Reason Magazine - Contributors

Tony Snow:

info@reason.com (Shikha Dalmia) — Mon, 14 Jul 2008 12:00:00 EDT

I heard stories about Tony Snow's legendary charm long before I met him. But charm takes many forms and I wasn't prepared for his particular brand when we first had lunch in Rosslyn, Virginia, in 1995, several months after I joined the editorial page of the Detroit News, where he was then working as the D.C. correspondent.

Tony had not yet become a TV personality. And since I rarely tuned into the Rush Limbaugh show, where Tony subbed when the perennially enraged host was on vacation, my only direct familiarity was through his columns, where Tony was sarcastic, witty, and pulled no punches. He was like the Joe Frazier of column-writing: He hit first and he hit hard.

When we met, however, what struck me was how different he was from the persona portrayed in his columns. He was smart and funny, of course and—true to the picture that accompanied his column—very good looking. But there was no machismo, no attitude, not even an edge.

His most dominant characteristic was sweetness. Contrary to the impression I had formed from reading his columns, Tony's humor didn't function to smooth over some deep partisan edge. Instead, it served to leaven his innately gentle spirit.

Tony was openly conservative. But unlike Limbaugh, he did not regard those on the other side as his enemies. He assumed no malice or venality on their part. He could talk to them, reach out to them and—most importantly—learn from them. His attitude was of a sportsman, not a warrior. He wanted his side to win, and he played hard to do so, as his tenure as President Bush's press secretary amply demonstrated. But he always played fair, maintaining good will towards his opponents, never demonizing or denigrating them.

I saw him for the last time back in September, when I interviewed him for reason just a few days before he left his job as press secretary. And what was remarkable was how little he had changed over the years, especially after being part of an embattled administration. He had seen the administration through some bitter political battles, including the Iraq surge, the firing of federal attorneys by Alberto Gonzales, and immigration reform. He felt intensely about some of these causes, yet, at that time, they were losing in the court of public opinion. On the personal front, he was battling a recurrence of his cancer—and, as it turns out, losing that fight too. But there was no hint of disappointment or bitterness or even sadness in him. His positive spirit seemed completely undiminished.

I tried hard to draw him out through my questions, hoping that, given our old connection, he would level with me; perhaps allowing me to see his frustration with the White House, perhaps hinting at things that it could have done differently to make his job easier. He criticized the president plenty before he became his press secretary. Now that he had a front-row seat to the presidency—and given that he was no star-struck cipher—surely he would have some suggestions for improvement. But Tony wouldn't take the bait, even expressing minor irritation at my line of questioning.

As I walked past the Old Executive building, I wondered if it had been a mistake to conduct the interview while Tony was still in office. Perhaps he would have talked more openly if he had had time to put some distance between himself and the White House. So I watched his subsequent appearances on Jay Leno, David Letterman, and Jon Stewart to see if he revealed more about how he really felt about the Bush presidency. But his posture and position remained more or less unchanged.

It was as if being a part of the presidency hadn't made Tony more self-important, it had made him more humble. Having observed the administration from close quarters, he had come to appreciate the enormous weight that any president—even one far from stellar—has to bear. The act of dispensing advice under such circumstances would have been presumptuous, something that his unassuming nature would not allow.

During the tail end of our conversation, he mentioned that his future plans involved spending more time with his family—to whom he was utterly and completely devoted—and writing a book about his experiences in the White House. I don't know how much progress he made on the book, but I would confidently predict one thing: It will contain no tell-all expose, offer no scathing critique of the Bush administration like his predecessor, Scott McClellan, recently did in his memoir.

Many commentators have called Tony a great man, given his combination of talents and charm. But that isn't quite right. The way he conducted himself throughout his career and his life, especially the last year, suggests that he was something far rarer: He was a good man.

Rest in Peace, Tony.

Shikha Dalmia is a senior analyst at the Reason Foundation.

Scrap the Visa Cap

info@reason.com (Shikha Dalmia) — Mon, 07 Apr 2008 15:00:00 EDT

Writing in the Wall Street Journal, Shikha Dalmia advises Congress to pass pending legislation to scrap the cap on skilled worker (H1-B) visas. This cap is currently so low (65,000) that in April last year it got used up within a day of these visas becoming available, leaving thousands of left over engineers to be scooped up by America's competitors. America should worry less about keeping unskilled immigrants out—and more about keeping skilled immigrants in. Otherwise, it'll lose the race for the most crucial resource in the knowledge economy: intellectual capital.

Read this article at the Wall Street Journal.

Penalize Peter to Deport Pablo?

info@reason.com (Shikha Dalmia) — Wed, 02 Apr 2008 12:00:00 EDT

Reasonable people can disagree about the best solution to illegal immigration. But everyone can agree that, whatever the solution, it should not compromise the right of ordinary Americans to work. Yet that's precisely what a bill sponsored by U.S. Reps. Heath Shuler, D-N.C., and Tom Tancredo, R-Colo., would do.

Read the rest of the article at The Detroit News.

The New New Thing

info@reason.com (Shikha Dalmia) — Mon, 24 Mar 2008 15:00:00 EDT

Every year, there is a new green technology that triggers eager predictions that the days of gasoline-powered engines are numbered. Last year, it was lithium-ion batteries. The year before that, it was hydrogen fuel cells.

This year's buzz generator—a new biofuel developed by a small Illinois company called Coskata—holds genuine promise to become a cleaner and cheaper alternative to gasoline. But the fuel's efforts to achieve commercial viability will be hurt, not helped, if its well connected investors succeed in convincing the federal government to mandate a distribution infrastructure for it.

