Tilting at Windmills

Obama talks only about creating permanent jobs, but he should not fear temporary jobs that can bridge the gap until private employers begin hiring again. Temporary jobs are exactly what Franklin Roosevelts CCC and the WPA provided.

This year, thank goodness, the Census should result in roughly 1 million temporary jobs. Another possibility is to give federal, state, and local governments the money to hire temporary employees to install storm windows and other devices to increase the energy efficiency of government buildings. Much of the work involved is not complicated and the modest skills needed could be quickly learned. The CCC proved that many valuable conservation functions can be performed without extensive training. Millions more could be hired to work in jobs such as teachers or nurses aides in public schools and public clinics and hospitals, for which they could be quickly trained and in which they could acquire skills leading to permanent employment.

I have long been fascinated by how certain words attain the status of “in” and then appear over and over in conversation and in writing for the next several years. Soon after I entered Columbia in 1946, it became clear to me that those who aspired to intellectual respectability had to learn to make frequent use of “ambiguity” and “dichotomy.” In the 1990s, “nuance” reigned supreme. It now seems to have been succeeded, at least among policymakers and commentators, by “robust.”

As I was preparing this column, I saw Ben Bernanke on CNBC endorsing “proprietary trading by banks.” That means that, in addition to accepting deposits and lending money as banks have traditionally done, they speculate on whether the price of a stock or a commodity or a currency or practically anything else will rise or fall. Remember Nick Leeson? He was the Barings Bank employee who provided an early warning of the trouble our own big banks would get into. He traded derivatives based on the Nikkei average. “What was a bank doing speculating on the Nikkei average?” we should have asked. Leeson made a series of bad bets and catastrophic losses quickly followed. And Wall Street, freed by the repeal of Glass-Steagall, proceeded to repeat Baringss mistakes.

Why not have banks stick to their traditional knitting? That was what the Glass-Steagall Act required until Lawrence Summers and Robert Rubin and Alan Greenspan got it repealed. Only Paul Volcker now speaks out in favor of separating trading from banking, and Summers has apparently succeeded in freezing him out of the White House.

Im glad to see that former Fed vice chairman Alan Blinder, writing in the Wall Street Journal, and Alec MacGillis, in the Washington Post, are calling for more stimulus in the form of more government jobs. Direct government employ worked in the 1930s to put more than 20 million people to work and, as I pointed out in our March/April 2009 issue, government can create jobs faster than the process Obama has followed of contracting out through private employers.

But “government cant do anything right” has become the view of far too many Americans, and it is Obamas fear of their criticism that keeps him from considering government employment as a way of dealing with the jobs problem. I, however, have had eighty-three years to observe government programs, and I can tell you that though some agencies are incompetent, other have proved themselves capable of truly amazing accomplishments. But people need to understand that agencies rarely stay good. They can start out doing great things but end up serving little besides their own bureaucratic self-interest. Recall the example of the Rural Electrification Administration that I mentioned several issues ago, which did such a remarkable job of bringing power and light to American farms during the 1930s but by the 1990s degenerated to financing country club improvements just to justify its continued existence.

Franklin Roosevelt understood this. Thats why when he wanted something done, he often created a new agency. The drive and idealism of new employees can do wonders. For example, FDRs Civil Works Administration put 4 million people to work during the winter of 193334. Between them, the Civilian Conservation Corps and the Works Progress Administration employed 11 million.

At various times during my nearly half century in Washington, the Department of Justice, the Securities and Exchange Commission, the Internal Revenue Service, the Federal Trade Commission, and the Food and Drug Administration, among many others, have performed extremely well. But indifferent or hostile presidents, inept oversight by Congress, and bureaucratic longevity have brought many of them down. The SEC, for example, had by the last decade become scandalously oblivious to its duties.

Having been part of a new agency and seen firsthand the miracle that could be worked, I pray that Obama will follow FDRs example. But first he must make several fireside chats explaining enough history of government to the American people to convince them that the Johnny One Notes who sing only the antigovernment song are just plain wrong. And he must make sure he has people on his White House staff who know how to make government work, and I mean the executive branch of government where policy is turned into action. The current White House is full of policy and legislative expertise, but not the knowledge of how to make a jobs program effective.

John C. Whitehead, a retired cochairman of Goldman Sachs, has called Wall Street pay levels “shocking.” Unfortunately, almost all of his former colleagues disagree. But I have a solution to this problem: make the tax on income derived from trading 50 percent higher than the tax on other income. Trading does not create or produce anything. Lets encourage bright people to do something else.

Did you know that, according to Adam Liptak of the New York Times, “prosecutors cannot be sued for anything they do during a trial including knowingly submitting false evidence”? I was trained as a lawyer and practiced in criminal courts for three years, but I was still shocked to learn about prosecutors immunity.

In one of the cases currently before the U.S. Supreme Court that occasioned Liptaks article, the issue is whether prosecutors can be held liable for pretrial conduct even if it includes “coaching and coercing a witness into giving false testimony.” The case is being brought against Iowa prosecutors by two former prisoners who had been freed by the Iowa Supreme Court when it concluded that same witness was “a liar and a perjurer.”

