Thursday, December 30, 2010

China's Carrier-Killer Missile Now Operational

In April, 2009, this Blog called attention to China's efforts to develop a conventional ballistic missle capable of striking surface vessels, particularly aircraft carriers, 2,000 kilometers from the Chinese mainland. In particular, reports at the time suggested that China was working to modify its DF-21 mobile intermediate range ballistic missile, pictured previously on this blog here, so it could strike moving targets, particularly aircraft carriers. The blog opined:

"If the report is accurate, America's ability to project power near China, e.g., defend Taiwan, could be greatly diminished, absent effective counter-measures that could thwart such a missile."

Now, the Washington Times is reporting that the DF-21 is operational, though not yet thoroughly tested. The Times quotes an American Admiral stating that China has deployed the missile, which apparently has not been tested on sea-based targets. Given the missile's range, the Chinese could, for instance, threaten American vessels coming to the aid of Taiwan or South Korea. (Note in this connection that the F-18 Superhornet, the main offensive weapon deployed from carriers, has a combat radius of between 400 and 450 miles. Hence, even carriers deployed west of Taiwan would be vulnerable to DF-21 attack.) (However, the F-35 will have a combat radius closer to 600 miles, without refueling.)

As reported in this blog's initial post on the subject, this version of the DF-21 would rely upon satellites, over the horizon radar, and unmanned aerial vehicles to track its targets -- which themselves travel over 30 miles per hour --- and guide the missile to its destination. This particular version of the DF-21 carries a conventional warhead, so near misses will be misses.

There are, it should be noted, various counter-measures the U.S. could take to blunt the relevance of the DF-21. For instance, the RIM-161 Standard Missile 3, deployed on Aegis-class cruisers, has an anti-ballistic missile capability and can presumably shoot down the DF-21. Indeed, as previously discussed on this blog, the United States deployed such interceptors to defend Hawaii against a threatened North Korea missile "test" during 2009. Moreover, the same missile can destroy low-orbit satellites; in 2008 a Standard 3 launched from the USS Lake Erie destroyed a malfunctioning American satellite at an altitude of 130 miles. Presumably the same missile could destroy satellites employed to help guide the DF-21 to its intended target.

Monday, December 27, 2010

If Nuclear Power Works for the Chinese Navy . . . . .

Writing in the Japan Times, Michael Richardson reports that China is anxious about securing additional sources of imported oil and natural gas. According to Richardson China, once a net exporter of oil during the early 1990s, now imports just over one half the oil it uses, having recently surpassed Japan to become the world's second largest importer of oil. At the same time, China is encouraging "electricity generators, heavy industry and home-heating and cooking" to switch from reliance on coal to reliance on natural gas instead. (According to a different source, China is currently the world's largest user of coal.) In short, in 2030, China will import 80 percent of its oil consumption; natural gas, which currently accounts for 3 percent of China's energy production, will account for 10 percent of that production.

According to Richardson, China may take aggressive steps (what he calls "strong arm tactics") backed by a strengthened military, to assure itself of adequate supplies of oil and natural gas --- both by keeping sea lanes open and locating and exploiting supplies of oil and gas in waters also claimed by other nations. (At the same time, as Richardson notes, China is also moving to exploit offshore sources of oil and gas in undisputed Chinese waters.) Richardson also notes that China could choose a more cooperative approach to meeting its vast and rapidly increasing needs for oil and natural gas.

There is, of course, another way for China to deal with it growing dependence on imported oil and gas. That is, the country could follow the lead of the United States and other nations that have moved more aggressively to encourage carbon free energy production. As previously reported on this Blog, China is the world's largest emitter of greenhouse cases, having passed the United States several years ago, largely due to its coal-intensive energy strategy. Indeed, according to one source, the combined emissions of three Chinese electricity companies exceed those of Britain, and another source predicts that China will nearly triple its coal-fired electricity generating capacity and use 135 percent more coal than the United States by 2030. At the same time, China's GDP is currently less than one half that of the United States, with the result that China employs more than twice as much carbon per unit of output than the United States, for instance.

