wall street journal

Congress Mulls More Credit Card Restrictions, in Legislation Likely to Backfire on Consumers

by Hans Bader on January 5, 2010 · 3 comments

in Deregulate to Stimulate, Economy, Legal, Politics as Usual, Precaution & Risk, Sanctimony

Some in Congress want to impose interest rate ceilings on credit cards and restrictions on interchange fees.  Australia tried the same thing, and it backfired, harming consumers by forcing credit card companies to increase annual fees on responsible credit cardholders and scale back rewards programs.  (Ironically, recent interest rate hikes are partly the product of a law recently passed by Congress, the CARD Act, which forces responsible people to bear the costs of irresponsible borrowers.)

As law professor Todd Zywicki notes in the Wall Street Journal, the proposed legislation would harm both consumers and small businesses, since it would

reduce the quantity and quality of credit cards by restricting credit availability and cutting back on product innovation or ancillary card benefits. This is exactly what happened when Australian regulators imposed price controls on interchange fees in 2003: Annual fees increased an average of 22% on standard credit cards and annual fees for rewards cards increased by 47%-77%. Card issuers also reduced the generosity of their reward programs by 23%. Innovation, especially in terms of improved security and identity-theft protection, was stalled. Card issuers also increased their efforts to attract higher-risk customers who generate interest and penalty fees to offset lower interchange revenues from lower-risk transactional users.  The most important pro-consumer innovation in payment systems of the past two decades has been the general disappearance of annual fees on most credit cards. Cardholders now carry and use multiple cards at little or no cost. The consequences for consumer choice and competition have been profound—card issuers compete for consumer business literally every time they open their wallet to make a purchase.  Annual fees are essentially a tax on card-holding. Policies that produced a return of annual fees would strangle this process of competition by making it more expensive for consumers to hold multiple cards and to switch cards easily. Small businesses, three-quarters of which rely on credit cards, would also have to pay more to maintain access to multiple credit lines, stifling the most potent engine of economic recovery.

Earlier, Congress and the President misguidedly attempted to reduce burdens on irresponsible credit card borrowers, through a new law, the CARD Act of 2009 (Credit Card Accountability Responsibility and Disclosure Act), that backfired and resulted in the return of annual fees, bizarre interest rate hikes for some responsible borrowers, and the elimination of many cash back and rewards programs.

All these bailouts are taking their toll on the economy.  Economists and real estate experts say a $75 billion mortgage bailout program devised by the Obama administration is actually harming the economy, the housing market, and the construction industry.

Government Uses Takeover of Mortgage Giants to Deliberately Increase Their Massive Losses at Taxpayer Expense

by Hans Bader on January 5, 2010

in Bailout Watch, Economy, Politics as Usual, Precaution & Risk, Regulation, Sanctimony

The Wall Street Journal notes that the Obama administration has used the federal government’s bailout of mortgage giants Fannie Mae and Freddie Mac to do the exact opposite of what the federal government claimed it would do when it took them over a year ago.  It took them over in the name of winding down their risky loan portfolios, so they would stop running up losses at taxpayer expense.  But the Obama administration is deliberately making them run up huge losses to help out irresponsible borrowers who potentially might default on their mortgages.  “In today’s Washington, we suppose, it only makes sense that the companies that did the most to cause the meltdown are being kept alive to lose even more money.”

Over Christmas Eve, the Obama administration not only lifted the $400 billion limit on the bailout (and showered their CEOs with cash), but also ended “a key requirement of the 2008 bailout—that Fan and Fred begin shrinking the portfolios of mortgages they own on their own account, which total a combined $1.5 trillion.”

The Obama administration is now deliberately making them lose money:  “the government has directed both companies to pursue money-losing strategies by modifying mortgages to prevent foreclosures. . . Fannie reported last quarter that loan modifications resulted in $7.7 billion in losses.”

“Much of this is being done off the government books,” to hide the costs of the Obama administration’s record deficit spending.  And their CEOs are being paid a fortune, the Journal notes, because “Fannie and Freddie are exempt from the rules” limiting compensation at private banks.

The mortgage crisis was caused partly by the reckless government-sponsored mortgage giants Fannie Mae and Freddie Mac, and partly by the affordable-housing mandates imposed on them.

But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.”

