Soviet-Style Cybersecurity Regulation
Reading over the cybersecurity legislative package recently introduced in the Senate is like reading a Soviet planning document. One of its fundamental flaws, if passed, would be its centralizing and deadening effect on society’s responses to the many and varied problems that are poorly captured by the word “cybersecurity.”
But I’m most struck by how, at every turn, this bill strains to release cybersecurity regulators—and their regulated entities—from the bonds of law. The Department of Homeland Security could commandeer private infrastructure into its regulatory regime simply by naming it “covered critical infrastructure.” DHS and a panel of courtesan institutes and councils would develop the regulatory regime outside of ordinary administrative processes. And—worst, perhaps—regulated entities would be insulated from ordinary legal liability if they were in compliance with government dictates. Regulatory compliance could start to usurp protection of the public as a corporate priority.
The bill retains privacy-threatening information-sharing language that I critiqued in no uncertain terms last week (Title VII), though the language has changed. (I have yet to analyze what effect those changes have.)
The news for Kremlin Beltway-watchers, of course, is that the Department of Homeland Security has won the upper-hand in the turf battle. (That’s the upshot of Title III of the bill.) It’s been a clever gambit of Washington’s to make the debate which agency should handle cybersecurity, rather than asking what the government’s role is and what it can actually contribute. Is it a small consolation that it’s a civilian security agency that gets to oversee Internet security for us, and not the military? None-of-the-above would have been the best choice of all.
Ah, but the government has access to secret information that nobody else does, doesn’t it? Don’t be so sure. Secrecy is a claim to authority that I reject. Many swoon to secrecy, assuming the government has 1) special information that is 2) actually helpful. I interpret secrecy as a failure to put facts into evidence. My assumption is the one consistent with accountable government and constitutional liberty. But we’re doing Soviet-style cybersecurity here, so let’s proceed.
Title I is the part of the bill that Sovietizes cybersecurity. It brings a welter of government agencies, boards, and institutes together with private-sector owners of government-deemed “critical infrastructure” to do sector-by-sector “cyber risk assessments” and to produce “cybersecurity performance requirements.” Companies would be penalized if they failed to certify to the government annually that they have “developed and effectively implemented security measures sufficient to satisfy the risk-based security performance requirements.” Twenty-first century paperwork violations. But in exchange, critical infrastructure owners would be insulated from liability (sec. 105(e))—a neat corporatist trade-off.
Local Governments Also To Blame For Housing Crisis
Most narratives of the financial-mortgage-housing crisis tend to focus on what are essentially demand-side factors. Whether it is federal mortgage subsidies, like Fannie Mae, or reduced interest rates via loose monetary policy, these policies increase the demand for housing by allowing, and encouraging, more buyers to enter the market. As I’ve written in more detail elsewhere, this narrative ignores the supply side of the market.
If housing supply could easily adjust to the increased demand that arises from other policy interventions, then prices would be unlikely to increase. In fact, if supply increased more than demand, we could see falling house prices, despite the various federal subsidies. The point is that for a price boom to develop, you need some sort of rigidity in supply (inelastic supply, as we economists would say).
So who has the most influence over housing supply? Local governments. A recent article in the January 2012 issue of the Journal of Urban Economics provides empirical evidence ”that more restrictive residential land use regulations and geographic land constraints are linked to larger booms and busts in housing prices. The natural and man-made constraints also amplify price responses to the subprime mortgage credit expansion during the decade, leading to greater price increases in the boom and subsequently bigger losses.” A similar argument has been made by Cato scholar Randal O’Toole.
The lesson here is that if we want to avoid future property booms and busts, with their devastating impact on financial institutions, we also need to reform our local land use controls to allow for the more rapid response of supply to changes in demand.  Again, it wasn’t a lack of regulation that caused the crisis, but too much regulation, particularly of the land/housing market.
Senator Harkin’s Definition of Success
At a Senate Agriculture Committee hearing earlier this week, Senator Tom Harkin (D-Iowa), gave somewhat parenthetical comments (the main focus of the hearing was energy, rural development and crop insurance) on federal nutrition programs. Parenthetical they may have been, but I think they signify something important.