A promising indication of the kind of justice Sonia Sotomayor will be is provided by her comment during the argument in this case that “neither of the two prosecutors in this case were sanctioned in any way for their conduct.” She added that courts and bar associations rarely punish similar behavior by lawyers, clearly implying that a civil suit brought by the two former prisoners in Iowa is the only realistic way to bring about justice.

Heres another example of the mischief banks have gotten into after the repeal of Glass-Steagall. J. P. Morgan Securities, a branch of JPMorgan Chase, has agreed to pay $25 million to the SEC and $50 million to Jefferson County, Alabama, to settle a case in which it is charged with making what the New York Times describes as “unlawful payments to friends of Jefferson County commissioners in a scheme to win lucrative business from the county to sell bonds and trade in derivatives.” Italics supplied.

One place where more government employees are definitely needed is in the inspection and enforcement branches of almost every regulatory agency, whether it is regulating health, safety, or financial institutions. These functions, already shortchanged in 2001, were eviscerated by the George W. Bush administration.

Take just one recent example: job injuries are habitually underreported to the Occupational Safety and Health Administration, according to the Government Accountability Office. Obviously, OSHA needs more staff to find out what the true figures are. As for food safety, havent you read enough stories about contaminated meat, poultry, and vegetables to make you a little apprehensive about what youre getting at your local grocery store? A recent New York Times headline reported “E. Coli Outbreak Traced to Company That Halted Testing of Ground Beef.” Why had the company halted testing? Because, the Times reports, the grinding companies are pressured by slaughterhouses who fear inspections would “cause expanded recalls.” Pardon me, but arent recalls good if the meat is bad?

Once again recalling Columbia 1946, I remember the tuition was $225 a term. What a contrast with the outrageous cost of higher education today! In considering why that cost keeps rising faster than the rate of inflation, one possible culprit deserves more attention. It is the compensation of administrators and the growing size of administrative staffs.

The number of private college presidents earning more than $1 million a year doubled in 200708, according to a study reported by John Hechinger of the Wall Street Journal. As for the number of administrators, it has increased not only by the usual tendency of bureaucracies to grow but by the official or unofficial tenure often granted administrative staff. Those who prove incompetent or unneeded remain in their jobs anyway, often with annual pay increases.

To understand why Washingtons big shots dont feel the pain the recession has inflicted on the average citizen, it helps to know a little about the Bacara Resort & Spa near Santa Barbara, California, where Ben Bernanke recently went to speak at a conference sponsored by the San Francisco Fed. Suites can cost as much as $2,000 a night, according to Bacaras Web site, and “every one of the 311 rooms and 49 special suites is like the rest of the resort: luxurious, understated, intimate and relaxed. Every room features a private patio or balcony.”

After doing his duty in Santa Barbara, Bernanke flew to the Boston Feds conference at the Wequassett Inn on Cape Cod, where the in-season rate for a suite is a mere $2,800 a night. Its Web site, and Im indebted to the great Al Kamen of the Washington Post for his research on this entire story, describes it as “a secluded paradise for the discerning traveler.” It adds, “We could tell you we are quite simply the best resort on Cape Cod. But we wouldnt want to be guilty of understatement.”

“Education schools are hopeless. Heres how to fix them,” says a recent op-ed in the New York Times. The solutions mentioned in the article include making sure that the teachers know their subject and that they are effective in the classroom. Whats discouraging about this is that the Washington Monthly began preaching this gospel in our second issue, March 1969, almost forty-one years ago. We have, as with our other favorite causes, not hesitated to elaborate and repeat our case many, many times over the years. The net effect, however, has been close to zero because the power of these schools and their allies in state legislatures is great. But Barack Obama and Arne Duncan seem to understand the problem, so there is at least reason to hope we will finally see real action.

Yale and Harvard continue to prohibit ROTC programs on their campuses. This is an outrageous legacy of the excesses of the antiwar movement of the Vietnam era. It discourages a substantial group of brilliant young people from serving their country and encourages the growth of the gulf between Americas intellectual elite and our military, a gulf that is costly to both groups.

The FBI recently told the Senate Judiciary Committee that each day 1,600 people qualify for its “watch list.” The total number of people on this list is now 400,000. They make the list because an FBI “assessment” has deemed that there is a “reasonable suspicion” that they are terrorists or would help terrorists.

I find it hard to believe that the FBI is capable of making 1,600 such assessments in one dayor at least doing so intelligently. But, granted that they can, why are only 9 percent of those on the watch list also on the government “no-fly list”? I know that sounds crazy, but that is what the FBI has testified, according to the Washington Posts Walter Pincus.

On November 23, a Wall Street Journal headline reported that “Americans Seek Up to 7,000 Extra NATO Troops for Ramp-Up in Afghanistan.” But just a week before, the Journal reported something that cast considerable doubt on the usefulness of the NATO troops, assuming they are actually forthcoming. It seems that the German troops now in Afghanistan “dont like to go out at night.” Apparently, they assume that the Taliban consists entirely of nine-to-five clock watchers.