What could China do? Of course wind power and solar power are options. However, China might also take a hint from its own Navy, which boasts ten nuclear-powered submarines, one of which is pictured above. While China is rapidly modernizing its own navy, and, according to some reports, planning to deploy a nuclear-powered aircraft carrier by 2020, the nation truly lags behind several other nations when it comes to non-military nuclear power. Indeed, according to one source, China ranks 9th in the world in nuclear power generation, behind Ukraine, Canada and South Korea, to name a few. Indeed, while China produces more output than France, for instance, France generates six times more electricity with nuclear power than does China. (The United States generates more than 12 times more electricty with nuclear power than does China.) According to the U.S. Energy Information Agency, China's coal-fired power plants had just under 496 gigawatts of generating capacity in 2007. That's less than the combined nuclear generating capacity of France (418 gigawatts) and Canada (84 gigawatts) in 2008.

If China is truly serious about moving to a clean energy economy, it should get with the (nuclear) program.

Sunday, December 26, 2010

Has George Will Tripped on Federalism?


Today George Will praises the proposed Public Employee Pension Transparency Act, the title of a bill introduced by Congressman Devin Nunes (R-California). As Will describes it, the bill would perform two main functions. First, the Act would enhance the transparency of state and local pension systems, by requiring states to disclose the full extent of their pension liabilities as well as the nature of the financial assumptions used to calculate those liabilities. Second, the Act would, Will says "stipulate that state and local governments are entirely responsible for their pension obligations and the federal government will provide no bailouts."

As Will points out, states and localities together labor under nearly $4 Trillion in unfunded pension liabilities. Given these facts, encouraging fiscal responsibility by spendthrift states is a laudable objective. At the same time, there are two possible objections to the bill as Will has described it.

First, Congress cannot, as a matter of Constitutional Law, bind future Congresses not to bail out insolvent states, even states whose insolvency is the result of reckless spending. So, for instance, the new incoming Congress could not enact a tax cut and at the same time provide that "no future Congress shall repeal this reduction in tax rates." Allowing one Congress to bind future Congress's would entrench the decisions of today's representatives, and the people they represent, depriving citizens of their ability to alter the course of national policy by electing different representatives in the future.

Hence, while it might make sense as a matter of policy in this particular instance for Congress to bind itself in this manner, future Congresses would properly feel perfectly free to ignore such an effort and thereby address any request for a bailout "on the merits" of such a request. I hasten to add that, like George Will, your humble blogger cannot imagine an instance in which the national government should bail out a state that has become insolvent due to its own fiscal profligacy.

Second, some might wonder why the National Government should be attempting to induce states to disclose additional information to their own citizens about pension liabilities. In particular, devotees of federalism can justly ask why Will, a prominent conservative, would advocate such national interference with states' inner political workings. As this blog has previously noted, in a federal system, states compete with each other for citizens and capital; states that adopt inefficient rules will lose capital and citizens to other states. Moreover, presumably a state's own citizens have a greater interest in that state's solvency than citizens in other states. Given these assumptions, there is no apparent reason why a national government would be in a better position to determine the appropriate level of public pension transparency than state governments subject to these competitive and democratic constraints. It should also be noted that individuals, including large institutional investors, have significant incentives to ascertain the actual liabilities of states and localities that issue debt before purchasing such debt, with the result that states that decline to provide such information my find themselves paying higher rates of interest, other things being equal, than those that do.

Will and, for that matter, Congressman Nunes, have anticipated such an objection. For, as Will points out, the Act would not require ANY state to adopt the sort of disclosure he describes. Instead, the Act would "merely" encourage states to do so by withdrawing the tax exemption for interest on debt issued by those states that decline to comply. In other words, states that declined to comply with the Act's disclosure provisions would be placed at a competitive disadvantage in the capital market compared to those states that did, in fact comply.

To be sure, subsidizing the issuance of state debt via exempting its interest from taxation is questionable practice. Moreover, withdrawl of a tax exemption is not equivalent to the outright coercive imposition of such rules. Moreover, Congressman Nunes should be praised for showing some sensitivity to federalism concerns. At the same time, use of the tax system to induce states to pass legislation they otherwise would not enact still, in the view of this blogger, requires some showing of a national interest that justifies such attention to the disclosure practices of individual states. While there may be such an interest, Will has not provided one, leaving the case for such legislation as of yet unproved.

