National Center for Policy Analysis
(The National Center for Policy Analysis is a nonprofit public policy research institute that seeks innovative private sector solutions to public policy problems.)
What the Enron scandal is about
By Bruce Bartlett
After weeks of fruitlessly trying to make Enron into a Watergate-style political scandal, the press has finally realized that the Enron mess raises important questions about corporate governance, accounting standards, transparency and other issues critical to all businesses.
The Washington Post's E.J. Dionne correctly recognizes that the true conflict in business today is not between owners and workers, but between insiders and outsiders. Managers, on the inside, appear to have manipulated the system for their own enrichment, at the expense of outsiders, including both workers and shareholders.
A front-page news story in the New York Times by Leslie Wayne indicated congressional investigators are moving away from a narrowly-focused probe of Enron political donations to a broader inquiry of accounting and financial practices. Wall Street is terribly worried there are other Enrons out there. It is important to find out if that is true and do something about it before another major company implodes.
Finally, an excellent series of articles in London's Financial Times correctly views Enron as a failure of existing checks and balances. Part of this breakdown is related to globalization.
With all major companies increasingly global and multinational, it is too easy for them to shop for the most favorable tax and regulatory climate. One of the factors leading to Enron's downfall was its offshore financial dealings in small Caribbean nations -- out of sight of shareholders, auditors, financial analysts and government regulators.
Thus the Financial Times notes that reforms arising from the Enron wreckage need to be worldwide in scope. At the same time, governments need to resist the temptation to adopt tighter, more detailed regulations.
These insights stand in stark contrast to the shallow focus on campaign contributions that has been the main attention of Enron press coverage thus far.
(Bruce Bartlett is a senior fellow at the National Center for Policy Analysis)
The National Center for Public Policy Research
Ten-second response: Bush's global warming plan a mix of giveaways and research
By Gretchen Randall
Background: President Bush has announced his voluntary plan to reduce greenhouse gas emissions 18 percent by 2010. The initiative would allot $4.6 billion in total climate spending over the next five years including $3 billion in funds for more research into climate change and new technologies. Among the proposals is a request for $40 million to fund "debt for nature" forest conservation programs with developing countries which would have U.S. taxpayers pay some of these countries¹ debts if they protect native forests.
The president¹s proposal proposes to spend about a billion dollars in FY 2003 for climate research --nearly the same as the $977 million budgeted for bio-terrorism research in the National Institutes of Health's budget.
Ten-second response: This proposal would spend nearly the same amount on climate change research as it would on bio-terrorism research, and thus shows that President Bush is serious about serious scientific inquiry on climate change.
Thirty-second response: To date, none of the empirical science shows that mankind is the cause of any significant climate change. In fact, most climate scientists believe climate change is overwhelmingly influenced by natural causes. Therefore, even voluntary reductions of C02 emissions are most likely unnecessary. Worse, voluntary restrictions could eventually lead to costly mandatory restrictions, which are what President Bush rightly refused to agree to under the Kyoto Protocol because they would severely harm our economy.
Discussion: Below are some of the details of the proposal President Bush outlined in a speech on Feb. 14:
1. A cap and trade system to let utility companies that have achieved more emission reductions "trade" credits to other companies, which haven¹t yet made the necessary changes to their equipment.
2. Establishment of a new cabinet level committee on climate change science to be led by the Secretary of Commerce and the Secretary of Energy. Includes $1.7 billion to fund basic scientific research on climate change and $1.3 billion for research on energy and sequestration technologies.
3. A related program, the "Clean Skies Initiative," that would set new standards for power plants to reduce sulfur dioxide emissions from current levels, nitrogen oxide emissions by 67 percent and mercury by 69 percent. This would occur in two phases with one set beginning in 2010 and another occurring by 2018.
The Reason Foundation
Blowing the budget: Bush's budget means more spending, more government.
By Michael W. Lynch
If the president's annual budget can be accurately read as a statement of political values, George W. Bush values a much larger federal government -- although one that he hopes will (someday, somehow) consist of only well-managed programs.
Bush's proposed budget for fiscal 2003 makes history -- it's the first to break the almost unimaginable $2 trillion mark, spending roughly $20,000 on behalf of each American household. We're at war, so of course the military gets a huge 18 percent increase in outlays. But if Bush has his way, which he surely will and then some, even non-defense discretionary outlays will increase by 5 percent, with every department getting a boost. The budget not only picks the Social Security lock box (a short-lived but useful fiction) but also violates the deficit-spending taboo, which had been an even more useful restraint on spending.
If President Clinton had submitted this budget, right-of-center groups in D.C. would have pounced, slamming him for failing to make tough choices. This budget does, after all, throw more money at such once-scorned programs as AmeriCorps, whose chief virtue now appears to be its presence in numerous congressional districts.