Coskata's backers include General Motors CEO Rick Wagoner and Sun Microsystem co-founder and venture capitalist extraordinaire Vinod Khosla. They want every gas station in the country to replace half of their gas pumps with special units known as E-85 pumps. E-85 is a blend that contains 85 percent ethanol and 15 percent gasoline. Like diesel, it must be pumped through a different system than conventional gasoline.

Most ethanol in the United States is produced from corn, but Coskata says that it has found a way to generate ethanol from woodchips and other biomass at potentially half the cost of gas and a third the cost of corn-based ethanol. What's more, it has done so without any research subsidies that many other alternative fuel ventures get. This is especially impressive since such "cellulosic ethanol" has to date been more expensive than corn-derived ethanol. That's because the sugar in corn is relatively easy to extract, while that in wood chips and other raw materials for cellulosic ethanol is hard to reach because it is protected by a rigid cell wall. Breaking down this cell wall has been prohibitively expensive. Until now, that is.

Coskata's breakthrough involves a new thermal process that gasifies biomass (and, in the future, potentially even rubber tires and petroleum coke) to produce something called syngas, a mixture of carbon monoxide and hydrogen. This gas is then fed to Coskata's patented cocktail of five bacteria that turn it into ethanol. Using this method, Coskata says, it can generate more ethanol from less feed and water than corn-based techniques.

Coskata's fuel has a number of other advantages over corn-based ethanol. Since corn doesn't grow everywhere, corn-generated ethanol generated has to be transported. Given ethanol's corrosive and volatile nature, this can't be done through existing oil pipelines. So it has to be hauled in trucks, which adds to its costs (not to mention related greenhouse gas emissions). This is one of the main reasons why the energy-adjusted average price of E-85, whose main ingredient is corn-based ethanol, is currently around $3.53 per gallon-despite a 50-cent per gallon federal tax subsidy for producers. This is still 20-30 cents higher than the price of gas right now when it is at a record high.

What's more, diverting corn for fuel has the undesirable effect of raising food prices. Higher corn prices lure farmers to grow corn over other produce, bumping up prices of fruits and vegetables. Meat-eaters are effected, too, since corn is a major component of livestock feed. Because Coskata's fuel can be produced anywhere, from any sort of plant, it avoids these drawbacks.

Impressive though Coskata's technology is, its market success will ultimately depend on offering pump prices that are about 25 percent lower than gas, since ethanol contains 25 percent less energy than gas. Coskata is confident the pump price of its fuel will be somewhere between 50 cents to $1.00 lower.

But that range spans the difference between market success and failure. Assuming average annual gas prices of $3.00 per gallon, a 50-cent saving won't be enough to compensate consumers for the lower energy content of ethanol-much less offset the $20,000 to $200,000 that gas station owners would have to spend to install ethanol tanks and pumps. Savings of $1.00 might do the trick, but that will require Coskata, which plans to produce 40,000 gallons of fuel by the end of the year, to develop a highly efficient production process.

But its incentive to do so will be vastly diminished if the federal government delivers it a ready market by forcing ethanol on gas stations. This might allow Coskata to capture some market share now, but over the long run its fuel will have a harder time becoming a sustainable alternative to gas, especially if gas prices drop. It will also be less able to compete with foreign ethanol if the federal government slashes tariffs on the stuff. That's a real possiblity, despite the powerful farm lobby, given the interest in promoting greener alternatives to traditional gasoline.

Khosla—an IT revolutionary turned ethanol evangelist—is fully capable of understanding such market realities. He told CNN Money some years ago that he believes in making only small investments in startup companies because too much cash breeds over-confidence and thwarts experimentation. "The right way to build a company is to experiment in lots of small ways, so that you have plenty of room to make mistakes and change strategies," he noted. That's precisely what a guaranteed market for Coskata will prevent it from doing.

It's widely recognized that the government is inept in directing subsidies to market winners. Consider three quick examples: In the 1970s, the federal government pumped hundreds of millions of dollars to develop thermal solar technologies as an alternative to the photovoltic cell. Three decades later, there is nothing even close to being commercially viable. The government also pumped billions of dollars into developing liquid fuel from coal to cut down on our consumption of Middle Eastern oil—another total bust commercially. More recently, in 2003, George W. Bush pumped $1.3 billion into a "Freedom Car" that would run on hydrogen-powered fuel cells. Four years later, the Freedom Car is not even close to being commercially viable and the enthusiasm for those fuel cells has considerably waned.

Ethanol's backers maintain that a government mandate to convert half of all pumps to ethanol is necessary because the major oil companies won't let gas stations install E-85 pumps. But this is a bogus claim. Federal laws, including the most recent energy legislation, prohibit gas station owners and oil companies from discriminating against ethanol. The real reason why stations don't carry ethanol is that it simply does not currently offer the returns to offset the thousands of dollars needed to make them ethanol-ready—much less make up the losses from oil sales.

There's no question that government intervention through taxes, regulations, and subsidies has distorted energy markets and provided oil companies with an unfair advantage. So it is not surprising that even a self-made billionaire such as Khosla with a promising new fuel on his hands should think it's right to demand government help. (Actually, he does this quite often, including last year when he attempted unsuccessfully to convince California voters to impose new taxes on oil to fund research into alternative fuels.) However, mandating a distribution infrastructure for ethanol would take government intervention in energy markets to a whole new level. Worst of all, it will make even promising new companies such as Coskata less able to innovate in a real, ultimately self-sustaining way.

If Coskata's fuel can make it without market-distorting subsidies, it will. The best thing that Washington can do for the company—and, more important, for consumers—is to ignore GM and Khosla's demands.

Shikha Dalmia is a senior analyst at Reason Foundation, a Los Angeles-based, free market think tank.

