WASHINGTON, May 16 (UPI) -- The UPI think tank wrap-up is a daily digest covering opinion pieces, reactions to recent news events and position statements released by various think tanks. This is the first of several wrap-ups for May 16. Contents: CEPR's economic indicators; blancing liberty and security; American Lung Association's scary report.
The Center for Economic and Policy Research
(CEPR's goal is to ensure that citizens have the information and analysis that allow them to act effectively in the public democratic debate on important economic and social issues that their lives, by informing them about the problems and choices they face in an accurate and understandable manner, so they are better prepared to choose among various policy options.)
WASHINGTON -- Further slowing of rental inflation could signal the end of the housing bubble.
The core consumer price index, which excludes the food and energy components, was unchanged for the second consecutive month. This is the lowest two-month inflation rate in the core, since a drop of 0.3 percent from Oct. to Dec. 1982, a time when the unemployment rate was over 10 percent. Over the last three months, the annual rate
of inflation in the core index has been just 0.4 percent.
The overall CPI showed a drop of 0.3 percent in April, driven by a sharp 4.6 percent decline in energy prices. This decline in energy prices reversed a March increase of the same size, although energy prices are still 13.0 percent above their year ago level. The overall CPI has risen at a 2.4 percent annual rate over the last quarter and a 2.2 percent rate over the last year.
Two of the biggest factors holding down the core rate are the slowing of inflation in housing and medical care. The rent component of the housing index rose by 0.3 percent in April, while owners' equivalent rent was unchanged for the first time since December of 1994. Over the last quarter the annual rate of change in the owners' equivalent
rent index has been just 1.1 percent, the lowest rate of increase since the series was started in 1983.
The rent index has increased at an annual rate of 2.8 percent over the last three months. The slowing of rent increases is striking since these components had been rising at close to a 5.0 percent annual rate at the end of 2001.
The slowing of inflation in the medical care sector has also been striking. Medical care costs rose by 0.2 percent in April for the second consecutive month. The annual rate of price increase has been just 2.1 percent over the last three months. By comparison, medical care costs had been rising at over a 5.0 percent annual rate in the
summer of last year.
It is not clear what would lead to such a sharp slowing of the inflation rate in this sector. It is possible that cutbacks in the demand for health care services forced by state and local budget cuts are leading to greater pressure for cost containment, but the speed at which the inflation rate has fallen is extraordinary.
Sharp declines in apparel and new car prices, 0.6 percent and 0.4 percent respectively, also helped to keep the core inflation rate down. Apparel prices have fallen at a 4.5 percent annual rate over the quarter while new car prices have declined at a 1.4 percent rate. While the sharp decline in apparel prices is partly due to erratic seasonal factors, the continued downward movement in both indexes is worth noting, since it comes in the wake of a rapidly falling dollar.
The falling dollar has led to a modest increase in non-oil import prices over the last year. From 1999 to 2001, import prices had been falling at close to a 2.0 percent annual rate, so it is striking that this reversal has yet to show up in a big way in consumer inflation, although it has led to rises in the early stage producer goods
indexes.
The producer price indexes all fell in April, driven primarily by falling energy prices. The overall finished goods index fell by 1.9 percent, while the core index fell by 0.9 percent, largely as a result of lower car prices. The intermediate goods index fell 2.2 percent in April, while the core index was unchanged. The overall crude goods index fell by 16.3 percent, with the core index dropping 1.3 percent. Over the last year, the core intermediate goods index is up 2.3 percent, while the core crude goods index is up 11.3 percent.
The lack of inflation in the April data is striking, but the prospect of rising import prices on the horizon should counteract deflationary pressures. At the same time, falling housing prices will pose a real danger to the economy.
The Heritage Foundation
WASHINGTON –
Balancing liberty and security
How ironic that the war on terrorism we've been waging since Sept. 11 -- a war meant to ensure our safety -- should itself inspire fear in some Americans.
Yet cries of "Big Brother" materialize whenever we hear about new government programs meant to enhance our security, such as increased information sharing under the Patriot Act or the Total Information Awareness program. Some critics have even suggested that such measures could eventually lead to a totalitarian state.
Many won't go that far, but they admit they're concerned. When Attorney General John Ashcroft testified before Congress in March, Rep. Jose Serrano, D-N.Y., told him: "Some of the policies the (Justice) department has proposed to combat terrorism are deeply troubling, and I fear some officials are so intent on fighting against terror that they forget what we are fighting for."
A healthy mistrust of government is commendable. Indeed, one could argue that such skepticism has helped America remain a free nation for well over two centuries.
But fears of a police state are overblown. We're merely witnessing a recurring pattern in American history. Professor Geoffrey Stone of the University of Chicago recently outlined some of this history in an address to the Supreme Court Historical Society, and what he said shows how the pendulum between liberty and security swings as circumstances change.
In 1798, the United States was in a state of undeclared war with Napoleon's France. To combat pro-French political views, Congress enacted the Alien and Sedition Acts to prohibit the publication of "false, scandalous and malicious writings" against the government.