I was delighted to see Fox Newss Shepard Smith recognized by the Washington Posts media critic, Howard Kurtz. Smith deserves high praise for resisting his colleagues tendency to tilt the news to the right. I would also add that many, if not all, at CNN deserve credit for resisting the tendency to tilt in any direction. At MSNBC, I find myself agreeing with most of the opinions and acknowledge that there is much less outright lying than at Fox. Still, facts favorable to the conservative case are rarely emphasized and sometimes not even mentioned.

I was delighted to see a major media institution tell the story, oft repeated here, of the AARPs dependence on a health insurance company. Dan Eggen of the Washington Post reports that royalties from the AARPs selling of its endorsements have become “the primary source of revenue for the group.” And 63 percent of those royalties come from UnitedHealth Group. I can assure you that what this means is that, as long as the AARP endorses the White Houses health care bill, the Obama administration will do nothing to reform the Medigap policies endorsed by AARP that are UnitedHealth Groups main cash cow.

Seniors think these policies will cover the gap between doctors and hospitals bills and the amount actually reimbursed by Medicare. In fact, because of insurance company manipulation of the rules, these policies pay only the difference between “Medicare Authorized”a figure the determination of which is heavily influenced by the health insurance lobbyand “Medicare Pays.” That difference is occasionally substantial, but usually only a few dollars, meaning UnitedHealth Group is making a very substantial profit on the premiums.

As you may know, it has become all too common for prominent medical school professors to put their names on medical journal articles actually written by employees of pharmaceutical or medical device manufacturers. Senator Charles Grassley recently asked the top medical schools what they are doing to stop the practice. Duke replied, “Severe and/or repeated offenses will result in formal disciplinary action,” leaving us to guess what constitutes severe and just what the disciplinary action would beor, for that matter, why it would require repeated offenses to justify any punishment.

When asked if the schools saw any difference between the professors behavior and plagiarism by a student, the University of Pennsylvania said it did. It maintains, according to a paraphrase from Duff Wilson of the New York Times, that “students who plagiarize a paper may know nothing about the subject” while “faculty members who sign their names to ghostwritten papers for research credit usually have some agreement with the paper.” Unbelievable! How does the fact that the author has “some” agreement with the paper in any way justify his lying about its authorship?

“Perhaps [Obama] thought he was elevated to pass healthcarethey loved it in Iowa!but in fact it was the economic crisis that got him elected, is now our national preoccupation, and will be the solution of which (or lack of one) that determines whether hes re-elected,” notes Steven Stark in the Boston Phoenix.

Tough words, but I fear they are true. Stark got at something else in the same column that troubles me. It is that Obama has “never run anything before.” Hes gifted at inspiring us with his rhetoric but, Stark argues, “the hard, nitty-gritty labor of figuring out how government can actually work better seems to hold no appeal for him Put another way”and here Stark inserts a dangerous shiv between the presidential ribs”where are our flu shots?”

Im not sure Obama deserves blame for the swine flu problem, but he has appeared to me to be bureaucratically innocent, as the ineffective implementation of his program to aid those threatened with foreclosure has demonstrated.

On a lighter note, Im happy to report a solution. It is to a problem that I suspect most of us hadnt even thought of: doctors neckties. It seems that a study carried out at the New York Hospital Medical Center of Queens discovered that nearly half of physicians neckties carry bacteria that, according to Rebecca Smith of the Wall Street Journal, “could cause illnesses such as pneumonia and blood infections.” Smith, however, is not one of those reporters who frighten us with terrible problems but dont offer solutions. She reports that Dr. Robert Thompson has the answer to this knotty problem: he wears a bow tie.

There is a strong case to be made for Obamas Afghan policy. Pulling outor failing to escalateinvolves real risks. The case for escalation in Vietnam appeared even stronger in July 1965 with Lyndon Johnson enjoying much more congressional and public support than Obama does now. But, however good the arguments for a policy are, the question remains: Will it work? And to that the answer in 1965 was no, just as is my answer today.

If we could not create an effective South Vietnamese army after more than a decade of a greater effort than Obama now plans in Afghanistan, how can we expect to train an effective Afghan security force by July 2011 or any reasonable time thereafter? So far our training of Afghan soldiers has been a farce. An American trainer told the New York Times “[an Afghan] soldier does not have to master any task prior to graduating [from training]. Attendance equals graduation.”

During the Vietnam War, we made repeated attemptsincluding a CIA-sponsored coupto reform the South Vietnamese government. Exhortations and threats abounded year after year after year. But no real reform took place because the South Vietnamese leaders did not truly want it or were incapable of implementing it. There has been absolutely no sign that Karzai has the will or the competence to reform. What we should do now is exactly what we should have done in Vietnam in 1965start getting out. Above all stop risking the lives and the exposure to catastrophic injury for the handful of brave men who have been doing the fighting in Iraq and Afghanistan. Remember the actual number of Army and Marine combat troops is less than 100,000. Those people have been stretched to the limit and beyond.

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Charles Peters

Charles Peters is the founding editor of the Washington Monthly.