And banks will now be pressured to make even more risky loans.  The House has approved Obama’s proposal to create a politically-correct entity called the Consumer Financial Protection Agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.”  The Community Reinvestment Act was a key contributor to the financial crisis.  But the Administration’s proposal would direct the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness.

Obama’s financial-regulation plan is “largely the product of extensive conversations” with two lawmakers responsible for the current financial mess, the corrupt Chris Dodd, and Barney Frank.

Another $75 billion in taxpayer money is already being wasted on mortgage bailouts that economists and real estate experts say is actually harming the economy and the real estate market.

Stimulus Package Forces States to Raise Taxes, Harms Economy

by Hans Bader on January 2, 2010 · 2 comments

in Deregulate to Stimulate, Economy, Employment, International, Labor, Politics as Usual, Stimulus to Nowhere, Trade

The federal government’s $800 billion stimulus package, which failed to cut unemployment, is now forcing states and local governments to raise taxes. The Wall Street Journal describes how “stimulus dollars came with strings attached that are now causing enormous budget headaches . . . At the behest of the public employee unions, Congress imposed ‘maintenance of effort’ spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs,” such as ”welfare, if the state took even a dollar of stimulus cash,” even if a state’s tax revenue has since fallen due to the recession.  “So when states should be reducing” their spending ”to match. . . lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes.”

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package actually would shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.

The Washington Examiner says that “75,000 jobs” Obama has claimed credit for are “clearly imaginary” or “highly doubtful.”  That includes thousands of jobs the administration claims credit for creating in nonexistent Congressional districts. As the Examiner notes:

If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.

The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

The stimulus package has since spawned countless examples of government waste and corruption.  Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.  Obama’s alleged justification for firing the inspector general turned out to be false.

Utopia and totalitarianism — Revel’s new book

by Fran Smith on December 11, 2009 · 1 comment

in Culture, Odds & Ends, Personal Liberty

On my booklist for gifts this Christmas is Jean-Francois Revel’s “Last Exit to Utopia,” reviewed in the Wall Street Journal today. Revel died in 2006, and this newly translated work had been available in French for almost a decade, according to reviewer Bret Stephens.  Stephens notes that:

“Revel’s great subject was totalitarianism, not just its practice but also its intellectual methods, deceits and disturbing psychological attractions. In books such as “The Totalitarian Temptation” (1976) and “How Democracies Perish” (1983), he dissected the mind-set of Western intellectuals who, living in democracies, found much to admire in gulag countries like the Soviet Union and Cuba and much to detest in free ones—the U.S. most of all.

. . . . .

“Of this mental fortress, Revel acidly writes: “Utopia is not under the slightest obligation to produce results: its sole function is to allow its devotees to condemn what exists in the name of what does not.” Thus the political collapse of communism offered members of the hard left an avenue of ideological resurrection, since they could return to their favorite pastime of lambasting globalization and other American conspiracies to enslave the world without having to suffer any unpalatable reminders of some of the alternatives—the Berlin Wall, for instance.

He was one of the 40 Immortals of the Académie Française.  Here’s his NYT obituary from 2006.  Sounds like this book is very relevant today.


Why was that? “The totalitarian phenomenon,” Revel observed years ago, “is not to be understood without making an allowance for the thesis that some important part of every society consists of people who actively want tyranny: either to exercise it themselves or—much more mysteriously—to submit to it.”

Climategate — the Real War on Science?

by Marlo Lewis on November 25, 2009 · 6 comments

in Environment, Global Warming

The huge pile of emails purloined or leaked from the Climate Research Unit (CRU) last week does indeed “give every appearance of testifying to concerted and coordinated efforts by leading climatologists to fit the data to their conclusions while attempting to silence and discredit their critics,” as the Wall Street Journal stated yesterday. However, the main issue brought to light by these emails is even more serious.

In a column posted yesterday on Anthony Watts’s blog, amateur scientist Willis Eschenbach documents the many ruses and excuses CRU director Phil Jones and his allies employed over several years to deny outsiders access to the CRU gang’s temperature data and computer codes.

Skeptics have been accused of waging a “war on science“ because they frequently question the Intergovernmental Panel on Climate Change’s (IPCC’s) interpretation of the rapidly expanding field of climate change research.