Bush's budget, however, was met with laudatory press releases from such watchdogs as Citizens Against Government Waste and Americans for Tax Reform. William Eggers, a former Bush aide and senior fellow at the Manhattan Institute, took to the pages of The Wall Street Journal to declare the budget a "distinct departure from the Beltway practice of rewarding failure with more spending."
Eggers and others, including Reason Public Policy Institute, the nonpartisan think tank funded by Reason Foundation (the nonprofit that publishes Reason magazine and the Reason Online Web site), point to the president's management agenda as evidence that Bush is a man committed to better managed, if not necessarily smaller, government.
Not everyone is convinced. "This is the first Republican administration in eight years and they have really wimped out on the spending side," says Chris Edwards, the Cato Institute's director for fiscal policy. "If a program is failing it ought to be terminated or privatized, but there are very few terminations or privatization proposals."
But Bush is taking the long view. For this budget cycle, departments and agencies are rated with a traffic light system of red, yellow or green, with select programs declared "effective" or "ineffective." The idea is to get program heads to commit to delivering specific, measurable results. If they fail, the programs will supposedly get cut or reformed -- more likely simply renamed.
This is the baseline year, so even though more than 85 percent of the agencies graded by the administration earned a red, many still got slated for funding increases. In Washington, later rarely comes -- especially if it means cutting anything.
It's not, after all, that we don't know certain departments and programs fail year in and year out. (The Department of Energy, Head Start and Amtrak are three excellent examples.) It's that every program serves someone's interest, even if only that of the people operating it.
An alternative to using the war as an excuse to save the federal government from spending restraints would have been to use the need for defense spending combined with zero deficits as cover to make the tough choices and knock some real losers off the federal books. Instead, we get massive new spending, no real cuts, and a promise that with sophisticated management techniques, such beauties as the Drug Enforcement Administration, the Internal Revenue Service, and the Department of Labor will start delivering real results.
"I don't pay any attention to that kind of nonsense," says Heritage Foundation economist Daniel Mitchell when asked about the effort to improve federal management. "I shouldn't say nonsense because I'm sure there is something worthwhile in it, but it's one of these things where I don't want to manage government better, I want to shrink government."
It's doubtful that many on the Hill will pay attention either. The administration has "lost credibility," says Cato's Edwards, "because they say 'Congress has to control spending, except for all of these areas where we want more spending.'"
The same can be said of the tax side of the budget, which calls for tax simplification and promises a series of learned papers on the subject. But for now, this new budget further junks up the tax code.
"They have 30 new provisions, and 20 of them will complicate the code," says Edwards. "Solar power credits, credits for fuel cell cars, credits for teachers to buy supplies. You don't need a white paper to know that stupid tax credits complicate the code."
That is probably the point. Tax simplification is a wonderful product for Republican pols. But if they actually delivered on it, they could no longer sell it so profitably on the stump. The same holds for sending Congress a bloated budget with a rhetorical call to hold the line on spending. When Congress and the president agree to spend far more than Bush originally requested, he'll be able to blame the free-spending Congress, placing a special emphasis on the Democrat-controlled Senate.
As a political performance, this rates a green light. But it rates a red light for good governance and is clearly "ineffective," if the goal is a smaller, less intrusive government.
(Michael W. Lynch is Reason magazine's national correspondent.)
The Cato Institute
Axis of Evil: Tilting at windmills
By Charles V. Peña
In his State of the Union address, President Bush warned that North Korea, Iran, and Iraq "constitute an axis of evil, arming to threaten the peace of the world" and that "by seeking weapons of mass destruction, these regimes pose a grave and growing danger."
Interestingly enough, the president did not make a single direct reference either to al Qaida or Osama bin Laden. Yet just two weeks after the State of the Union, the director of Central Intelligence, George Tenet, testified before Congress that al Qaida was trying to rebuild its network, resume its operations, and remained capable of another large-scale attack against the United States. At the same time, the whereabouts of Osama bin Laden -- as well as a large number of al Qaida's top leadership -- remains a mystery.
So what's wrong with this picture? Al Qaida is the one terrorist group with global reach that attacked the United States on Sept. 11. Osama bin Laden was the driving force behind that attack. It has not been shown that North Korea, Iran and Iraq support al Qaida or are complicit in the planning, financing or execution of the Sept. 11 attack. And they are not known to be providing safe haven for al Qaida as did the Taliban regime in Afghanistan.
How then, has the threat expanded from terrorist groups of global reach to an axis of evil comprised of North Korea, Iran and Iraq? North Korea is no longer an active state sponsor of terrorism. It's nuclear weapons program and long-range ballistic missile program are both currently considered to be on hold. Tensions on the Korean peninsula are at an all-time low as a result of South Korea's "sunshine policy" of economic incentives to the North. That seems like progress in the right direction rather than an imminent threat.
