Tuesday, June 26, 2012

What Happened to Habeas Corpus?

On December 31, 2011, a historic and controversial peace of legislation was signed into law by President Obama. His administration had fine-tuned the wording of bill, which was primarily to fund the military. But one provision in the bill had nothing to do with sustaining our defense efforts. (This is a common maneuver: attaching unrelated riders to major bills, knowing that Congress will be so eager to pass them that they will overlook the distasteful amendments.) Historian Michael Savage writes that

Barack Obama signed into law legislation that spelled out his power as president of the United States to detain any U.S. citizen indefinitely on the grounds that he or she might be a "terrorist." The National Defense Authorization Act (NDAA), which the president had earlier promised to veto, represents the single most egregious rollback of American civil liberties in our nation's history. Obama made the move under cover of America's New Year's Eve Party, while most Americans were more concerned with having a good time than with losing their freedom.

No other president in U.S. history has sought or had such power. Note that this law does not merely apply to people in general, but to citizens. The legal tradition of habeas corpus demands that citizens cannot be jailed without being told which specific charges are being leveled against them; this tradition also implies the notion of a "speedy trial" and not "indefinite" detainment.

Obama insisted that the reason he signed the bill was to guarantee funding for the military, to support our troops. In the process, he deprived U.S. citizens of the very freedom for which our military is fighting. In fact, despite his insistence to the contrary, it was the president himself who had fought for the right of the Commander-in-Chief to detain American citizens. Obama was outed by radial leftist legislator Carl Levin, who explained what the president was up to on the floor of the Senate. Levin made it clear that the White House had pushed for the law to be applied indiscriminately to American citizens.

The president had directed his administration to insert these directives into the bill, and then explained that he was reluctantly signing them into law because they had been attached to an important piece of legislation: a sophisticated move indeed. How has the Obama administration interpreted the law since its passage?

The White House and the Justice Department have fought against bringing any cases involving indefinite detention of American citizens to trial for fear that the courts would overturn their right to abrogate citizens' constitutional guarantees of freedom from arbitrary arrest. In addition, the administration fought tooth and nail to insure that language barring the law from being applied to Americans was not included.

President Obama would prefer that this piece of legislation not be given much attention at all: it makes things easier for him if it is not well-known, or if the public doesn't think about it much. If any attention is given to it, he would certainly hope that it is perceived as a necessary, if regrettable, tool for national security. In fact, however, its wording is broad enough that it can justify any detentions ordered by the executive branch. It is less about national defense and more about increasing the discretionary power of the president.

Thursday, June 14, 2012

Ending the Cold War

Before Western Europe and the United States could win the Cold War, they had to first believe and imagine that they could win it. For many years, the Iron Curtain had divided the free world from the communist world, and many people had come to see that situation as permanent. But it wasn't. Somebody had to wake them up. Somebody had to get people to see that things could be better, that we didn't have to accept communist tyranny over half of Europe. The Wall Street Journal reports that

on June 12, 1987, Ronald Reagan delivered a speech in Berlin. Standing in front of the Berlin Wall, with the Brandenburg Gate, the historic ceremonial entrance to the city, rising behind him, the president of the United States issued a challenge to the leader of the Soviet Union, Mikhail Gorbachev.

Although Reagan's speech posed the question rhetorically to Gorbachev, its effect was also to wake up Europeans, Americans, and others to the notion that the world did not have to endure Cold War misery indefinitely. We could end the Cold War, and even better, we could win it. Before Reagan's speech, says Yuri Yarim-Agaev, a former Soviet dissident interviewed by the Journal,

even the West accepted the division of Europe. "Imagine how hard this made our struggle. We almost had to admit that it was hopeless. Then Reagan says, 'Break the wall!' Why break this wall if these borders are valid? To us, it was more than a question of Berlin or even of Germany. It was a question of the legitimacy of the Soviet empire. Reagan challenged the empire. To us, that meant everything. After that speech, everything was in play."

It is a powerful thing to open people's minds to a new possibility - the possibility that they did not have to accept the Soviet Union as a communist bully threatening free people - the possibility that freedom could be brought back to those suffering under communist tyranny. A wake up call - getting people to see that a new thing is possible:

To come to, to snap out of it, to awaken. Ronald Reagan was hardly alone, of course. John Paul II, Margaret Thatcher, Lech Walesa and Vaclav Havel called for an end to the division of Europe. Yet when the president of the United States demanded the destruction of the Berlin Wall, Dieter and Yuri enabled me to see, he issued a summons of such power and clarity that many who heard him felt as if they had suddenly regained consciousness. The Berlin Wall address represented a call to awaken.

Ronald Reagn was not alone - a number of heroes not only bravely opposed communism, but awoke their fellow citizens to the possibility that Western Europe and America together could win the Cold War, which we did!