Wednesday, December 22, 2010

The Senate Stands for Federalism

The Daily Press of Hampton Roads has penned a superb editorial praising the Senate for rejecting a bill that would have required states, localities and municipalities to allow the unionization of their public safety employees, even if such unionization was otherwise contrary to state law. As the Daily Press points out, states that allow such unionization are laboring under the financial yoke of the resulting collective bargaining agreements, struggling to locate the funds necessary to pay the often-inflated salaries and benefits, including pensions, that unions negotiate on behalf of their members, backed up by the threat of a strike or work slowdown.

As the Daily Press puts it:

"From California to Massachusetts, localities are raising taxes, borrowing money, cutting services and eyeing bankruptcy to pay for the police and fire union contracts that have driven up costs, in some cases to the point where the average firefighter costs $170,000 a year in pay and benefits."

Of course, proponents of unionization would invoke various purported benefits of allowing workers to "bargain collectively" (that is, form cartels). Moreover, your humble blogger has previously rebutted some of these arguments. However, as the Daily Press points out, and as this blogger has previously pointed out, there is no apparent rationale for allowing the National Government to impose the benefits of mandatory collective bargaining against the will of individual states. That is to say, if allowing the unionization of public safety employees advances the public interest, then states --- who are uniquely interested in the public safety of their own citizens --- will presumably allow for such unionization themselves. As James Wilson put it, in statement previously quoted by this blog:

"Whatever object of government is confined in its operations and effects, within the bounds of a particular state, should be considered as belonging to the government of that state; whatever object of government extends, in its operation or effects, beyond the bounds of a particular state, should be considered as belonging to the government of the United States."

The decision whether to allow unionization of local public safety workers plainly falls into Wilson's first category --- an "object of government confined in its operations and effects, within the bounds of a particular state" and should thus be left to that state.

Indeed, the Daily Press put this point in Constitutional terms.

"The Constitution reserves to the states all powers not specifically assigned to the federal government. Among those would seem to be the power to manage relations with their own workers. Virginia decided it doesn't want to deal with unions in the government sector, and that works well here."

The Daily Press is plainly referring to the 10th Amendment to the U.S. Constitution, which provides:

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Because the Constitution does not authorize Congress to determine the working conditions of state and local employees, the argument goes, the 10th Amendment reserves such issues to individual states.

To be sure, there are some Supreme Court decisions suggesting that Congress has the authority, employing the power to regulate interstate commerce, to regulate the terms and conditions of the employment of state and local employees. See Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985). However, Garcia rested upon the assumption --- controversial to be sure --- that the political process would protect states from undue intrusions on their sovereignty, there, the wages and other working conditions of transit workers. It would therefore seem that members of Congress would have a special responsibility in this context to give voice to the sort of federalism values that animate the 10th Amendment and the more general limitation on Congressional powers.

Of course, the Garcia doctrine only comes into play when Congress might otherwise possess the authority to regulate the activity in question. Since 1937, the Supreme Court has rarely struck down a federal statute because it exceeds the scope of the commerce power. In part, this track record reflects judicial deference to Congressional determinations that particular activities in fact have a substantial impact on interstate commerce thereby justifying regulation. Here again, the prospect of such deference demands legislative sensitivity to the sort of federalism concerns that led the founders to place limits on the power of the national government, what John Marshall called "the genius of the whole system."

Kudos to Senator Mark Warner for displaying such sensitivity to federalism concerns in this case and protecting the sovereignty of Virginia against such unjustified intrusion into the state's authority.

More fundamentally, decisions by the Supreme Court are not the final word on the meaning of the Constitution, as Andrew Jackson, Abraham Lincoln, James Madison, and Ronald Reagan understood. That is, individual citizens and political actors, when acting within the sphere of their authority, are free to take a different view of the Constitution than that taken by the Supreme Court. So, for instance, in his first inaugural address, President Lincoln announced his opposition to the infamous Dred Scott decision. Moreover, both Andrew Jackson and Ronald Reagan vetoed legislation on constitutional grounds despite Supreme Court precedents holding that such legislation was valid. Public officials take an oath to the Constitution and not to the Supreme Court. Perhaps some Senators believed that the proposed bill exceeded the scope of their authority, properly construed.

