Stimulus and Unemployment

Federal Reserve Working Paper on the effect of the Stimulus Package: 800,000 jobs saved or created by May 2010, down from approximately 2 million in March 2010.

NPR reporting on a Moody's Analytics study demonstrating the economic impact of unemployment benefits versus tax cuts. Mark Zandi, Chief Analyst for Moody's and a former advisor to Sen. McCain's 2008 campaign, testified similarly before Congress.

A Good Regulation

A new federal regulation imposing steep fines--$27,500 per passengers—on airlines that subject passengers to 3 hour or longer tarmac delays may be bearing fruit. In May, the first full month in which the regulation was in effect, only 5 flights suffered 3 hour or longer tarmac delays—compared to 34 in May 2009.

The airline industry trade group argues that the number of 3 hour or longer tarmac delays has been in decline for over year. BTS data, however, reveals a more mixed picture. April and March 2010 were likewise significantly lower than the numbers for 2009, but February 2010 was actually higher by 50%.

Read USA Today’s article on the new regulation here. See the BTS data for yourself here.

The Glory of Deregulation

The other day, our friend and foil at To Get Rich is Glorious put up a couple of posts, one called "Questions for Progressives" and the other "What Inflation?" both included references to the airline industry.  What Inflation purported to demonstrate that airfares have decreased in real terms over the last decade while Questions for Progressives included this bit: "Deregulation of the airline and trucking industries are widely credited with producing lower costs and improved service. What are the lessons should be taken from this experience?"  Both of these items raised my hackles, particularly for the reference to the airline industry.  I had set about to write a post describing, contra the premise in Questions for Progressives, the long decline of the airline industry since deregulation.  But, TIME has done my work for me, relating the history of decreased service and increased prices since deregulation.

Highlights:

• The disappearance of in-flight meals.
• The end of checked baggage for free (or, rather, included in your ticket price).
• Charging for blankets and pillows.
• The death of stand-by.
• The impending end of carry-on baggage--which, nicely dovetails with being charged for checked baggage.

And, the best part of most of these added fees?  Well, the best part is that they occur after ticket purchase meaning the Bureau of Travel Statistics does not count them as airfare--leading to the apparent real decline airfares!

John McCain's Kagan Op-Ed

Sen. John McCain pens an Op-Ed in today's USA Today outlining his opposition to Elena Kagan's nomination to the Supreme Court. Sen. McCain's argument against Solicitor General Kagan is built on her actions as Dean of Harvard Law School in opposition to Don't Ask, Don't Tell. While the bulk of the Op-Ed rehashes Kagan's actions, McCain goes completely off the rails in the second section of his piece when he attempts to link Kagan's action as Dean to a judicial philosophy.

According to McCain, because the Supreme Court disagreed with actions like Kagan's, Kagan "stepped beyond public advocacy . . . into the realm of usurping the prerogative of the Congress and the president to make law and the courts to interpret it." One would be justified in asking how exactly an university administrator could possibly "usurp[] the prerogative of the Congress?" The statement is so baldly irrational it really defies critical examination. McCain's criticism might sound in reason if he were extrapolating her actions as Dean to some indication of judicial temperament--this too would be an extraordinary leap--but McCain goes out of his way not to do that. Instead he writes, "I do not believe judges should stray beyond their constitutional role and act as if they have greater insight than representatives who are elected by the people. Given the choice to uphold a law that was unpopular with her peers and students or interpret the law to achieve her own political objectives, she chose the latter." But Kagan's duty was to the students of Harvard Law School--all of those students, regardless of sexuality--it was to not interpret the Constitution of the United States. She embraced the rather long and generally celebrated tradition of American academia staking out positions that sometimes contravene current law in pursuit of justice and equality.

Don't Ask, Don't Tell was and is a stupid, half-measure of policy that has served only to discriminate against patriotic Americans. It is one thing for the Congress to pass such a law and for the Supreme Court to interpret it in accord with its plain meaning, however they manage to rationalize it with the principles of the American Constitution. It is entirely another matter for the Dean of an institution of higher learning--to say nothing of one dedicated to educating students in the law and justice--to invite onto campus recruiters compelled to discriminate in hiring against one or another minority.

Kagan's actions were civil disobedience. They were not an example of one branch of government overreaching and insulting another branch of government. I should hope that every future Supreme Court nominee in a position like Kagan's during the era of Don't Ask, Don't Tell--or any other patently discriminatory regime--would take similar action on behalf of her students.

Time to Recognize Somaliland

On Friday, the newest President of Somaliland, Ahmed Mohamed Silanyo, declared his intention to make Somaliland’s international recognition his top priority. In truth, recognition has been a top priority of Somaliland’s political leadership since it declared its independence over nineteen years ago. Analysts and observers have been quoted in the few articles and bulletins announcing Somaliland’s election results pronouncing that this election—graded free and fair—will encourage the international community to extend Somaliland recognition.