Saying No to CoerciveCare

info@reason.com (Shikha Dalmia) — Mon, 04 Feb 2008 14:58:00 EST

One week ago, California Gov. Arnold Schwarzenegger's "universal" health-care plan was shot down by a committee in the state's Senate, 7-1. The most vociferous opponents were not fiscal conservatives, but labor unions that launched a last-minute revolt against its most crucial feature: an individual mandate that would have forced everyone to buy coverage.

This defeat has national political implications. Hillary Clinton, for example, has denounced Barack Obama for refusing to include an individual mandate in his health-care plan. Yet many California unions argued that a mandate would force uninsured, middle-income working families to divert money from more pressing needs toward coverage whose price and quality they cannot control.

The unions are correct: This is exactly what is happening in Massachusetts, where Mitt Romney enacted a similar plan two years ago as governor. (And Mr. Romney's plan is the inspiration for both the Schwarzenegger and Clinton plans.) The experience in the Bay State deserves a lot more scrutiny than it has been getting.

Massachusetts uses a sliding income scale to subsidize coverage for everyone up to 300 percent of the poverty level—or a family of four making around $60,000. Everyone over that limit is required to pay for their own coverage if their employers don't provide it. All this has inflated demand, which, combined with onerous regulations on insurance suppliers, has triggered premium increases of 12 percent for this year—double last year's national average.

No one is escaping the financial sting. The state health-care bill for fiscal 2008-2009 is expected to be $400 million more than originally projected—an 85 percent increase. Still the state won't be able to full shield those it subsidizes from the premium increases. But uninsured folks who don't qualify for government help really get pounded. Before the hike, the cheapest plan for uninsured couples in their 50s cost $8,200 annually. Now, unless government bureaucrats hand them an exemption, they might well find it cheaper to pay the penalty—up to half the price of a standard policy—than purchase insurance. That is, pay to remain uninsured. This is legalized extortion: TonySopranoCare.

The government response to rising premiums is, unsurprisingly, price controls. The Commonwealth Health Insurance Connector Authority—the bureaucracy created to oversee RomneyCare—is considering prohibiting underwriters from raising premiums more than 5 percent for unsubsidized plans, meanwhile requiring them to cover 40-odd benefits from hair prostheses to chiropractic services. If companies can't scale back coverage, they'll have to compromise care; and the Connector is perfectly willing to assist.

As reported in the Boston Globe, the Connector is encouraging insurance companies to include only a limited network of cheaper physicians and facilities in some plans to hold down premiums. Patients who wish to see more expensive providers will have to dig into their own pockets. Dr. Steffie Wollhandler, a professor of medicine at Harvard University, worries that the Connector will revive Gov.
Romney's original idea of enrolling poor people in plans that only offer access to neighborhood health centers ill-equipped to treat anything beyond routine ailments. Forcing people to buy substandard care they cannot afford is not universal care, she says. "It is a hoax." And so Massachusetts is marching toward a system of two-tiered medicine—the alleged market inequity that universal care is supposed to cure.

How about enforcing the mandate? In Massachusetts, non-compliers lose their personal tax exemption—about $220—the first year, followed by fines in subsequent years.California was planning to garnish the wages or impose liens on the mortgages of the uninsured to pay for coverage. "This bill was like telling someone who is in need of help, 'I'm going to give you food, but I'm going to take away your clothes," Leland Yee, a Democratic senator from San Francisco, told the California Chronicle.

The problems with RomneyCare have prompted Mr. Romney himself to abandon it. And Mr. Obama is surely correct that part of the reason 45 million Americans are uninsured is not that no one is forcing them to buy it, but that they can't afford it. It may be too much to hope that Mr. Obama would embrace market-oriented measures—such as deregulating insurance markets, giving patients more control over their health care dollars, and fixing the federal tax code to let individuals, like employers, buy health coverage with pre-tax dollars—to bring down insurance costs. But unlike Mrs. Clinton, he at least seems to understand the perverse side effects of an individual mandate.

Should Hillary Clinton ever be in a position to bully people into buying coverage, a coalition of labor and fiscal conservatives might well do to HillaryCare what it just did to GovernatorCare.

Shikha Dalmia is a senior analyst at the Reason Foundation. This article originally appeared in the Wall Street Journal.

Legacies of Injustice

info@reason.com (Shikha Dalmia) — Tue, 19 Feb 2008 12:00:00 EST

College-bound high school students do not always lose their chastity before graduation, but they certainly lose their innocence. Nearly every senior who has gone through the admissions mill can recount stories of peers with outstanding academic records—class valedictorians with stellar SATs and perfect GPAs—who were passed over by top colleges while others with far more modest credentials got the nod. The New York Times reports that Harvard turned down 1,100 applicants with perfect 800s on the math SAT this year. Yale rejected several with perfect 2400s on the three-part SAT exam. Princeton said no to thousands with 4.0 GPAs.

To many frustrated parents, one word de-scribes the admissions process at America’s elite universities: arbitrary. But that’s not the word admissions officials use, as I discovered two summers ago when I toured a dozen or so East Coast campuses with my son, a high school junior at the time. Asked what kind of grades and scores made kids competitive for their schools, officials in university after university insisted, as if reading off the same memo, that the review process was “holistic,” “comprehensive,” or “individualized.” Grades, we were repeatedly told, “are only one among many factors we consider.”

Another such factor is race. Nearly every selective college, public and private, gives a sizable edge to underrepresented minorities. Before the U.S. Supreme Court outlawed the University of Michigan’s undergraduate admissions criteria in Gratz v. Bollinger (2003), the school relied on a complicated rating system that awarded points for several personal and academic factors, including skin color. Black and Hispanic candidates automatically got 20 points. A great essay counted for only one point; a perfect SAT score, a mere 12.