 But science is not a set of dogmas certified by government-funded bodies. Rather, as Mr. Eschenbach points out, science is fundamentally an ”adversarial process” whereby competing scientists attempt to reproduce — that is, invalidate — each other’s results. This process absolutely depends on each combatant allowing the others to examine his data and methods. Tactics designed to hide data and methods are anti-science even if — nay, especially if – those resorting to such tricks are big-name scientists.   

“Science,” writes Eschenbach, “works by one person making a claim, and backing it up with data and methods they used to make the claim. Other scientists then attack the claim by (among other things) trying to replicate the first scientist’s work. If they can’t replicate it, it doesn’t stand.”

This means, says Eschenbach, that researchers who hide their data and computer codes to prevent others from replicating/invalidating their results “attack . . . the heart of science.” Such behavior is unethical and, as Eschenbach notes, likely illegal as well.

If you read only one commentary on Climategate, read this one. It is an eye-opener.

Real Climate Spin

by Marlo Lewis on November 24, 2009 · 2 comments

in Features, Global Warming, Zeitgeist

Real Climate.Org is chief defender of ”consensus” climatology on the Internet. One of its enduring missions has been to defend the dubious, indeed discredited “Hockey Stick” reconstruction of Northern hemisphere temperature history. The Hockey Stick was the basis for the IPCC’s claim in its 2001 report that the 1990s were the warmest decade and 1998 the warmest year of the past millennium.

That Real Climate (RC) should feel special solicitude for the Hockey Stick is no accident, comrade. Two of the five principals at RC — Michael Mann and Raymond Bradley — were among the three researchers (Mann, Bradley, and Malcolm Hughes) who authored the Hockey Stick.

All of the RC principals (Gavin Schmidt, Caspar Ammann, Rasmus Benestad, Mann, and Bradley) are frequent senders and recipients of the thousands of emails and other documents, now posted on many Web sites, that were hacked or leaked last week from the University of East Anglia’s Climate Research Unit (CRU).

The Wall Street Journal today published a selection of the leaked emails and an editorial concluding that the emails ”give every appearance of testifying to concerted and coordinated efforts by leading climatologists to fit the data to their conclusions while attempting to silence and discredit their critics.”

Even eco-radical George Monbiot says he is “dismayed and deeply shaken” by the emails, because, “There appears to be evidence here of attempts to prevent scientific data from being released, and even to destroy material that was subject to a freedom of information request.”

So far, the only email on which RC has seen fit to comment is one from CRU director Phil Jones dated Nov. 16, 1999, 13:31. It’s gotten a lot of buzz on the Internet, because it appears to advocate the use of a “trick” to “hide” a “decline” in global temperatures.

In a post titled “The CRU Hack” (November 20), RC writes:

No doubt, instances of cherry-picked and poorly-worded “gotcha” phrases will be pulled out of context. One example is worth mentioning quickly. Phil Jones in discussing the presentation of temperature reconstructions stated that “I’ve just completed Mike’s Nature trick of adding in the real temps to each series for the last 20 years (ie from 1981 onwards) and from 1961 for Keith’s to hide the decline.” The paper in question is the Mann, Bradley and Hughes (1998) Nature paper on the original multiproxy temperature reconstruction, and the ‘trick’ is just to plot the instrumental records along with reconstruction so that the context of the recent warming is clear. Scientists often use the term “trick” to refer to a “a good way to deal with a problem”, rather than something that is “secret”, and so there is nothing problematic in this at all. As for the ‘decline’, it is well known that Keith Briffa’s maximum latewood tree ring density proxy diverges from the temperature records after 1960 (this is more commonly known as the “divergence problem”–see e.g. the recent discussion in this paper) and has been discussed in the literature since Briffa et al in Nature in 1998 (Nature, 391, 678-682). Those authors have always recommend not using the post 1960 part of their reconstruction, and so while ‘hiding’ is probably a poor choice of words (since it is ‘hidden’ in plain sight), not using the data in the plot is completely appropriate, as is further research to understand why this happens.

So a “trick” is just scientific shorthand for a “good way to deal with a problem,” not something “secret.” But RC ducks the real issue. Is the ”trick” Phil Jones learned from Hockey Stick author Michael Mann a form of trickery? Does it create a false impression, as an illusionist does on stage, right out in the open, in front of an audience?

The trick, according to RC, is to splice onto the end of a temperature reconstruction, built on proxy data going back several centuries, the data from instrumental records starting in 1960 and 1981.

Now this is quite a trick, because it involves comparing apples (proxy data) to oranges (instrumental data) and pretending that the composite forms a continuous record.