Monday, December 20, 2010

Erroneous and Tautological Arguments for The Coercive Health Insurance Mandate

Ezra Klein of the Washington Post has penned an editorial defending a national coercive requirement that individuals purchase over-priced health insurance, by touting the supposed virtues of the recently-adopted Massachusetts plan, which also contains such a mandate. Close inspection reveals that one of Klein's assertions about the Massachusetts plan is erroneous, and two others are mere tautologies.

1. Klein argues that the Massachusetts individual mandate has reduced health insurance premiums "for everybody" in Massachusetts. Here's the full quote:

"The bigger reason [for Massachusett's supposed success] is that the individual mandate - plus the combining of individual and small firms in the same insurance market - brought healthier, younger people into the mix, which brought average premiums down for everybody." (emphases added).

This is false. As Klein himself argues, one point of the Massachusetts law was to force young, healthy individuals who declined to buy insurance to purchase insurance required by the state. Thus, before the law was passed, thousands of citizens in the Bay State were paying health insurance premiums of zero. Now, having been forced to buy a product they don't want, these citizens must pay premiums that are much higher than zero. So, the law did not reduce premiums for "everybody."

2. If pressed, Klein might reply that the individual mandate helped reduce health insurance premiums for individuals that were purchasing health insurance BEFORE passage of the Massachusetts Act. Here is the pertinent quote consistent with that view:

"Like the federal law, the Massachusetts law left most people's health arrangements alone. The exception: people who don't get their coverage through a large employer or a public program. That accounts for most of the uninsured. It's also where the individual mandate is primarily in play and where the "exchanges" - the purchasing markets that put individuals and small businesses in a single pool and force insurers to compete for their business and treat them fairly - really matter.  In Massachusetts, that market has worked better than expected. According to data from America's Health Insurance Plans, the largest health insurer trade group, premiums for that market have fallen by 40 percent since the reforms were put in place. Nationally, those premiums have risen by 14 percent."
This assertion may well be correct, but if so it's beside the point. Indeed, it's a meaningless tautology. By design, the Massachusets plan, like the National Health Care Reform Act, requires a modified form of "community rating," preventing insurance companies from charging individuals with higher risk profiles more than they might charge those who pose lower risks. As a result, low-risk individuals who declined to purchase insurance before such reform must now purchase insurance at rates higher than justified by their risk profile, while high risk individuals receive a state-mandated discount from the premiums they had to pay before the law. (This is why some have argued that the National Health Care Reform Act is a "Bad Deal for Young Adults." ) It should be no surprise whatsoever, then, that, after passage of the Massachusetts law, individuals who previously paid cost-justified high premiums because they posed a high risk, now pay lower premiums, because Massachusetts coercively requires other citizens to subsidize their health care.

In the same way, of course, taxing left handers to subsidize the health insurance premiums of right handers will, believe it or not, reduce the premiums paid by right handers!

In other words, Klein has made no argument for Massachusetts-style individual mandate. He has, instead, simply reported the natural consequence of such a mandate when combined with the sort of price controls inherent in community rating.

3. Klein also praises the Massachusetts Act because, he says, it has lowered the proportion of Bay State citizens who are uninsured. Here again, this is not really an argument. Instead, it is a description of the natural consequences of a coercive requirement that citizens take a certain action. After all, Massachusetts requires all citizens who don't have health insurance via their employers or a public program like Medicare or Medicaid to .... purchase health insurance. If they don't, they suffer a penalty. Apparently most citizens of the Bay State follow the law for one reason or the other.

Monday, December 13, 2010

The Constitution Vindicated (so far).

"Adhere to the Constitution."

"Eat your Wheaties (and buy over-priced health insurance)."

Judge Henry Hudson of the Eastern District of Virginia has struck down a portion of the recent Health Care Reform Act that would have required individuals to purchase over-priced health insurance. His opinion is here.