It is not the first time a successful democratic process in Somaliland has inspired hope that now, finally, Somaliland will receive international recognition. Similar hopes attended the referendum ratifying Somaliland’s constitution in 2001, its first presidential election, and its parliamentary elections. In fact, Somaliland’s short, nineteen year history is a string of disappointments for the people of a country that is doing all the things that vex post-conflict societies all over the world: disarmament, reconstruction, establishment of the rule of law, and adoption of democratic institutions. Somaliland has done all these things without outside assistance and in the face of outright hostility by the international community.

Somaliland’s story would be remarkable and triumphant anywhere in the world. In a place nominally under the jurisdiction of Somalia—a state synonymous with failure and anarchy—it is unthinkable. But the incongruity of the international community’s refusal to recognize Somaliland is not limited to its juxtaposition with its neighbor to the south. No, what makes Somaliland’s nonrecognition bizarre is Somaliland’s cooperation with the international community which refuses to recognize it. While Somalia serves as a haven for al-Qaeda linked militants and pirates, Somaliland cooperates with NATO and prosecutes captured pirates and terrorists.

On this, the two hundred-and-thirty-fourth anniversary of our independence, the United States, through a simple act of diplomacy, has the power to secure the dreams of independence of a small nation. In doing so, the United States will both be manifesting its own values and securing an ally who shares those values in a region of the world with few nations evincing commitments to democracy and rule of law.

It is time to recognize Somaliland.

Conflict Minerals

More on Afghan Mineral Wealth

AFP reports that the Taliban have threatened to attack any companies attempting to extract minerals from Afghanistan.  This is wholly unsurprising.  I actually find it a little odd that the Taliban felt the need to state their threat explicitly.  It would seem to me clear—threat or no threat—that any company doing business with the Karzai government would become a target, just as aid organizations have been targeted.

On McChrystal

The now infamous profile of Gen. Stanley McChrystal in Rolling Stone makes for compelling reading. McChrystal comes across as a deeply dedicated and committed commander. For all the hyperventilation over the disparaging remarks McChrystal has for Vice President Biden and others in the Obama administration, what is most interesting is how clearly McChrystal understands counterinsurgency—and how clearly the author of the piece, Michael Hastings, does not.

Passages like this one are particularly telling:

During the question-and-answer period, the frustration boils over. The soldiers complain about not being allowed to use lethal force, about watching insurgents they detain be freed for lack of evidence. They want to be able to fight – like they did in Iraq, like they had in Afghanistan before McChrystal. "We aren't putting fear into the Taliban," one soldier says.
"Winning hearts and minds in COIN is a coldblooded thing," McChrystal says, citing an oft-repeated maxim that you can't kill your way out of Afghanistan. "The Russians killed 1 million Afghans, and that didn't work."
"I'm not saying go out and kill everybody, sir," the soldier persists. "You say we've stopped the momentum of the insurgency. I don't believe that's true in this area. The more we pull back, the more we restrain ourselves, the stronger it's getting."
"I agree with you," McChrystal says. "In this area, we've not made progress, probably. You have to show strength here, you have to use fire. What I'm telling you is, fire costs you. What do you want to do? You want to wipe the population out here and resettle it?"
A soldier complains that under the rules, any insurgent who doesn't have a weapon is immediately assumed to be a civilian. "That's the way this game is," McChrystal says. "It's complex. I can't just decide: It's shirts and skins, and we'll kill all the shirts."

That McChrystal gets it, understands what must be done to achieve any sort of success in Afghanistan, makes it that much worse that he must now, in my view, be relieved of command. In what is truly epic irony, the man the article describes repeatedly as knowing just how far to push against a system and survive, in allowing this profile to be done, he has pushed too far.

Economic Assessment

Alan Blinder's Op-Ed in the Wall Street Journal yesterday is a fantastic analysis and defense of Obama administration economic policies. Blinder is a professor of economics at Princeton and former vice chairman of the Federal Reserve. He was moved to write by a recent poll demonstrating extraordinarily low marks for the Obama administration's economic policies.

Let's start with two indisputable facts. First, both the financial system and the economy are in far better shape today than they were in the dark days of January or February 2009. For example, even though unemployment is higher now, it is receding rather than soaring, dropping to 9.7% in May from 9.9% in April. Second, the growth of the U.S. economy over, say, the last 12-18 months beat virtually every forecast made back then. I know, because I stuck my neck out on this page with a forecast viewed as too optimistic in July 2009, and the U.S. economy did better than I predicted.

. . . .

Why the bad reputation [for the stimulus package]? The main reason appears to be that the White House's January 2009 forecast was too optimistic -- projecting, for example, an unemployment rate around 8% by the end of 2009 if the stimulus passed. (It was actually 10%.) Notice the reasoning here: Since unemployment turned out worse than expected, the stimulus must have failed. Did someone say non sequitur? Let's see. If the Yankees lose a game 13-11, as they did one day last month, the hitters must have failed. Right?