Wednesday, June 13, 2012

How Businesses Fix a Broken Economy

By the end of the 1960's, the U.S. economy was beginning to experience difficulties. By the early 1970's, there was serious problem. Cengage's history textbook describes it:

Lyndon Johnson, determined to stave off defeat in Indochina without cutting Great Society programs or raising taxes, had concealed the true costs of the war, even from his own economic advisers. Nixon inherited a deteriorating (although still favorable) balance of trade and rising rate of inflation. Between 1960 and 1965, consumer prices grew an average of only about 1 percent per year; by 1968, this figure exceeded 4 percent.

The problems had more than one cause. First, total government spending had increased annually. Second, entitlement spending and social welfare spending had increased both absolutely and as a percentage of the increasing federal budget (Great Society programs). Third, although LBJ had worked to avoid major tax increases (minor revenue increases did sneak in), there had been no significant tax cut since 1964. Finally, there was a private sector cause as well: the failure of some industries to implement the full efficiency of technology.

Although most of the damage to the economy came from the government, the private sector causes warranted attention as well, because they were perhaps more quickly and easily fixable. As technology had entered into various sectors, decreasing the need to for labor, industries had failed to respond with tighter staffing. Thus, as David Brooks writes about the situation in 1972:

Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.

While the economic history of the 1970's is alternately dominated by damage done by the federal government and attempts by the federal government to correct its mistakes, the non-governmental side gets less attention in history books. Cengage tells us that, on the government side, harm was done when

domestic programs favored by most congressional Democrats contributed to this economic distress. Increasing the minimum wage and vigorously enforcing safety and antipollution regulations

stifled economic growth, raised prices to consumers, sapped resources out of business, and discouraged any creativity in the private sector. Eventually, even Democrat President Jimmy Carter

cut spending for some social programs, sought to reduce capital-gains taxes to encourage investment, and began deregulating various industries, beginning with the financial and transportation sectors.

In these actions, Carter agreed substantially with his predecessor President Ford, and with his successor President Reagan. Tax cuts, spending cuts, and deregulation were the common-sense measures to help the economy. To this would be added a reduction in debt and deficit as concern grew about fiscal responsibility.

Thus far the standard economic history. What has not always been made so clear, however, is the role played by business in finally getting American out of the economic doldrums. The time had arrived to fully implement the cost-saving aspects of technology, as David Brooks explains:

The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.

Business could either turn themselves around, or in some cases be taken over by new ownership and management which would help them become efficient:

Over the past several decades, these firms have scoured America looking for underperforming companies. Then they acquire them and try to force them to get better.

Economic principles often make use of inequalities, and of the changes produced when inequalities are brought toward equilibrium levels:

in any industry there is an astonishing difference in the productivity levels of leading companies and the lagging companies.

One cure is to give the management of a lagging company an incentive to work toward better productivity. New owners can

acquire bad companies and often replace management, compel executives to own more stock in their own company and reform company operations.

This was the key to turning around certain sectors and getting them out of the rut of the 1970's. Even if the government does its part - cutting taxes, spending, regulations, debts, and deficits - the private sector must also do its part, maximizing efficiency and productivity. Individuals and companies which specialize in "turning around" unprofitable businesses are often the catalyst to improving productivity.

Most of the time they succeed. Research from around the world clearly confirms that companies that have been acquired by private equity firms are more productive than comparable firms.

Sometimes this process is painful. Companies which have supported offices long after technology has made them superfluous - imagine keeping a typewriter repairman on the payroll - must face the reality that they cannot afford to pay for unneeded services.

This process involves a great deal of churn and creative destruction. It does not, on net, lead to fewer jobs. A giant study by economists from the University of Chicago, Harvard, the University of Maryland and the Census Bureau found that when private equity firms acquire a company, jobs are lost in old operations. Jobs are created in new, promising operations. The overall effect on employment is modest.

Turnaround specialists often form what are called 'private equity firms' - companies formed by groups of investors who hope to make money by improving the efficiency of lagging companies. Once productivity - and thereby profitability - have been improved, these companies can be sold by the private equity firm to other investors.

Nor is it true that private equity firms generally pile up companies with debt, loot them and then send them to the graveyard. This does happen occasionally (the tax code encourages debt), but banks would not be lending money to private equity-owned companies, decade after decade, if those companies weren't generally prosperous and creditworthy.

The majority of companies bought by turnaround specialists are able to reenter the marketplace in a profitable and competitive condition. Any private equity firm which did not succeed in reviving lagging companies would soon cease to be funded. Turnaround specialists and private equity firms are sometimes mocked in the popular press as "vultures" because instilling efficiency requires self-discipline and hard work. Lagging companies often employ underutilized or excess numbers of workers, who simply don't have enough to keep them busy.

Private equity firms are not lovable, but they forced a renaissance that revived American capitalism.

When large sectors of the economy were headed for destruction in the 1970's, it was - in part - the turnaround specialists who saved them. The process was sometimes painful, but the alternative was the annihilation of selected industry groups, a blow from which the country could not have recovered.