In so doing, Judge Hudson rejected the administration's claim that Congress may coercively compel all individuals to purchase health insurance because: (1) such individuals will, at some unspecified time in the future, need medical care, with the result that failure to purchase such insurance now will have an impact of some sort on the health care market and (2) failure by some individuals to purchase health insurance will undermine Congress's effort to pool risks, by allowing some individuals to avoid participating in the risk pool and subsidzing individuals who pose higher risks, by paying premiums higher than those that are actuarially justified. (Apparently the first argument by the United States assumes that individuals who decline to purchase health insurance now will not have such insurance when they need medical care in the future or will not be able to pay for such care at that time "out of pocket."). It should also be noted that, actuarial considerations to one side, the insurance Congress hopes to force individuals to purchase will be over-priced, because Congress failed to take numerous steps that would have lowered the cost of medical care and also lowered the price of insurance. Such steps would have included preempting state certificate of need laws, allowing additional immigration of physicians, and repealing the McCarran-Ferguson Act, thereby reinstating the Federal ban on collusion between health insurance providers and eliminating otherwise unconstitutional state-created barriers to entry by out-of-state health insurance providers. Put another way, by failing to enact other, perfectly vaild federal legislation, Congress has itself helped to create the very economic conditions that supposedly justify additional (and unconstitutional) legislation.

According to Judge Hudson:

"This broad definition of the economic activity subject to congressional regulation lacks logical limitation and is unsupported by commerce clause jurisprudence." (See page 23).


"Of course, the same reasoning [by the United States] could apply to transportation, housing or nutritional decisions." (See page 23).


"Neither the Supreme Court nor any federal circuit court of appeals has extended commerce clause powers to compell an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market." (See page 24).

In other words, if courts accept the rationale for federal intervention offered by the government here, Congress would also have to power to compel individuals to purchase and eat more nutritional foods, to take vitamins, to purchase a treadmill and use it three times a week, and to get more sleep, all because an individual's failure to engage in such activities would have an impact on their future health care expenditures and thus, for this reason alone, be appropriate objects of Congressional regulation. As Judge Hudson rightly noted, no American appellate court has ever sustained national legislation on such a theory. Doing so would even further erode the boundaries that constrain what the founders and ratifiers meant to be a national government of limited powers.

As Judge Hudson himself put it:

"The unchecked expansion of Congressional Power to the limits [necessary to sustain the coverage mandate] would invite unbridled exercise of federal police powers.” (See page 37).

Judge Hudson also rejected the government's claim that the fine imposed for non-compliance with the mandate to purchase insurance was merely a revenue-raising tax, and not a penalty. If the fine is a tax, then it would be constitutional so long as it furthers the general welfare. According to Judge Hudson, "the notion that the generation of revenue was a significant legislative objective was a transparent afterthought." (See page 32). Moreover, he concluded that "the use of the term 'tax' appears to be a tactic to achieve enlarged regulatory license." (See page 33). Finally, after a careful review of the statute, he concluded that numerous features of the Act itself confirm that, unlike the actual taxes explicitly imposed by the law, the penalty imposed for non-compliance is not a tax. (See pages 33-36). In other words, Congress and the President now realize that the coercive mandate exceeded Congress's power under the Commerce Clause and have thus sought to recharacterize what had been conceived of as a penalty, inducing purchase of insurance, as a tax.

Of course, the United States will appeal Judge Hudson's ruling to the Fourth Circuit Court of Appeals and then, if necessary, to the U.S. Supreme Court. Hopefully the appellate judges who hear the case will keep in mind the following excerpt from the majority opinion of Chief Justice Charles Evans Hughes (pictured above), joined by, inter alia, Justice Brandeis, in Schechter Poultry v. United States, 295 U.S. 495 (1935).

"It is not the province of the Court to consider the economic advantages or disadvantage of such a centralized system. It is sufficient to say that the Federal Constitution does not provide for it. Our growth and development have called for wide use of the commerce power of the federal government in its control over the expanded activities of interstate commerce, and in protecting that commerce from burdens, interferences, and conspiracies to restrain and monopolize it. But the authority of the federal government may not be pushed to such an extreme as to destroy the distinction, which the commerce clause itself establishes, between commerce "among the several States" and the internal concerns of a State."