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Obama's Ten Worst Ideas

Brief responses (some agreeing, some disagreeing) to a list from Foreign Policy:

1) Renegotiating the North American Free Trade Agreement

Foreign Policy's why, in its entirety, reads: "Trade agreements take years to negotiate, and Mexico and Canada would almost certainly seek new concessions of their own in a new round. Obama is right to argue that more economic development in Mexico will lower illegal immigration; he’s wrong to think that bashing NAFTA is the right way to address the Rust Belt’s economic woes. Happily, since the Ohio primary, Obama has backed off his harshest criticisms of the agreement."

The problem is that the reasoning assumes the point: renegotiation is bad because it's bad. This is at least debatable. While globalization drives down the cost of goods, it also drives down American wages and increases American dependence on foreign production (and therefore our dependence on fossil fuels).

2) Opposing the U.S.-Colombia Free Trade Agreement

Foreign Policy why: "Although Obama citied antilabor violence, the murder rate for union members in Colombia last year was 4 per 100,000, well below the rate for the general population."

Lies, damned lies, and statistics. Perhaps the murder rate for union members was lower than the overall murder rate for Columbia. But perhaps the murder rate for union members was also thirty times the murder rate for persons of the same class, or those who lived and worked in the same areas.

Consider, for example, a city of 100 people. 25 of them live on the east side and 75 on the west side. People on the east side are poor and people on the west side are middle class. 25 people on the west side are non-unionized plant workers; 50 people on the west side are unionized plant workers. In a given year, 5 east siders are murdered and 5 west siders are murdered. The overall murder rate is 10%; the west side murder rate is only 6.7%--below the citywide average. If four of the murdered people are from the union set, then the union members have a 8% murder rate--lower than the citywide average, but higher than the 6.7% rate for the more affluent west side, and twice the 4% rate for non-union west siders.

In other words, the above statistic is only slightly better than meaningless outside of context.

3) Talking Openly About Bombing Pakistan

Foreign Policy why: "Engaging in military strikes in Pakistan happens to be established policy. But, as none other than Joe Biden pointed out last August, 'It’s not something you talk about. … The last thing you want to do is telegraph to the folks in Pakistan that we are about to violate their sovereignty.'"

Here we can agree--why antagonize a reasonably friendly nation in the middle east? The answer is political posturing on Obama's end--shame on him.

4) Sitting Down with Mahmoud Ahmadinejad

Foreign Policy why, in its entirety: "Engaging rogue states can be a savvy move, and even the Bush administration has negotiated with Pyongyang and sent envoys to meetings with Iran. But sitting down with heads of state without precondition? That’s another thing entirely, especially when it comes to Iranian President Mahmoud Ahmadinejad. As Carnegie Endowment expert Karim Sadjadpour told the Wall Street Journal, 'Only two things can rehabilitate Ahmadinejad politically: bombing Iran or major efforts to engage.' No wonder Obama’s foreign-policy team has walked back its candidate’s off-the-cuff remarks."

After penning and deleting tangents on the concept of "rogue states" and sovereignty, suffice to say that I don't think there's any reason on a state-to-state level to avoid diplomacy without preconditions. On a state-to-individual level, to the extent that that diplomacy legitimizes a despot, I do think that there's a reason to avoid diplomacy. Would diplomacy with Ahmadinejad have legitimized him? I believe the issue could be handled in such a way as to strengthen U.S. soft power in the middle east and weaken Ahmadinejad. More precisely, in every official statement and press release, frame the negotiations as being between the U.S. and Iran. Mention Ahmadinejad as little as possible. Presto: we're negotiating with a nation, not a man.

See how it works? I've mentioned Ahmadinejad every other sentence for seven sentences now, and Iran only once. I bet you're thinking of Ahmadinejad.

5) Pushing the Patriot Employer Act

Foreign Policy why: "It’s never smart economic policy to reward companies for placing limitations on their own profitable activities, but as The Economist put it, 'Obama deserves a slap on the wrist' for this one, not a full-throated indictment."

Hm, I have to take issue with the statement that "[i]t's never smart economic policy to reward companies for placing limitations on their own profitable activities..." It is perfectly smart economic policy to reward companies for placing limitations on their own profitable activities IF those limits serve other valuable economic goals that outweigh the benefits of the lost profit to the companies. I don't think any rational economist would take issue with that statement.