But as Justice Clarence Thomas observed in his dissent in a companion case, race is not the only factor that distorts college admission decisions. “The entire [college admission] process is poisoned by numerous exceptions to ‘merit,’ ” he noted.

The Wall Street Journal’s Daniel Golden exposes those other exceptions in his 2006 book The Price of Admission. Golden shows that elite schools routinely hand preferences to athletes; to the children of faculty, celebrities, and politicians; to “development cases” whose fabulously wealthy parents offer hefty donations up front; and, above all, to the offspring of alumni. Universities expect the parents of these “legacy” candidates to contribute to their coffers after their children are admitted.

Robert Birgeneau, chancellor of the University of California at Berkeley, told Golden that at one Ivy League school only 40 percent of the seats are open to candidates competing on pure educational merit. According to a 2005 study by the Princeton sociologists Tom Espenshade and Chang Y. Chung, in 1997 nearly two-thirds of all these non-race-based preferences at elite universities benefited whites, even though whites comprised less than half of all applicants that year.

We have a vigorous national movement to eradicate racial or minority preferences, at least in public universities. In 2006 Michigan became the third state in the country after California and Washington to approve a ballot measure imposing a constitutional ban on the use of race in admissions at state-run schools and in government hiring decisions. And this year the author of all those bans—Ward Connerly, a black California businessman—is stepping up his crusade. He has launched petition drives in Oklahoma, Missouri, Colorado, Nebraska, and Arizona to put similar measures before voters in November.

But there’s no comparable effort to get rid of legacy preferences. Even more troubling, many prominent opponents of racial preferences greet suggestions to get rid of legacies, the mother of all preferences, with a perfunctory nod—or a gaping yawn.

It shouldn’t be that way. Legacy preferences are the original sin of admissions, the policy that fundamentally compromises fair, merit-based standards. Universities can’t in good conscience tip the admission scales for the more privileged and then ask the less privileged to compete solely on merit. What’s more, eliminating race while keeping legacies will make the admissions process less fair, not more fair, because it will open up minority slots to competition by whites but not vice versa.

Legacy preferences are an especially terrible idea for tax-supported public universities, since they make it possible for rich, white, and less qualified kids to take seats that are at least in part supported by the tax dollars of poor, minority families. Private schools, of course, should be free to admit whomever they want, and it is therefore tempting to ignore their use of legacies. But there are few genuinely private schools in America anymore, thanks to the enormous amount of federal funding they accept. And setting public policy aside: Just as a matter of propriety, should there be room for legacies at institutions that market themselves as bastions of meritocracy? The use of legacies by the Harvards, Yales, and Princetons of the world dilutes the standards of excellence they pretend not merely to uphold, but to embody.

Who Cares About Legacies?
With only a few exceptions, both the right and the left have ignored legacy preferences. Sen. John Edwards (D-N.C.) has promised to do everything in his power to end legacy admissions if he becomes president. But for the most part liberals have picked up the anti-legacy mantle only in retaliation against efforts to eliminate racial preferences. Local activists forced Texas A&M and the University of Georgia to abandon legacy preferences, for example, after these universities stopped using race in admissions. Otherwise, liberals seem quite willing to tolerate legacies, presumably because they make it easier to advocate countervailing preferences for their favored groups.

Given that dynamic, you might expect the opponents of racial preferences to go on the offensive against legacy preferences. But if liberals have been opportunistic about legacies, conservatives have been paralyzed.

In part, that’s because they’re genuinely divided on the issue. Ward Connerly, like Justice Thomas, regards legacies as a fundamental violation of a fair, merit-based standard. He prodded the University of California, where he is a regent, to abandon them in 2000, four years after California voters banned racial preferences. But Terry Pell, who heads the Center for Individual Rights (CIR), the outfit that engineered the lawsuit against the University of Michigan’s race-based admissions, has never fought against legacies. Neither has Stephan Thernstrom, who has co-authored several books attacking racial preferences. “Legacy is a far more complicated issue than race,” insists Thernstrom, who once served on Harvard’s admissions committee.

Conservatives in Pell and Thernstrom’s camp argue that racial discrimination is in a class apart, given this country’s history of slavery and segregation. What’s more, they say, legacy preferences are just not as big a problem as racial preferences, quantitatively speaking. Further, they produce huge benefits for universities that racial preferences don’t. Above all, to the extent that legacies are practiced by private rather than public universities, there are no easy or desirable legal cures that aren’t worse than the disease.

The last argument is their most powerful one, but it is hardly grounds for ignoring the issue. There are ways to address the issue of private universities’ legacy preferences—and racial preferences—that don’t involve lawsuits or government action. But the other arguments for why legacies aren’t a public policy problem are simply disingenuous and suffer from the same ideological blind spots that afflict defenders of racial preferences.

A Small Problem?
Legacy preferences, like racial preferences, are repugnant because they reward not individual virtue or accomplishment, but an accident of birth that has no relevance for a college education. Moreover, just because they aren’t linked with an egregious history of racial abuse does not justify turning a blind eye to them. India has a far uglier record of discrimination by caste than race. Yet no one would argue that it ought therefore to concentrate only on eradicating caste discrimination and treat race as a non-issue.

It is true that the use of legacies is mainly limited to undergraduate programs in the more selective public and private schools. Racial preferences, on the other hand, pervade every aspect of every school—from undergraduate and graduate admissions to faculty hiring and promotion. Moreover, according to a 2007 paper by Princeton’s Douglas S. Massey and Margarita Mooney of data from 28 elite universities, while 77 percent of minorities had standardized test scores below the institutional average, about 48 percent of legacies did. In rare exceptions, such as Middlebury College, legacies actually scored higher than the institutional average.