As the Center for the Study of Carbon Dioxide and Climate Change observed years ago, researchers attempting to construct long-term (centuries to millennia) temperature records should ”finish the dance” with the (proxy) data they started with.

Grafting instrumental data onto proxy data to produce a seemingly continuous record is trickery, because instrumental data, unlike proxy data, are massively influenced by land-use changes and site-specific quality control issues.

Urban heat islands and irrigated agriculture can inject false warming biases into instrumental data that are absent from proxy data taken from remote forests or sediment cores at the bottom of lakes, for example. Improper placement of temperature sensing equipment near local heat sources (e.g. air conditioning vents, asphalt parking lots, waste water treatment plants) also generates significant false warming signals, as retired meteorologist Anthony Watts documents in gory detail.

So RC’s “nothing to see here” argument based on the alleged insider meaning of “trick” raises rather than allays suspicion that CRU is attempting to fit data to a predetermined conclusion.

Note also that RC says nothing about Phil Jones’s advice to backdate correspondence (Sept. 12, 2007, 11:30 a.m.), to delete emails related to the 2007 IPCC report (May 29, 2008, 11:04), and to evade FOIA requests, if necessary by deleting files (Feb. 2, 2005, 9:41 a.m.). RC also says nothing about Mann’s call to delegitimize the Journal of Climate for publishing papers critical of his work (March 11, 2003, 8:14).

The Wall Street Journal editorial’s concluding comment is spot on:  ”In the department of inconvenient truths, this one surely deserves a closer look by the media, the U.S. Congress and other investigative bodies.”

Reid Health Care Bill Adds New Tax Increases, Costs Twice As Much As Promised

by Hans Bader on November 19, 2009 · 3 comments

in Health and Illness, Healthcare, Insurance, Legal, Personal Liberty, Politics as Usual, Precaution & Risk, Regulation, Sanctimony

The health care “reform” bill drafted by Senate Majority Leader Harry Reid adds new tax increases, and costs twice as much as its promised $849 billion price tag.

The tax increases (in billions) include:

1. 40% excise tax on health coverage in excess of $8,500 (individuals) / $23,000 (families). . .
2. Additional 0.5% Medicare (Hospital Insurance) tax on wages in excess of $200,000 ($250,000 for joint filers) – begins in 2013 – $54 B tax increase
3. Impose annual fee on manufacturers and importers of branded drugs – begins in 2010 – $22 B tax increase
4. Impose annual fee on manufacturers and importers of certain medical devices – begins in 2010 – $19 B tax increase
5. Impose annual fee on manufacturers and importers of certain medical devices – begins in 2010 – $60 B tax increase
6. Cut in half (to $500K) the amount of an executive’s compensation that a health plan can deduct from its corporate income taxes – begins in 2013 . . .
7. Impose 5% excise tax on cosmetic surgery and similar procedures – begins for surgery in 2010 – $6 B tax increase!

The bill will cost far more than projected. The bill uses “accounting tricks” to keep the short-term costs down, by temporarily raising taxes before spending explodes. But in every year thereafter, it will increase the deficit, notes an analysis from the Congressional Budget Office. “In its true first decade (2014 to 2023), CBO projects the bill’s costs to be $1.8 trillion — double the price Reid is advertising.”

The Dean of Harvard Medical School, Jeffrey S. Flier, gave the health care bill a “failing grade” in an analysis published yesterday in The Wall Street Journal, saying that it would drive up costs and stifle medical innovation.

The health care “reform” bills “would reduce senior care,” increase “medical costs,”  and “jeopardize access to care for millions,” reported experts at the federal Centers for Medicare and Medicaid Services.    They will explode state and federal deficits, and contain payoffs for trial lawyers and racial preferences.

ObamaCare spends money on frills like “cultural competency,” while cutting spending on crucial things like anesthesia.

Fact-checkers say Obama is lying about health care.  In a speech, Obama claimed that Medicare is “unsustainable” and “running out of money,” then contradicted himself by claiming that “Medicare is a government program that works really well,” making it a model for national health care.

A CNN commentary noted that Obama’s plan would take away “5 freedoms,” such as the freedom to choose your doctors, keep your existing plan if you like it, and choose what’s in your plan.