Try to imagine any government spending a massive sum like $862 billion without creating or saving millions of jobs. More specifically, suppose peak-year spending from the stimulus bill was about $300 billion -- which is roughly correct -- and that our hapless government just sprinkled its purchases around at random. On average, each job in our economy accounts for about $100,000 worth of GDP. (We are a highly productive bunch!) So $300 billion worth of additional GDP should be the product of about three million more jobs. Do we really believe the stimulus produced only a small fraction of that -- or none at all?

Lessons Learned from the Anbar Awakening

A friend and I are reading Al-Anbar Awakening: U.S. Marines and Counterinsurgency in Iraq 2004-2009 together, intending to talk over the lessons learned by the Marines in their part of the United States struggle to learn “to eat soup with a knife.” I just opened the book this evening and began reading the forward, which is written by Gen. John F. Kelly—who I had the opportunity to speak with almost a year ago. Immediately I was struck by what he had to say. Here are a few passages I found note worthy:

In Iraq to a very large degree, we—the U.S. military and civilians—were the source of the insurgency. Honest men and women can argue the whys, what-ifs, and what might-have-beens, but ultimately, it was mostly about unfulfilled promises and the heavy-handed military approach taken by some over the summer of 2003 that caused events to spiral out of control.

And, as far as why the Anbaris turned against the insurgency:

To [the Anbaris], their alliance with [al-Qaeda] was a marriage of convenience to fight the U.S. occupation. Al-Qaeda brought dedication, organization, funding, and a willingness to die. Over time, however, it overplayed its hand and wore out its welcome by forcing an extreme Islamic agenda on a generally secular and very tribal culture. Al-Qaeda’s campaign evolved from assistance, to persuasion, to intimidation, to murder in the most horrific ways, all designed to intimidate Anbari society—tribes and sheikhs alike—to adopt the most extreme form of Islam . . . . It was increasingly directed at the sheikhs themselves, and just as importantly, it began to have an impact on the business of tribal leaders.

More to come. Obviously, the value of lessons learned is the portability (or not) of the lesson to other contexts. From Iraq to Afghanistan, say.

Killing Off The Awakening

I'm with Ricks' friend in Iraq.  I don't think it's armed Shi'as that are killing off the awakening.  Were I seeking to restart an sectarian civil war in Iraq, I'd start by eviscerating Awakenings—and the tribes that undergird it. 

Weird Story of the Day

AFP reports that a 50 year-old California man was arrested in Pakistan on a quest to kill Osama bin Laden.

Just What It Needs

The New York Times leads with a story today detailing the discovery of vast amounts of mineral wealth in Afghanistan. According to the article, the United States "has discovered nearly $1 trillion in untapped mineral resources in Afghanistan." The deposits include iron, copper, gold, lithium, and cobalt—minerals necessary for everything from heavy industry to high technology. A Pentagon source reportedly describes Afghanistan as the "Saudi Arabia of lithium."

The Times article highlights the possibility the mineral wealth has to transform the Afghan economy. That is certainly so. Unfortunately they also have the possibility of transforming the Afghan conflict—a political one—into a rent-seeking conflict and exacerbating the already outrageous amounts of graft and corruption retarding that country's development.

Even without the mineral wealth, Afghanistan suffers from epidemic corruption. Already, the heroin trade adds a degree of complexity to counterinsurgency that has proven extraordinarily difficult to surmount. Warlords, Taliban, civilian farmers, and members of the Afghan government all profit or draw their livelihoods from the cultivation of poppies for heroin delivery. Interdicting the trade has the possibility of alienating or impoverishing the local populace, undermining COIN's overall efforts. The common profiting from the trade gives elements of the Afghan government or warlords who nominally support ISAF reason to cooperate in a limited way with the Taliban.

The difficulty of extracting minerals from the ground—as compared to harvesting poppies—may make mineral wealth an unlikely complicating factor to the Afghan war. However, the experience of blood diamonds in Africa should teach us that complicated extractive resources can be tapped by seemingly unsophisticated armed bands and used to fuel already entrenched conflicts.

Vast mineral wealth also raises the strategic importance of Afghanistan. Afghanistan already held substantial strategic import due both to its location geographically and untapped petroleum and natural gas reserves. Copper, gold, and lithium—ores necessary for high tech devices—will have only increasing value and importance. The scale of the deposits hinted at by the New York Times articles suggest that Afghanistan will be of increasing interest to Iran, Pakistan, Russia, the United States, and China. This has the potential of increasing the number of spoilers involved in any conflict-resolution or accommodation process. It also may open doors to the Karzai government otherwise foreclosed to it; giving it alternatives to dealing with the United States—an already fraught relationship.