How far below average do those legacies and minorities score? It’s impossible to get up-to-date, nationwide data on the subject, given the universities’ secrecy, but the late psychologist Richard Herrnstein and the social scientist Charles Murray reported one telling piece of information in their 1994 book The Bell Curve. In 1990, the average student admitted to Harvard scored 697 on the verbal SAT and 718 on the math section. By comparison, legacies scored 674 on verbal and 695 on math—a 47 point difference. Combined minority scores hover at about 100 to 150 points below the institutional average.

What’s more, even when universities lower admission standards for legacies, they don’t lower them as much as they do for minorities. As mentioned before, the Michigan point system used to award 20 bonus points to under-represented minorities—the equivalent of boosting a 3.0 GPA to a 4.0. By contrast, it handed only four points to children of alumni.

But such statistics don’t tell the full story. Given how intense the competition is for the nation’s most selective schools, even seemingly small differences in scores translate into significantly higher rates of acceptance for legacies over “unhooked” candidates—admissions lingo for those who don’t qualify for any preferences.

According to the October 1996 Brown Alumni Magazine, 40 percent of legacy applicants were accepted to Brown University, as opposed to 19 percent of the total applicants. The Office of Civil Rights similarly found in 1990 that children of alumni were twice as likely to be accepted at Harvard over more qualified students who did not get legacy or athletic or any other preferences. And a study by the Center for Equal Opportunity, a Virginia-based think tank, found that at the University of Virginia, after controlling for test scores, grades, and other academic credentials, a legacy candidate had 4.3 times higher odds of admission than non-legacy applicants in 1999.

Universities claim that legacy status is never a major or decisive factor in their admission decisions. It’s only used, they say, as a tie-breaker among otherwise comparable candidates. That’s what they claimed about racial preferences too, and that turned out to be false. Indeed, it is hard to really know how much weight universities award to legacies given their stubborn refusal to reveal their admissions data or even talk about their admission policies. (University of Michigan officials, for instance, declined repeated requests to discuss this issue.) But why do legacies deserve any edge, big or small?

Racial preferences, at least originally, were meant to remedy discrimination—both historic and current—against blacks. What is the justification for favoring the offspring of Harvard, Yale, and Princeton alumni? Unlike many inner-city kids, they grow up in families with a strong pro-education ethos. They have access to the finest public or private high schools in the country. Their parents can spring for tutors, standardized test preparation courses, and even consultants to help them write essays and complete their college applications. “These are kids who grow up with every privilege,” notes Connerly. “They don’t deserve any additional advantage.”

Moreover, though the policy of using legacy as a “tie-breaker” among equivalent candidates sounds innocuous, it has perverse consequences for one group in particular: Asian Americans. Asians don’t benefit from racial preferences because they are not considered underrepresented minorities. And they don’t benefit from legacy preferences because they tend to be the children of first-generation immigrants. Espenshade, the Princeton researcher, found that while legacy and athletic preferences offset the effects of racial preferences on whites, they compound them for Asian Americans.

According to Espenshade’s regression analysis of data from a dozen selective colleges, on a 1600-point SAT scale, being black and Hispanic adds up to an advantage of 230 and 185 extra SAT points respectively. The preference for legacies translates into an edge of 160 points. By contrast, being Asian American represents a 50 SAT-point disadvantage.

The CIR’s Pell, however, argues that the legacy problem is “self-correcting.” Racial preferences have become so ideologically embedded that universities will never abandon them unless forced to by courts or voters, Pell maintains. But as the ethnic mix of the broader population changes so does the composition of the student body. A generation later, then, so will the composition of the beneficiaries of legacy preferences.

But the problem with legacies is not that they never adjust to shifting demographics. It is that they slow the process of adjustment. Legacy policies protect groups that are already in, at the expense of those that are trying to break in.

Practical Benefits?
Conservatives pride themselves on being sensible realists, not starry-eyed utopians eager to stamp out every form of social injustice regardless of consequences. This tendency partially explains their squishiness on the legacy issue. On the one hand, they don’t dispute that legacy admissions border on institutionalized nepotism—rewarding children for the accomplishments of their parents and relatives. On the other hand, enforcing a strict merit-based standard seems a tad fanatical given all the practical benefits of legacy policies for universities.

One purported benefit is that legacies are an important source of funding for universities. Not only do more legacies donate to universities, they donate in greater amounts. For instance, according to the Cavalier Daily, the University of Virginia’s student newspaper, 65 percent of legacy parents contributed to the university’s 2006 capital campaign, compared with 41 percent of non-legacy parents. Moreover, legacy parents on average coughed up $34,759 each whereas non-legacy parents gave only $4,070.

All in all, legacies alone account for over 30 percent of the private donations to most elite colleges. “If mild preferences to legacy students allow universities to maximize their income, is that so objectionable?” asks Thernstrom.

Without such donations, universities claim, they could not invest in high-quality faculty and facilities and remain competitive. Even more important from the standpoint of social justice, universities say they couldn’t maintain need-blind admission policies. These policies allow colleges to admit students purely on academic grounds—and then offer financial aid to anyone unable to afford the roughly $50,000 per year it costs in tuition and living expenses to attend a top-notch university these days. Without legacy contributions, such aid would supposedly become more difficult, and elite campuses would truly become playgrounds of the rich.

But Thernstrom and Pell don’t buy arguments from social utility when it comes to racial preferences. Like other conservatives, they insist that universities that want to help inner-city minorities need to find race-neutral ways that don’t selectively dilute academic standards for some groups. Nor do they believe that the educational benefits of a diverse student body are real or big enough to justify giving minorities a leg up.