Get more doctors — get rid of H-1B visa cap

by Fran Smith on November 11, 2009 · 2 comments

in Health and Illness, Healthcare, Mobility

CEI’s champion of letter-writing, Alex Nowrasteh, has a letter to the editor in the Wall Street Journal today advocating removing the cap on H-1B visas to encourage more doctors to practice in the U.S.  As Alex points out:

In 2005, a paltry 7,218 medical and health-care professionals earned H-1B visas, while many were denied. A cap on the number of doctors and medical professionals entering the U.S. discourages health-care access and raises costs. The H-1B visa cap should be removed along with other barriers to the migration of foreign-born doctors and medical professionals. Training more American doctors is important for tomorrow, but looking abroad can help lower medical costs and improve access today.

Also worth noting is the succinct letter following Alex’s by Harry Deloidian:

Convert all law schools to medical schools. That would solve more than one problem.

ObamaCare Blueprint Called ‘The Worst Bill Ever’: It Drives Up Taxes, Insurance Premiums, State and Federal Deficits, and Legal Bills

by Hans Bader on November 3, 2009 · 2 comments

in Healthcare, Insurance, Politics as Usual, Regulation, Sanctimony

The Wall Street Journal calls the House version of President Obama’s health care plan “the worst bill ever,” noting that it will lead to “epic new spending and taxes, pricier insurance, rationed care, dishonest accounting,” and other problems.

At the Atlantic, Megan McArdle, who voted for Obama, explains how ObamaCare will cost much more than promised — at least $150 billion more.  That’s true even if promised cuts to Medicare included in ObamaCare actually take place — but as McArdle notes, even the head of the Congressional Budget Office “does not think the cuts will take place” (which didn’t stop him from pretending those cuts would occur in giving ObamaCare its original $900 billion price tag).

ObamaCare is based on deceptive accounting that makes Enron look good.  As The Wall Street Journal notes:

“The House disguises hundreds of billions of dollars in additional costs with budget gimmicks. It ‘pays for’ about six years of program with a decade of revenue, with the heaviest costs concentrated in the second five years. The House also pretends Medicare payments to doctors will be cut by 21.5% next year and deeper after that, ‘saving’ about $250 billion. ObamaCare will be lucky to cost under $2 trillion over 10 years; it will grow more after that…

“All this is particularly reckless given the unfunded liabilities of Medicare—now north of $37 trillion over 75 years. Mrs. Pelosi wants to steal $426 billion from future Medicare spending to ‘pay for’ universal coverage. While Medicare’s price controls on doctors and hospitals are certain to be tightened, the only cut that is a sure thing in practice is gutting Medicare Advantage to the tune of $170 billion. Democrats loathe this program because it gives one of out five seniors private insurance options.

“As for Medicaid, the House will expand eligibility to everyone below 150% of the poverty level . . . at a cost of $425 billion [to state and federal governments at a time when] when budgets from Albany to Sacramento are in fiscal collapse.  . .

“All told, the House favors $572 billion in new taxes, mostly by imposing a 5.4-percentage-point ‘surcharge’ on joint filers earning over $1 million, $500,000 for singles. This tax will raise the top marginal rate to 45% in 2011 from 39.6% when the Bush tax cuts expire—not counting state income taxes and the phase-out of certain deductions and exemptions. . . .Meanwhile, a tax equal to 2.5% of adjusted gross income will also be imposed on some 18 million people who CBO expects still won’t buy insurance in 2019.”

A study by PriceWaterhouseCoopers found that the provisions in the Senate version of ObamaCare would add $1,700 a year to the cost of family coverage in 2013 and $600 for a single person. By 2019, family premiums could be $4,000 higher and individual premiums could be $1,500 higher.

Greg Conko calls the bill “worse than the disease.”  In a recently-released paper, “A Cure Worse than the Disease: Obama Care Won’t Cut Costs, But May Cut Quality,” Conko notes that most of the alleged cost-cutting measures in the Baucus bill merely shift costs from the federal government onto the states or private payers, without reducing long-term health care inflation.  The only measures that could conceivably reduce the annual rate of growth in health care costs would erect government barriers between patients and their doctors, while jeopardizing long-term medical innovation.

Another new study found that provisions contained in the health care reform bills, like guaranteed issue and community rating mandates, would drive up premiums by 50 percent for individual policies and 19 percent for small group plans.

A study from the Independence Institute says that ObamaCare would drive up inflation and medical care costs, while shrinking the economy.