Harkin’s remarks on nutrition programs (or “food stamps” as they are more commonly, if less accurately, called) begin at about 52:30 and end at about 53:35 or so of this video. The part that most struck me was when the senator was describing a meeting he had with some Iowa consitutents. He had this to say [an official transcript is not yet available, but my trusty intern Ian Yamamoto listened to Harkin's remarks and transcribed them for me]:
I just had my weekly breakfast this morning with Iowans. Had a big group there from the diocese of Davenport, a Catholic dioceses, and that’s what they wanted to talk about: was not backing off of our support for low-income people who are facing tough times now, with high rates of unemployment, that need the supplemental nutrition assistance program, or as it’s called, food stamps. And I thought one of the statements made there was kind of profound they said ya know, someone’s accusing this president of being a food stamp president. One of them said well he ought to wear that as a badge of honor…
OK, hold it right there. Really? The fact that millions of this nation’s people depend on the federal government to feed themselves is a badge of honor? Can we all agree, please, that regardless of how you feel about the federal government’s role and responsibility in providing a safety net—of food stamps or anything else—that this is not a situation to be proud of? According to Lisa Levenstein and Jennifer Mittelstadt, writing in the New York Times earlier this month, the food stamp program feeds 46 million Americans, about 15 percent of the U.S. population. But they point out that if everyone who was entitled to the program actually used it, we would see 20-25 percent of Americans on food stamps. They also, by the way, see the high numbers using food stamps as a good thing: “Conservatives are trying to smear Barack Obama by dubbing him the ‘food stamp president.’ He should not run from the label but embrace it…”
I don’t mean to pick on food stamps here—it’s not the policy hill on which I would choose to die. But I really do object when politicians or welfare advocates start celebrating dependency. We should all be talking about ways to cut the number of people needing food stamps in the first place.
Senator Harkin has form on this issue, by the way.
Trying to Do Everything, Doing Nothing Well
One of the perennial laments about American strategy offered by people like me is that Washington seems incapable of setting out clear priorities in its foreign policy. Everything is urgently important. The business section of today’s New York Times highlights the unfortunate results of this orientation.
You may have heard by now that the United States and other allied countries are currently trying to strangle the Iranian economy to the point where the regime in Tehran feels enough pain—or, more accurately, fears for its survival enough—that it is forced to comply with the preconditions for negotiations and come to the table. This is deemed a Very Important Objective by the Washington foreign-policy elite.
But what you may have forgotten is that the United States is currently undertaking a “pivot†away from the Near East and toward the region where Washington believes the future of international politics lies: the Asia-Pacific. In pursuit of that objective, the United States is currently trying to pull together a coalition of junior partners to help diplomatically and militarily surround China so as to hem it in, should it have any ambition to take charge of the security environment in its region. This, too, is a Very Important Objective.
And before you get ahead of yourself, don’t forget about Poor Little Georgia, which got a chunk of its territory annexed after it lost a war to Russia in 2008. As President Bush pointed out, America’s vital interests and its deepest beliefs are now one. And surely our deepest beliefs don’t involve leaving a flawed-but-promising democratic nation to the tender mercies of a predatory and authoritarian Moscow regime, do they? So let’s agree that keeping Georgia safe is a vital interest.
The problem with this approach is that it’s very hard to pursue these difficult objectives at once. As the Times piece points out, the sanctions coalition against Iran conflicts with a number of these other objectives:
[N]ew threats to Iranian oil flow could have at least one beneficiary: Russia…
For Russian oil companies like Rosneft and Lukoil and the Russian-British joint venture TNK-BP, the international tensions that began over Iran’s nuclear development program last autumn have meant a windfall. Analysts estimate that Iran jitters have added $5 to $15 a barrel to the global price of oil, which means an extra $35 million to $105 million a day for the Russian industry. And the taxes the Russian government has received from those sales have been a political windfall for Prime Minister Vladimir V. Putin as he campaigns to return as Russia’s president. The extra money has helped further subsidize domestic energy consumption, tamping down inflation.
“It’s good for Putin,†Mr. Mercer said. “In the United States, when oil prices go up, the president’s ratings go down. In Russia, it’s the opposite.â€
President Obama To Promote Possibly Limitless Corporate Welfare
The Wall Street Journal reports today that President Obama will formally announce his intention to let Beijing set U.S. export credit policy [$] at, fittingly enough, a Boeing plant. Boeing is obviously feeling a bit of political heat about the fact it benefits from almost half of Ex-Im’s disbursements, though, so they are pledging to commit more than $700 million to small business so they can better access credit. They’ve also stepped up their lobbying efforts, this time hiring a Republican-aligned lobbying firm to help them squash some mutinous feeling among Republican ranks.
Here’s Don Boudreaux’s take; spot-on, as usual.
Mandates in Practice: the Flap over Contraception Coverage
First, President Obama requires church-affiliated employers to offer insurance that covers contraception. When that’s properly challenged as a violation of religious liberty, the administration offers a supposed compromise that essentially shifts the burden to the insurance industry: the church-affiliated employer is off the hook, but its insurer has to provide coverage—and can’t charge for it. That’s right: private companies must provide free insurance for services that Obama’s HHS secretary has repeatedly called a major financial burden.
Government by fiat: to solve a First Amendment religious freedom problem that the president himself created, he orders private companies to offer contraception coverage at zero premium.