Iran was actually cooperative with the U.S. military campaign in Afghanistan and played a key role in the Bonn meetings that resulted in the post-Taliban government in Afghanistan. Plus Iran is one of the few Muslim countries in the world actually showing signs of possible democratic and cultural reform. Again, that seems like progress in the right direction.
Furthermore, the terrorist organizations that Iran does support -- such as Hezbollah, HAMAS, Palestinian Islamic Jihad, and Popular Front for the Liberation of Palestine-General Command -- do not currently focus their attacks against the United States. So why go out of the way to give them reason and motivation to put the United States squarely in their sights?
Iraq is admittedly a thorn in the side of the United States -- a classic case of "blowback." The United States originally supported Saddam Hussein in an effort to counterbalance Iran and the Muslim fundamentalist regime of the Ayatollah Khomeni. But Hussein has since become a threat after invading Kuwait in 1991 and the subsequent Persian Gulf War to expel Iraq. And the primary reason Iraq is even considered a threat at all is because the U.S. national security establishment perpetuates the myth of needing to defend Persian Gulf Oil.
But oil is not a national security issue. It is an economic issue. And economists from across the political spectrum -- including two Nobel Laureates, the liberal James Tobin and free-marketeer Milton Friedman -- agree that going to war for oil is unneeded. The bottom line is that the oil-rich countries of the Persian Gulf need to sell oil more than the United States and other countries need to buy it.
The bottom line is that North Korea, Iran and Iraq are comparatively weak nations, both economically and militarily. They have, in fact, become less of a threat -- unless the United States insists on intervening in their respective regions.
Rather than needlessly resurrecting and antagonizing such enemies -- none of whom have attacked the U.S. homeland or present a direct threat to U.S. national security -- and putting them in a position where conflict seems a foregone conclusion, the United States needs to first finish the job against the those who did attack the country and still represent a real threat to inflict great harm: the al Qaida terrorist network.
Their training camps in Afghanistan may be destroyed, but the worldwide network -- operating in more than 60 countries -- is still largely intact. Their leader is still presumably alive, as is most of the rest of the leadership.
Instead of being pre-occupied with perceived unfinished business with other countries, the United States needs to remain focused on the business at hand. The United States can ill-afford to be tilting at windmills while al Qaida remains at large and able to operate.
(Charles Peña is senior defense policy analyst at the Cato Institute.)
Institute for Public Accuracy
(The IPA is a nationwide consortium of policy researchers that seeks to broaden public discourse by gaining media access for experts whose perspectives are often overshadowed by major think tanks and other influential institutions.)
War in Colombia
A fierce assault by thousands of U.S.-backed Colombian government troops -- launched on Friday to retake a large safe-haven region controlled by rebels for three years -- has already resulted in confirmed reports of civilian deaths. The Bush administration is now seeking more than $500 million in additional aid to the Bogota regime, which would supplement a previous $1.3 billion U.S. aid package.
As the New York Times reported over the weekend, some members of Congress "express doubts about aiding a military with a poor human rights record and alliances to right-wing paramilitary forces."
The IPA experts are critics of this U.S. government policy.
-- Sandra Alvarez, head of the Colombia Human Rights Program at Global Exchange, returned from Colombia earlier this month.
"In modern wars, most casualties are civilians and the situation in Colombia is no exception. With the breakdown of peace talks, it is the people of Colombia who are in the greatest jeopardy, and especially those who are consistently and tirelessly working for peace and social justice. Recent U.S. actions have added fuel to the flames of this half-century-old conflict. Increases in U.S. military aid have emboldened the most hawkish voices within the Colombian military. The abrupt shift in rhetoric by Bush administration officials from support for counter-narcotics operations to discussing counter-insurgency efforts and urging protection of the Colombia assets of U.S. oil companies has, in effect, given the Colombian military the green light to attack the rebel zone. It is clear that all sides of the armed conflict of Colombia have been preparing for more war, and not for peace. It is more important than ever to restart a peace dialogue that includes representatives of civil society...."
-- Sanho Tree, fellow at the Institute for Policy Studies who is specializing in U.S.-Colombian relations.
"The civil war in Colombia has been raging for so long that even Martin Luther King Jr. in his famous 1967 speech against the Vietnam War mentioned this Andean conflict: '... American helicopters are being used against guerrillas in Colombia...' A negotiated solution coupled with social reforms is the only viable way to end the longest-running civil war in this hemisphere ... Oil interests are illustrative but not determinative -- for example, Occidental Petroleum clearly wants military intervention for its pipeline. The rhetoric of drug war politics is what was used to escalate U.S. intervention in Colombia and those in Congress who pushed that now seem wary of crossing the line from the drug war into the civil war. But the Bush administration has been up-front about this naked interest in oil and using 'counterterrorism' as an excuse to fight the FARC guerrillas."