It was, in effect, an effort to suppress political criticism of President John Adams, his policies and his administration. When Thomas Jefferson replaced Adams as President, he pardoned all those who were convicted under the Act, which is today widely regarded as a stain on American liberty.
During the Civil War, President Lincoln suspended the writ of habeas corpus eight times, and the military imprisoned as many as 38,000 civilians. In 1866, a year after the war ended, the Supreme Court ruled Lincoln's acts unconstitutional. Today, they are considered an excessive but necessary response to a wartime crisis. Indeed, some believe that, had Lincoln not acted, anti-draft riots might have ended the war with the United States divided.
During World War I, federal authorities acting under the Espionage Act prosecuted more than 2,000 war opponents. Though the Supreme Court initially upheld the law, over the next half-century it overruled every one of its World War I decisions, repudiating the excess of that wartime era.
Finally, and most notoriously, was the internment of Japanese-Americans during World War II. Under an executive order signed by President Franklin Roosevelt, more than 110,000 people of Japanese descent were forced to leave their homes in California, Washington, Oregon and Arizona. Most were detained in camps scattered around the west, where they were penned up behind barbed wire and watched over by armed guards. Years later, the government offered an official apology and reparations to each of the Japanese-American internees.
The historic path of the pendulum teaches useful lessons:
First, the American system is resilient. Significant events like Sept. 11 alter the balance between liberty and security, but the pendulum always returns to center as the threat diminishes.
Second, the arc of the pendulum's swing is not nearly as great as it once was. For example, two Americans, Jose Padilla and Yasser Hamdi, are being detained as part of the war on terror. But both men have exercised their habeas right. That's a far cry from Roosevelt's wholesale internment of an entire population group or Lincoln's suspension of the writ. The watchful eye of the courts, Congress, the press and the public insures this trend will continue.
Third, history shows that we have been -- and at times should be -- willing to adjust the balance between liberty and security in times of crisis. We must, of course, be cautious. But not so cautious that we're immediately prepared to accept apocalyptic claims that American liberty is failing.
(Paul Rosenzweig is a senior legal research fellow in the Center for Legal and Judicial Studies at the Heritage Foundation.)
The Competitive Enterprise Institute
(CEI is a conservative, free-market think tank that supports principles of free enterprise and limited government, opposes government regulation, and actively engages in public policy debate.)
WASHINGTON – Commentary: the American Lung Association's phony air scare
Imagine a high school that flunks half of its students. Stranger yet, imagine a high school doing so even though SAT scores have improved by 25 percent since 1970. That's essentially what the American Lung Association's "State of the Air: 2003" report has done in handing out "F"s on air quality to more than half of the country. In truth, most of these areas deserve a passing grade; it is the ALA that should be left back for its increasingly phony annual air scare.
The ALA's report, released May 1, graded the air quality in the nation's counties and metropolitan areas. The grades are purportedly based upon the Environmental Protection Agency's data on ozone, the primary constituent of smog. But the advocacy group managed to draw conclusions far gloomier than anything coming from the agency. In fact, EPA's less bombastic but more informative annual report concluded that "since 1970, aggregate emissions of the six principal pollutants tracked nationally have been cut 25 percent."
Although progress for ozone has been slower than for the other pollutants, EPA says that smog has declined by 11 or 18 percent since 1982, depending on which measure one uses. Thus, virtually every area getting a failing grade from ALA is cleaner today than in the past.
Several of ALA's "F"s are downright silly, particularly those for areas EPA deems fully compliant with the existing federal air quality standards. For example, San Diego County has made amazing progress in fighting smog over the past decade, and EPA is in the process of redesignating it as being in attainment with the current one-hour ozone standard. But ALA manages to give many clean counties an "F" by cherry picking the worst readings at the worst air quality monitors.
In the case of San Diego, that means obsessing over one monitor in a remote location, though other monitors closer to heavily populated areas show virtually full compliance. "Ninety-nine-point-seven percent of people in San Diego County breathe air that meets all EPA ozone standards," says Joel Schwartz, a senior fellow at the Reason Public Policy Institute.
So 99.7 percent earns an "F" from ALA. That's one hell of a grading curve.
ALA's annual reports may be bad science, but they have been great PR for the organization. Every year, dozens of local papers and television news stations take the bait and report that their county or city received a failing grade. Publicity like this certainly helps ALA with its fundraising efforts.
But there are signs that some are wising up to this type of biased and self-serving green hype. Speaking generally about the environmental movement, Time magazine's Andrew Goldstein noted last year that "fuzzy math and scare tactics might help green groups raise money, but when they, abetted by an environmentally friendly media, overplay their hand, it invites scathing critiques ..."
In the end, such hyperbole hurts the environmental policy debate. For example, if San Diego County made the mistake of taking ALA's "F" seriously, it might abandon its currently successful air quality control strategy and replace it with something likely to be less effective. Nationally, it could lead to a misallocation of resources on new schemes to crack down on a problem already being addressed.
Indeed, the ALA spends a lot of time lobbying for such overkill. But rather than seriously considering this report, its time to grade the graders and give the ALA failing marks for both accuracy and usefulness.
(Ben Lieberman is director of clean air policy at the Competitive Enterprise Institute.)