So now we take up the part after the "IF": in this case, the "Patriot Employer Act" would apparently "end the tax breaks for companies who ship our jobs overseas, and ... give those breaks to companies who create good jobs with decent wages right here in America." In simplistic terms, the economic goal is increasing wages for American workers. The economic cost is profit to shareholders. But that cost may well be illusory. Increasing wages for American workers also means an increase in profit to shareholders; the theory goes, if I make an extra buck, then I spend it on a product produced by X Corp. and sold by Y Corp. X Corp. and Y Corp. shareholders have now shared in my extra buck. Everyone wins!

Of course, the converse is as follows: if Y Corp. ships its customer service to India, and X Corp. shifts its production to Malaysia, then the cost of that product is cheaper to me. I end up saving that buck, so the net outcome is the same either way!

But if that's the case, then why should anyone care? Well, I care because I recognize some externalized costs in the equation, particularly when X Corp. shifted its production to Malaysia. Now X Corp.'s goods must be shipped from Malaysia to U.S. distribution centers, where the goods are then trucked to wholesalers, then trucked to retailers, then brought by sport utility vehicle to the Smith residence in Lawndale, Ohio. If the production were to occur in the U.S., then we could save on the environmental costs of overseas shipping.

There is at least one more hidden cost to allocating that proverbial dollar directly to X Corp. and Y Corp. rather than our friend the worker. Although rationally the outcome is the same--in one case, the worker makes $10 and buys a $5 item, while in the other case the worker makes $9 and buys a $4 item--the worker is likely to rate the same $5 item as more valuable, because the worker paid 25% more for it (in non-adjusted dollars). Therefore the worker is less likely to wantonly discard the $5 item than the $4 item. And therefore, at least theoretically, the richer worker/more expensive goods model produces less waste. Maybe if we engaged in more protectionism, we wouldn't have a "huge plastic garbage mass — nearly twice the size of Texas — halfway between Hawaii and Los Angeles." NPR.

6) Promoting Coal-to-Liquid Fuels

Foreign Policy why, in its entirety: "Obama’s energy policy has much to commend it. But borrowing an idea from World War II Germany and apartheid South Africa? Bad move. Coal-to-liquid fuels produce nearly twice the greenhouse gases of ordinary petroleum, experts say, and it’s foolish to subsidize an industry that easily could go under if oil prices fall. Under withering fire from environmentalists, the Obama camp clarified his position in June 2007 as, '[U]nless and until this technology is perfected, Senator Obama will not support the development of any coal-to-liquid fuels unless they emit at least 20% less life-cycle carbon than conventional fuels.' It’s since been dropped from campaign materials."

I should hope that this idea has been dropped from campaign materials, because it deserves number one billing on the list of Obama's worst ideas. If only pandering to the coal industry weren't (seemingly) a necessary part of courting swing states in the coal belt. Coal, no matter its form (be it liquid or "clean") is a habit we need to kick.

Although coal-fired power plants generally keep getting cleaner, they contribute about three-fifths of all sulfur dioxide, one-third of all mercury, and one-fifth of all nitrogen oxide emissions in the United States. Air pollution's precise health effects are notoriously hard to quantify, but its links to heart attacks, lung disease and cancer are well established. ... "I see more people dying of particle air pollution than are dying of AIDS, and I need to call people's attention to that." Corey Powell, "Black Cloud," New York Times (June 25, 2006)

Please, Presidential candidates, put the money where it belongs--squarely behind wind and solar research.

7) Eliminating Income Taxes for Seniors Making Under $50,000

Foreign Policy why, in its entirety: "Most seniors already pay no income taxes. That’s because they already get preferential treatment in the tax code. Plus, why are seniors more deserving of tax relief than struggling young families? The Tax Policy Center—run by the Brookings Institution and the Urban Institute—criticized the idea in a recent report, saying that because government spending on seniors is already set to balloon due to retiring baby boomers, 'it seems inappropriate to target special income tax breaks to this group.'"

I don't have strong feelings on this issue, but Foreign Policy's reasoning is pretty shoddy. If most seniors already pay no income taxes, then why is it such a bad idea to eliminate income tax for those making under $50,000 per year? That makes Obama's idea seem essentially like a "patch" unworthy of much comment. Second, tax relief for seniors does not preclude tax relief for "struggling young families" except to the extent that the federal budget is a zero-sum game (which it is and it isn't). Provide the tax cuts for the elderly and struggling young families, use some eagle-eyed interns and the veto power trim the fat off some pork, and call it a day. Finally, I'd suggest to any reader who has actually made it this far that government spending is probably highest (and perhaps ought to be highest) on groups who bear little of the tax burden. These are typically the groups with the greatest need, which the government then attempts to allay. Whether this is an appropriate role for government is a question for another day, but suffice to say that if this policy is one of Obama's ten worst, then he must have a pretty solid platform.

