why Obama should have cut rather than increased education spending at this link.

Dealing with Union Suffocation: Pro-Labor Legislation will Protect Laborers

by Trey Kovacs on February 18, 2011 · 1 comment

in Labor

In a Huffington Post editorial, the author makes claims of GOP assaults on unions and Democrats not standing up for Big Labor. The column is referring to the legislation, proposed by Wisconsin Governor Scott Walker. The law would limit collective bargaining for public employees, except for negotiating salary. The claim that Gov. Walker is using union busting tactics is false. The law is pro-labor if anything. Governor Walker has not seized the rights of workers to unionize. The legislation allows workers to keep union officials accountable for how union dues are spent.

The claims of Democrats not standing up for Big Labor are unfounded. A quote from his article disproves his assertion:

“In Wisconsin right now, Democratic legislators have taken the extraordinary step of holing up in a hotel in Illinois to block a quorum for a vote on what would be the most anti-worker piece of legislation to come out of any state house in a generation. But they can’t hide forever.”

Could these Democratic elected officials be any more pro-union than fleeing the state they represent to block a vote on the legislation? I think not. Furthermore, President Obama has appointed multiple union officials to government agencies and commissions. Some political appointees by the Obama administration: Craig Becker, formerly of SEIU, appointed to seat on NLRB; Andy Stern, former president of SEIU, now is a member of the National Commission on Fiscal Responsibility and Reform; and recently Bob King, UAW boss, was nominated to the Advisory Committee for Trade Policy and Negotiations. Obama and Democrats have consistently pandered to Big Labors needs during Obama presidency. An executive order was issued that mandated all federal construction projects use project labor agreements (PLAs). PLAs are a complete sop for unions. They insist on using union workers, which increases the cost of construction projects on average by 10 to 20 percent.

The advancement of pro-labor law in Wisconsin should be seen as a step forward in the labor movement. It does not take away the right unionize. Gov. Walker is not attempting to vilify public employees, but his state has an upcoming two-year budget for 2011-13 that must address a pending $3.6 billion deficit. The fact is public employee union members make more than their counterparts in the private sector and in the public sector. Public employees contribute little or nothing to their health care or retirement benefits. These cuts and legislation are controversial, but are required because of the debt incurred from unnecessary government spending and public employees’ generous contracts. Public employees should be thankful for the legislation in hopes that Gov. Walker can improve Wisconsin’s deficit and prevent massive public employee layoffs.

Unions Bucking the Will of the People

by Vincent Vernuccio on February 18, 2011 · 4 comments

in Labor

If there was ever an “I told you so” moment on government unions becoming too powerful, this is it.

The Wisconsin State Capitol is under siege by unions. Thousands turned out to protest Gov. Scott Walker’s emergency budget bill. According to anecdotal reports, police advised workers in the Capitol to “lock [their] doors” after protesters marched through the halls of the building yelling and banging drums. A teacher “sick out” strike closed schools, and Gov. Walter put the National Guard on alert in case the public safety unions went on strike. Finally, all 13 Democrat senators fled the state to stop a vote on the bill.

Despite the last election where the voters of Wisconsin ousted the big spending Democrats — the state is expecting a $3.6 billion deficit over the next two years — unions want to overturn the democratic process. Gov. Walker and Republican candidates campaigned heavily on lower taxes, less spending, and curbing the power of government unions. Wisconsinites approved of these ideas and responded in kind when they elected Walker to the governorship and Republican majorities in both the Wisconsin Assembly and Senate. Gov. Walker told the Associated Press the actions are “not a shock … The shock would be if we didn’t go forward with this.”

The government union message from Wisconsin is loud and clear: Democracy be damned and the voters’ will does not matter if it takes away our benefits or power.

The proposed budget will require government employees to pick up 12.6 percent of their health care costs and contribute 5.8 percent of their pay to their pensions. They currently pay nothing. The amounts are roughly half of what workers in the private sector pay.

The contributions are not the real reason why the unions are upset. It is money and power. Before getting into what the bill will do, there are several things it does not do. It does not take away the right of workers to join a union. It does not take away their right to collectively bargain — although it does limit it to wages. It does not force Gov. Walker to lay off 6,000 state employees – the amount needed to fix the budget hole. It does not take away other civil service protections afforded to government workers.

The bill does give workers the right to say no to a union if they do not want to join. Currently, workers are forced to pay union dues simply to keep their jobs. It also takes away the union privilege of automatically deducting money from workers’ paychecks. Unions are truly incensed because now workers will have a choice and will have to affirmatively pay for union representation. If the unions do not perform, they will see their dues and their power decrease.

Image credit: Madison Guy’s flickr photostream.

Remembering Jack Calfee

by Sam Kazman on February 18, 2011 · 1 comment

in Health and Illness, Precaution & Risk, Regulation

The sad news of Jack Calfee’s death came out of the blue yesterday morning.

I first met Jack about two decades ago. FDA reform had not yet become a hot topic, but it soon would be, and then several years later it would go into reverse after the drug recall overreactions, and now it’s emerging again as a serious issue. Through it all, I found Jack’s writing and advice to be invariably useful. The same was true of his older work on tobacco and advertising regulation, which I continue to use to this day. And because Jack himself was so invariably cheerful and personable, I never hesitated to pester him with out-of-the-blue requests for information that I figured he’d have at his fingertips. And usually he did.

His death is a terrible loss. I’m glad to have known him, and I know I’ll keep using his work — even if, sadly, I won’t be using his phone number.

Image credit: dellacalfee’s flickr photostream.

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