Then we’re treated to the nonsensical and unsupported assertion that insurers will save money in the long run because they won’t have to pay for pregnancies that contraception would have prevented. In other words, executives running a multi-billion dollar industry—until they were enlightened by HHS bureaucrats—were too stupid to realize that providing free contraception to everybody costs less than pregnancies by individuals who (a) had childbirth coverage, but (b) not contraception coverage, and (c) would have used contraception, but (d) didn’t, because (e) they couldn’t afford to. Of course, that’s just baloney. What’s really at work, as Charles Krauthammer has aptly characterized it, is breathtaking arrogation of power by the feds: a Washington, D.C. takeover of our private health care system.
David Brooks, Charles Murray, and Market Education
In a recent column, David Brooks considers Charles Murray’s thesis that “America is coming apart,” and concludes that:
The country… needs to rebuild orderly communities. This requires… building organizations and structures that induce people to behave responsibly rather than irresponsibly and, yes, sometimes using government to do so.
The first recommendation is reasonable. The second suggests Brooks is not very familiar with the history of education.
For the past century and a half, the biggest single intervention by the government in American lives has been our state school systems. Prior to the mid 1800s, all education in this country was local. The majority of children attended private schools, and those who attended the local “common” or “public” schools usually paid tuition. Even “common” schooling was only free for the truly destitute. Partly as a result of this direct financial responsibility, parents had ultimate control over what and by whom their children were taught.
out of parents’ hands and place it under the control of state-trained, state-appointed experts.From the 1830s to the 1850s, Massachusetts state senator Horace Mann and his colleague in the House, James Carter, imagined and ultimately laid the foundation of the state school system we know today. They did so for a variety of reasons, one being their belief that the common man and woman could not be trusted to educate their own children. Their solution was to take educational power and responsibility
Shockingly, taking responsibilities away from people does not make them more responsible. Responsibility is like a muscle: use it, or lose it. The kinds of “organizations and structures that induce people to behave responsibly” are those that actually impose responsibilities upon them. When parents must not only choose but pay for their children’s education, they expect rather more from the system than when they are assigned “free” schooling by the state. And school efficiency rises as a result.
Some parents could not afford to pay for a good education for their children even without the heavy tax burden imposed by the present bloated state school monopolies. For those parents, we could easily provide financial assistance to cover most or (as necessary) all the cost of schooling. This is already being done on a small but growing scale in 8 states, thanks to k-12 education tax credit programs.
If Brooks wants “an organization and structure” that induces people to behave responsibly, he need look no further than the free enterprise system. “Using government” to achieve that end has been tried for 150 years, and the results are not impressive.
What Was the Point of Romney’s China Op-Ed?
Mitt Romney has an op-ed in today’s Wall Street Journal that Dan Drezner has aptly characterized as “Romney SMASH China!†Drezner takes Romney’s arguments on their own terms, but I’m more cynical, and accordingly I’m interested in why Romney wrote this piece. Sure, sure, maybe it’s possible that he just has strongly held ideas about U.S.- China policy and chose to voice them, but let’s be real: the man is trying to get the GOP nomination and then get elected president. He or someone in his campaign decided that now was a good time to reach out to the largest circulation conservative op-ed page in the country—one that gets read by a lot of people from whom he’d like to get contributions—with this message.
And what is the message? There’s the usual inchoate American nationalism (making the 21st “an American, not a Chinese centuryâ€) and criticism of Obama’s extravagant spending, sure, but there are also some fairly clear signs that Romney wants to signal he’ll get tough on China. He argues that Washington must “directly counter abusive Chinese practices in the areas of trade, intellectual property, and currency valuation.†On the latter, he goes so far as to promise that “on day one of my presidency I will designate [China] a currency manipulator…†despite gradual appreciation in the renminbi highlighted in today’s New York Times.
On the security side, he unsurprisingly suggests that the United States should bolster its role as the balancer-of-first-resort in the Asia-Pacific, claiming without evidence that our allies are worrying that we’re going to leave the region.
Now let’s go back to my question: What’s the play here? Does he think that this is some sort of mass appeal argument that will burnish his credentials in the eyes of the median Republican primary voter? Is he trying to tie economic malaise to the looming ChiCom menace? Maybe so, but does he think that the wealthy potential contributors who read the Journal op-ed page are going to be aroused by this message? That doesn’t seem right to me at all.
There are lots of people who’ve gotten wealthy running political campaigns who no doubt got this piece placed (and probably wrote it), but the questions remain: Why this message? Why this outlet? What was this piece supposed to accomplish? I can’t figure out a persuasive answer.
Chavez Launches Smears against His Opponent
I write on the Huffington Post that Venezuelan strongman Hugo Chavez is reaching into the age-old bag of anti-liberal smears to savage his newly nominated political opponent:
All of these epithets — homosexual, Jewish, bourgeoisie, and more recently, “American” — have been staples of illiberal rhetoric for centuries. Liberals — advocates of democracy, free speech, religious freedom, and market freedoms — have been tarred as “cosmopolitan” and somehow alien to the people, the Volk, the faithful, the fatherland, the heartland.