Yet they uncritically accept the business and social case for legacy preferences. And it is far from clear that universities lack “legacy-neutral” tools to—as Thernstrom puts it—“maximize their profits.” They could conceivably rake in more money by auctioning off a certain number of freshmen seats every year to the highest bidders. But elite universities would never entertain a scheme like that, because it could cost them their “elite” reputations. It would expose precisely how much they are diluting their admission standards for how many and for how much. This kind of information would erode their aura of selectivity—the very thing that makes them attractive to legacies and everyone else.

Connerly, after spending years on the University of California board, is not convinced that alumni will stop contributing to their alma maters if their kids don’t get preferential treatment. Indeed, as Golden noted in The Price of Admission, Caltech is able to tap alumni money without offering any edge to their children. For instance, Caltech in 2001 obtained a $600 million pledge—the largest gift in the history of higher education at the time—from Gordon Moore, cofounder of Intel, neither of whose two sons attends the university. Caltech’s commitment to high standards and excellence is a core part of its sales pitch to raise money from alumni and non-alumni alike.

Golden offers other examples, albeit isolated ones, of schools that have built sizable endowments through business strategies that don’t rely on legacy preferences. Cooper Union, a highly prestigious and selective art school in New York that offers a free education to everyone admitted, for decades lived off income generated through its investments in real estate. Berea College, a small college in Kentucky exclusively targeted toward low-income kids, has accumulated a startlingly large endowment by making its progressive credentials a selling point to potential donors: It is the South’s first inter-racial, co-educational college and was founded by an abolitionist minister. Its mission is to educate and uplift impoverished Appalachian families.

Legacy money doesn’t seem to boost the presence of low-income kids on elite campuses by subsidizing their educations, either. The schools that get the most legacy money—Harvard, Yale, and Princeton—are among the worst when it comes to the economic diversity of their students. In his 2005 book The Chosen: The Hidden History of Admission and Exclusion at Harvard, Yale and Princeton, Berkeley sociologist Jerome Karabel reported that among the top 40 schools, Princeton and Harvard are ranked at 38th and 39th, respectively, when it comes to such diversity, and Yale 25th.

For a contrast, look at Caltech. It is the nation’s most meritocratic private university that eschews all preferences, and it is among the 10 most economically diverse schools. Nor is it hard to understand why. Admissions are a zero-sum game with many candidates vying for a finite number of seats. The crucial determinant of economic diversity on campus therefore becomes not how much largesse legacies expend on poor kids but how many seats they take away from them.

If elite colleges were serious about offering equitable access to genuinely talented students, they could find business models that don’t involve legacy preferences. If they have not done so, it is because the government won’t—and market forces can’t—hold them accountable.

Is There Any Rationale for Legacies at Public Schools?
The core mission of taxpayer-funded public universities is not to conduct research, promote economic growth, or correct broader social problems. It is to expand higher education opportunities. That, at any rate, is what the general public believes: Respondents in a 2003 survey conducted by The Chronicle of Higher Education overwhelmingly picked “offering a general education to undergraduates” as the top priority among 21 different roles that public universities could play.

Taxpayers perceive different public universities as fulfilling this educational mission in different ways. They regard land-grant universities as catering to rural kids, urban universities to commuters who can’t live on campus, community colleges to students not served by traditional four-year colleges.

There is something problematic, even oxymoronic, about the very idea of “elite” public universities whose doors are by definition shut to the vast majority of taxpayers who fund them. If they must exist, they should exist to serve academically gifted kids. Thus the only defensible admission policy for these universities is one that allows all gifted kids an equal shot at admission.

This is precisely what legacy and other preferences don’t allow. They reduce the fate of applicants to the discretion of admissions bureaucrats, eliminating clear-cut standards applied equally to all. Preferences replace the rule of law with the rule of men.

There are no good legal tools to mount court challenges against legacies in either public or private universities. The Constitution requires public entities to award everyone “equal protection under the law.” But when a student tried to use this guarantee to mount a legal challenge against legacy preferences, she failed: In Rosenstock v. Governors of University of North Carolina (1976), an out-of-state applicant who was denied admission to the University of North Carolina argued that preferential treatment for in-state residents and children of alumni violated her right to equal protection. The court ruled that the state had no compelling interest in barring discrimination on the basis of alumni status, even at a public university.

But if the courts can’t or won’t ban legacy preferences, state voters certainly can. The simplest way to do so would be to append them to Connerly’s ballot initiatives banning “race, gender, color, ethnicity, and national origin” preferences. Even the CIR’s Pell acknowledges that it would be entirely appropriate for state voters to ban legacy preferences at public universities.

Connerly considered doing just that when drafting Proposition 2, the ballot amendment that banned racial preferences in Michigan in 2006. But he ultimately dropped the idea, he says, because constitutional amendments ought to be reserved for things that are “sacred for now and forever.” He wasn’t sure that alumni preferences were in that category.

But a further reason, some people close to Connerly admit, was that including legacies risked alienating whites in addition to blacks, making it harder to pass the initiatives. Strategically, it made more sense to deal with the two issues separately, reserving the ballot amendment process for race while looking for other ways to address legacies. Yet beyond Connerly’s own personal crusade against what he calls “fat cat preferences” at the University of California, there has been almost no action on a national level against legacies.

If voter bans against legacies won’t work, another way to force public universities to adhere to a stricter version of merit might be by requiring them to post—and adhere to—straightforward admission criteria like universities elsewhere in the world do.

For instance, Oxford, one of Britain’s most prestigious universities, states unambiguously on its website precisely what scores and grades applicants need in order to gain admission. U.S. kids, it notes, need a combined SAT score of 2100 or a composite ACT score of 32 to 36—comparable to what kids from England, Wales, Scotland, and Ireland need. In order to remain true to its mission of creating an intellectually rigorous academic environment, Oxford, at least on paper, maintains the same admission standards for British students as for applicants from elsewhere. By contrast, it is accepted practice for elite American public universities to lower the bar for in-state students. To the extent that the tax contributions of the parents of these students fund the universities, they certainly deserve a break over out-of-state students. But that break ought to only involve lower tuition fees, not lower standards.