8) Boosting Ethanol Subsidies

Foreign Policy why, in its entirety: "As economist Paul Krugman has written, corn-based ethanol is 'bad for the economy, bad for consumers, bad for the planet—what’s not to love?' World Bank economist Daniel Mitchell blames biofuels, including ethanol, for a 75 percent increase in global food prices since 2002 that has led to economic distress and rioting in such countries as Haiti, Egypt, and Somalia. There’s also little evidence that they do much to prevent global warming. A recent study published in Science demonstrated that the farmland needed to grow corn for ethanol results in deforestation on a massive scale, negating any benefit the reduction in carbon emissions might have. So why does the senator support such a wasteful and damaging subsidy, even voting for the recent farm bill’s billions in pork for ethanol producers? '[B]ecause Illinois … is a major corn producer,' he said in April. At least he’s honest."

Sigh. You can take the senator out of Illinois, but you can't take the Illinois out of the senator. Here's how this policy works. Okay, so in order to curtail the use of petroleum, let's derive a fuel from corn. First we'll provide a subsidy in order to encourage the production of mass quantities of low-grade corn--you know, the sort that grows on massive factory-farms which use petroleum-based fertilizers and huge gas-powered tractors. In order to produce enough, we're going to have to cut back on producing heavily subsidized export corn--sorry about that, other countries that have stopped growing corn in reliance on an ability to purchase cheap U.S. corn on the dime of the U.S. taxpayers. Um, you can figure out another way to get enough food, right? Ok, now we have to process the corn into ethanol. This should probably be a process that runs on petroleum, too. So now we've used as much oil as we've saved, starved some folks in third world countries, and our own domestic food prices are shooting up. If we increase our reliance on corn-based ethanol, maybe we can even raze the national forests and sow the cleared land with patented monoculture corn! Hurray!!!

So yeah, this one goes pretty high on the list of bad ideas, too. Again with the pandering.

9) Taxing Oil Companies Extra

Foreign Policy why, in its entirety: "He’s attacking the symptom, not the disease. It’s certainly hard to defend oil companies making record profits while consumers are struggling to fill their tanks, but Big Oil has very little control over day-to-day gas prices, which are set by global supply and demand and, of course, OPEC. By discouraging oil companies from making big profits, such a tax could potentially discourage them from making investments in new refineries and finding new oil sources, resulting in fewer jobs and even higher prices at the pump. Jimmy Carter tried this in 1980, and it only increased U.S. dependence on foreign oil. Singling out one particular industry for punishment because it is politically unpopular doesn’t make much economic sense, either."

Um, I have to take issue with this one as well. In fact, I think that Foreign Policy has it exactly backward: this policy attacks the disease head on. The disease isn't so much U.S. dependence on foreign oil as it is U.S. dependence on oil, period. If the government intentionally inflates the price of oil, then this should drive down demand for oil. This has occurred in the last year, although cause and effect can be difficult to extricate: "The price of their raw material, oil, is rising because of strong global demand. At the same time, consumption of gasoline in the United States is falling as a result of slower economic growth and consumer efforts to conserve." Jad Mouawad, "Oil Refiners See Profits Sink as Consumption Falls," New York Times (May 14, 2008).

So now we have higher prices for oil and lower consumption of oil. If the trend continues, then consumption will fall but remain high. This tax should therefore produce a large revenue stream for the federal government. This revenue would have an obvious end market in order to counteract any harm caused by an increase in fuel prices: research and development of alternative fuels.

I am aware that this is, in essence, the Carter plan, which is widely viewed as a failure. See, e.g., Jerry Taylor, Cato Institute, "Wrong then, too: let's not repeat Jimmy Carter's energy mistakes," National Review (Aug. 18, 2008). While I certainly disagree with this argument (and, on a side note, I get a bit sick to my stomach each time I read about President Reagan symbolically removing the solar panels from the White House), I am going to punt for now because it is now 1:13 a.m. Apologies.

10) Opening the Strategic Petroleum Reserve

Foreign Policy why, in its entirety: "WObama was right in July when he said that the strategic oil reserve 'has to be reserved for a genuine emergency.' Selling oil from the 700 million barrel reserve would increase domestic supply and could drive down prices in the short term, but encouraging consumers to use more oil isn’t going to fix anything. And depleting the reserve would leave the United States vulnerable to a supply disruption caused by a natural disaster or further unrest in the Middle East. Obama swapped common sense for this dangerous boondoggle in August after McCain started to hammer him on offshore drilling. So much for tough truths."

I agree with every bit of Foreign Policy's analysis as to this point. Obama's energy policy is unquestionably a mixed bag. And now I will go to bed.