As Conko notes, many states have highly concentrated markets.  In Hawaii, Rhode Island, and Alaska, for example, 95 percent or more of the health insurance market is served by just two insurers.  But Obama and congressional Democrats oppose letting insurers compete across state lines, blocking competition that could make health insurance cheaper.  Other countries with cheaper health insurance permit insurers to compete nationally.

ObamaCare would raise taxes.  It would also explode state and federal budget deficits, and would actually cost $2 trillion — far more than its promised $800 billion price tag.  It contains special-interest pork, like racial preferences.

It contains provisions sought by trial lawyers that will increase medical costs.  Doctors afraid of being wrongly sued for malpractice despite providing good quality care order unnecessary tests (or defensive medicine), which wastes $200 billion annually.

In his health care speech, Obama falsely promised tort-reform pilot projects, as a token gesture to doctors.   But the health care bill he backs does just the opposite, requiring states to repeal existing reforms to their medical malpractice laws if they want federal funds.  For example, they lose money if they do anything to “limit attorneys fees.”

The health care bills backed by Obama and congressional leaders ignore reforms that would help doctors and patients alike, like setting up specialized health courts to rule on malpractice claims instead of having them ruled on by juries that have little understanding of medicine or technology.

Honduras Agreement Did Not Promise Return of Authoritarian Ex-President, Contrary to Earlier Press Reports

by Hans Bader on October 31, 2009 · 2 comments

in International, Legal, Personal Liberty, Politics as Usual

The small country of Honduras did not agree to return its authoritarian ex-president to power after all.  Press reports said it did, but The Wall Street Journal says it merely agreed to submit a request for his return to Honduras’s Congress and Supreme Court, which previously backed the ex-president’s removal, in exchange for an end to U.S. sanctions and U.S. recognition of upcoming election results.  Under continuing U.S. pressure, they may soon allow his return to office, but it hasn’t happened yet.

The Washington Post admits that the ex-president, Manuel Zelaya, was trying to make himself into a dictator, like his mentor, Venezuela’s Hugo Chavez.  But the Post demands that he be returned to power anyway because he was “illegally deported” by the military after being removed from office.

But the ex-president is busy spinning the agreement as an unqualified recognition of his right to rule, which it isn’t.  And Obama Administration officials, like the State Department’s Thomas Shannon, are busy threatening Honduran legislators with sanctions and cancellation of their visas if they vote against reinstating Zelaya, in a manner seemingly at odds with the agreement itself.

Honduras removed ex-president Zelaya after he systematically abused his powers: he sought to circumvent constitutional term limits, used mobs to intimidate his critics, threatened public employees with termination if they refused to help him violate the Constitution, engaged in massive corruption, illegally cut off public funds to local governments whose leaders refused to back his quest for more power, denied basic government services to his critics, refused to enforce dozens of laws passed by Congress, and spent the country into virtual bankruptcy, refusing to submit a budget so that he could illegally spend public funds on his cronies.

By levying sanctions on Honduras, and refusing to recognize its current government, the Obama administration has destabilized the country, one of the poorest in Latin America, resulting in mass layoffs leading to 65% unemployment among workers at small and medium-size enterprises in Honduras.  Vulnerable social groups in Honduras, like orphans, have suffered especially acutely, and malnutrition has risen.

Even before the current crisis, the World Food Program noted that “One out of  four Honduran children under 5 years old falls  to chronic malnutrition. In some rural communities to the west of the country, chronic malnutrition can reach 48.5 percent.”  Since the crisis, things have gotten much worse: “A woman caring for six grandchildren can no longer afford milk. A bricklayer who used to work six days a week now is lucky to get two. A shop manager has seen his earnings evaporate.”

The Obama administration insisted that Zelaya’s removal was illegal, although many legal commentators said that Honduras’s removal of ex-president Manuel Zelaya was legal — and thus, not a coup. The ex-president’s removal was perfectly constitutional, say many lawyers and foreign policy experts, including attorneys Octavio Sanchez, Miguel Estrada, and Dan Miller, former Assistant Secretary of State Kim Holmes, Stanford’s William Ratliff, and The Wall Street Journal’s Mary Anastasia O’Grady.  Former Secretary of State James Baker, a lawyer, says that Honduras’s removal of Zelaya from office was legal, although its exiling of him was not.

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