Openly publishing admissions criteria ensures transparency in the admissions process and serves as a sort of guarantee to prospective students that those who score below these minimum requirements won’t be admitted ahead of those who do.

Connerly could use the contacts and machinery he has built in various states in the course of pursuing his anti–racial preferences amendments to push admission reform laws requiring public universities to set open and objective admissions standards. Universities will no doubt wail about the loss of academic freedom. But the rule of settled and transparent laws is no loss to freedom. It would only hem in the discretionary power of bureaucrats who wield it in an arbitrary way to offer access for their own self-serving purposes.

What About Market Forces?
There is a strong civil libertarian argument against applying such laws to private universities. Such schools ought to be allowed to admit whomever they want for whatever reason they want, as part of their right of voluntary association. Some schools might exercise this right for pernicious ends. But just as tolerating odious speech is essential for the sake of protecting broader freedoms, so, arguably, is tolerating odious forms of voluntary association.

This thinking has restrained conservatives from challenging racial preferences at private schools, even though they have powerful legal tools to do so. For instance, Title VI of the 1964 Civil Rights Act bars racial discrimination by any school that receives federal funds—a category that includes practically every private university given the ubiquity of federal research grants, scholarship aid, student loan guarantees, and countless other forms of direct and indirect financial assistance. Yet Michael Greve, former executive director of CIR, told the ABA Journal some years ago that his organization had no plans to go after private universities for racial preferences—a policy that his successor, Terry Pell, also adheres to. If Harvard, Stanford, and Yale want to discriminate for any reason, Greve said, that’s their business.

It is conceivable that laws requiring public universities to set open and objective admission standards might help trigger industry-wide change, including at private schools. But why hasn’t the higher education industry reformed its own admission practices? The market appeal of Harvard, Yale, and Princeton rests on the impression that getting through their door puts you in a league of intellectual superstars. If these schools dilute their standards—if they turn away incandescent intellects in favor of the merely bright with good family connections—how are they still able to maintain their luster? In a functioning marketplace, you would expect more Caltechs to emerge: Elite schools that market their uncompromising adherence to standards of excellence to snag students interested in being part of a true meritocracy. In the process, they would force Harvard and others to either reform their admission practices or relinquish their niche.

So far, instead of elite schools losing their niche, smart kids are losing their shot at an elite education. “Higher education is the only industry that is rewarded for turning away customers,” observes Richard Vedder, an economist at Ohio University.

There are both demand and supply reasons for this peculiar state of affairs. The demand for colleges with established reputations is artificially inflated, notes Vedder, because of the absence of any meaningful metrics of educational quality, leaving students with nothing but the prestige factor to go by. Meanwhile, instead of accommodating this demand by expanding their supply, colleges have every incentive to ignore it: Their ranking in the annual U.S. News and World Report college ratings depends in large part on their “selectivity”—on what percentage of applicants they reject.

U.S. News’ near-exclusive focus on inputs rather than outcomes when ranking universities perverts the admissions process in an even more direct way. One of the factors in its ranking is the extent of alumni giving, which is supposed to indicate alumni satisfaction with the education they received. Though this sounds reasonable, in practice it hands universities one more incentive to dole out more legacy preferences to shake down its alumni—and avoid a search for less compromising fundraising alternatives.

If market forces seem unable to hold elite universities accountable, it is because prospective students don’t have good information about their educational outcomes to truly gauge whether these colleges are worth six figures. “Competition succeeds only to the extent that customers…can define success in some legitimate way in order to establish a standard and reward those who best achieve it,” Derek Bok, Harvard’s president from 1971 to 1991, has noted. “In education, at least at the university level, this ability is lacking.”

So what did Bok—whose wife, the philosopher Sissela Bok, has written an entire book decrying institutional secrecy—do to make more information available to “customers” as Harvard president? Nothing. In fact, he tenaciously resisted repeated calls to reveal Harvard’s admissions and other data.

Bok’s reaction is typical. In 2003, Sen. Ted Kennedy (D-Mass.) tried to pass a mandate requiring both public and private universities to reveal their admissions data and show how many legacies they were admitting. Political pressure from universities killed the plan. Earlier this year, they opposed the recommendations of a commission convened by Education Secretary Margaret Spelling. The commission wanted all universities to report, among other things, their graduation and retention data.

Vedder, an ardent free-market advocate who served on that commission, is sympathetic to concerns about extending the government’s reach into private universities. But he also argues that these universities are only nominally private, given the enormous amount of federal research subsidies and student aid they receive. “If we are going to drop planeloads of money to these universities,” he asks, “why is it unreasonable to require them to report some basic information?”

Can Meritocracy Prevail?
Universities resist not just outside efforts to force more transparency, but also efforts from within the industry itself. Over the last decade, two serious efforts have emerged in the higher education marketplace to measure “outcomes”—the quality of education that colleges provide. In 2000, the Pew Charitable Trust and Indiana University launched the annual National Survey of Student Engagement (NSSE), which polls students about their college experience and, based on this feedback, ranks each college against its peers. Meanwhile, the Council for Aid to Education has developed the Collegiate Learning Assessment survey (CAL). While the NSSE measures only subjective student opinions about their college experience, the CAL actually offers extensive exit exams to students to measure what they have actually learned.

Making information about student satisfaction and learning available to consumers might revolutionize the way they make decisions about colleges. But elite colleges, having little incentive to have their reputation questioned by actual data, have refused to participate in either survey.