Fixing the House Transportation Bill
After catching flack from both fiscal conservatives and the transit lobby, House Speaker John Boehner has postponed consideration of a surface transportation bill. Fiscal conservatives (including my fellow Cato scholar Michael Tanner) objected to the bill’s deficit spending; transit interests (including Republicans from New York and Chicago), objected to the bill’s lack of dedicated funds to public transit.
Here are a few things you need to know about the transportation bill before it comes up again in a couple of weeks. First, the legislation now in effect, which passed in 2005, mandated spending at fixed levels even if gasoline taxes (the source of most federal surface transportation funds) failed to cover that spending. Gas taxes first fell short in 2007 and the program has been running a deficit ever since. Although the 2005 bill expired in 2009, Congress routinely extends such legislation until it passes a replacement bill.
Unlike the 2005 law, the controversial House bill only authorized, but did not mandate, deficit spending. Actual deficit spending would be considered on a year-by-year basis by the House and Senate appropriations committees. Should they decide not to deficit spend, passage of the House bill could potentially save taxpayers more than $60 billion over the next five years. Failure to pass a bill will only lead Congress to continue to deficit spend.
Second, transportation is big-time pork. The House Transportation and Infrastructure Committee is the largest committee in Congressional history because everyone wants a share of that pork. Fiscal conservatives’ dreams of devolving federal transportation spending to the states run into the roadblock made up of members of Congress from both parties who don’t want to give up the thrill of passing out dollars to their constituents.
War Against the Core
With the release of a new Brookings Institution report today, and one from a consortium of groups last week, resistance to the national-standards offensive seems to be mounting. And even though almost every state in the union has adopted the Common Core, and few are likely to formally undo that, the war against the Core can still be won.
Today’s new front comes in the form of the Brookings Institution’s 2012 Brown Center Report on American Education, which includes three sections attacking rampant misuse of standards and tests. The first focuses on the Common Core, looking at the discernable impacts of state-level standards on achievement, and finding that (a) varying state standards have no meaningful correlation with achievement on the National Assessment of Educational Progress, and (b) there is much greater variation within states than between them, meaning national standards will do little to change big achievement gaps.
The report’s other two sections deal, first, with differences between the Main and Long-Term Trend NAEP – which brings up a central problem of using tests to judge quality without knowing what’s on them – and second, the misues of international exams to tout favorite policy prescriptions. Basically, pundits and analysts love to pick out countries in isolation and finger one or two characteristics of their education systems as key to their success. Some also love to invoke  this stinker that I and others have railed about for years:
In the U.S., advocates of a national curriculum have for years pointed to nations at the top of TIMSS and PISA rankings and argued that because those countries have national curriculums, a national curriculum must be good. The argument is without merit. What the advocates neglect to observe is that countries at the bottom of the international rankings also have a national curriculum.
The report is well worth checking out. The only quibble I have is that it fails to mention what I covered two years ago, when the national standards stealth attack was fully underway: reviewing the national standards research literature, there is no meaningful evidence that national standards lead to better outcomes. It’s great to have more support for this, but we’ve known for a while that the empirical foundation for national standards is balsa-wood strong.
Dumb Government Intervention in the Housing Market of the Day
With the continuing bailout of Fannie Mae and Freddie Mac, along with the impending bailout of the Federal Housing Administration, it is easy to think that the federal government has a near monopoly on misguided and harmful housing policies. Sadly local governments manage, on regular basis, to give the federal government some real competition in terms of just plain dumb.
The last entry is this category comes from Winona, Minnesota. The great folks at the Institute for Justice summarize Winona’s recent actions pretty well:
“In Winona, only 30 percent of homes on a given block may receive a government-issued license entitling the owner to rent them out. As soon as 30 percent of the properties on a block obtain rental licenses, no other property on that block may receive a rental license.”
There are just so many reasons why this policy is harmful. First, if you happen to care about the poor and needy, this policy directly reduces the stock of available rental housing. It benefits existing landlords at the expense of renters and potential landlords, a policy that is likely to be very regressive.
Second the policy reduces the value of homes that don’t get the license. By reducing what you can do with a property, you reduce its value. You also end up leaving foreclosures vacant that could otherwise be rented out. That may also depress the value of near-by homes. Not to mention you may increase foreclosures, because absent owners, such as IJ’s client Ethan Dean who owns a home in Winona and is currently serving in Afghanistan, may not be able to cover the mortgage without renting out the property.
The good news is that the Institute for Justice is litigating to have this misguided policy overturned. Best of luck to them.
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