America’s fundamental promise is that individuals ought to control their destiny through hard work and talent, not arbitrary accidents of birth. Legacy preferences are no less damaging to this promise than racial preferences. Those who oppose race as a factor in admissions but ignore legacies open themselves to accusations of inconsistency and hypocrisy. But, worse, to the extent that they succeed in dismantling race while leaving legacies intact, they risk putting in place a less—not more—fair admissions system.

As their battle against racial preferences heats up this year, they need to open another front against legacy preferences. The U.S. Constitution and courts do not offer ready weapons for the new battle. But that hardly justifies laying down arms without a fight.

There are plenty of ways at the state level to stop the use of legacies at public universities, from constitutional bans to state mandates requiring more transparent admission policies. Government can’t ban private universities from using preferences, legacy or racial or any other, without running afoul of the Constitution. But that doesn’t mean that moral suasion can’t be used to prod them toward fairer admissions policies. Public outrage recently forced Harvard to give up its early decision program. The program, which overwhelmingly benefited the rich and connected, effectively lowered the bar for students who applied early and promised to accept its admission offer.

Most of all, we need policies to strengthen market accountability. We need to end the cartel-like character of the higher education industry, where private universities can keep consumers in the dark about their admission practices and educational product and still charge exorbitant prices without worrying that a competitor will emerge to challenge their market dominance with a cheaper and better product. An honest and straightforward recognition of the dangers of legacy preferences will go a long way toward bringing about such reforms.

Shikha Dalmia is a senior analyst at the Reason Foundation.

Hercules in New York

info@reason.com (Shikha Dalmia) — Fri, 04 Jan 2008 16:00:00 EST

New Yorkers should rejoice that the Environmental Protection Agency last week slapped down California's request to write its own fuel-economy rules to combat global warming. Gov. Spitzer had vowed to follow the lead of California's Arnold Schwarzenegger—so if the "Governator" had prevailed, New Yorkers would have seen their wallets and their cars shrinking.

New York (with more than a dozen other states) has historically adopted California's standards for tail-pipe emissions—requirements notably tougher than federal standards. Since 1970, the Golden State has regularly won the right to set tougher-than-the-feds clean-air rules because it needed more drastic standards to address its acute smog problem. The feds have granted other states with similar air-pollution issues the option of choosing California's rules.

But following California on fighting smog is far different from copying it on combating global warming, as Spitzer has declared he'd do.

Smog has local causes—and local health effects. It produces higher rates of asthma, emphysema and other respiratory ailments; these can be addressed by reducing local emissions of smog-causing gases, such as ozone and sulfur dioxide.

But global climate change is, obviously, a global issue - its causes and effects simply aren't localized in the same way. Its impact on particular communities is a vast unknown - and there are no local remedies for it.

California's proposed fuel-economy standards became especially redundant after President Bush signed the new energy bill into law last week. This will require automakers to raise their fuel-economy standards by 40 percent—to an industry-wide average of 35 miles per gallon—sby 2020.

Schwarzenegger doesn't agree; he's threatening to sue the EPA to overturn its decision. His rules would force automakers to bump up their fuel efficiency 23 percent by 2012 and 30 percent by 2016—the equivalent of 33.8 mpg.

This is an impossible task. The federal standards will be tough enough for automakers to deliver without compromising on space, safety, power and (above all) low prices—all things that consumers value more than gas mileage. There is simply no technology now available that can combine everything that consumers want with the stipulated gas mileage. If there was, automakers wouldn't need a mandate—they'd run, not walk, to put it on the market.

But why are California's goals so much tougher, even though the federal rules allow just four more years to another 1.2 mpg? Because cars have a long production cycle—models now in the planning stage won't be available until 2014.

So there's simply no time to come up with new designs that will do the job. That means the only way automakers could comply with California's deadline is by withholding from consumers the higher-emission vehicles they want in states that insist on it.

In other words, they'd have to pull the vast majority of their vehicles from those markets, not only SUVs and light trucks, but even most sedans.

Consider Toyota, the darling of the greens: It now makes maybe two vehicles—manual-transmission Yaris and hybrid Prius—that meet California's standards. Toyota's Camry, the top-selling car in America, gets only 25 mpg in combined city and highway driving.

Indeed, the net effect of the California standard would be to impose either small compacts or hybrids on all new-car buyers—even though hybrids costs $3,000 to $5,000 more than their non-hybridized versions and have a much shorter lifespan.

The few New Yorkers who prefer expensive, hybrid vehicles—or tiny subcompacts—wouldn't feel the pinch of the California rules. But hybrids make up only about 1 percent of New York's (and the nation's) auto purchases. By contrast, about half of New York motorists drive light trucks such as SUVs, minivans and pick-ups—compared with 53 percent nationally. And if you exclude Manhattan, New York's share of light trucks is actually higher than the national figure. (In parts of Upstate, it's close to 60 percent.)

It's not hard to understand why so many New Yorkers pick these gas-guzzlers over sedans with better gas mileage. Suburban families with kids love SUVs for their spaciousness and superior safety record. (Several national studies have confirmed that SUVs are responsible for 2,200 to 3,900 fewer auto deaths every year.) And certain types of light trucks are particularly suitable for winter driving in Upstate's hills.

Perhaps more important is the simple fact that cramming New Yorkers into smaller, more expensive and less safe cars wouldn't do anything about global climate change.

Many climate scientists agree: Even if the whole world adopted a 45 mpg fuel-economy standard, global temperature would drop by only five-hundredths of a degree Fahrenheit by 2100.

And James Hansen—a Columbia University climatologist and a global warming worrywart—has admitted under oath that subjecting the whole country to the Schwarzenegger standard wouldn't bring any measurable cut in global temperature.

Schwarzenegger seems determined to cast himself as Don Quixote in the unfolding drama of global warming. Spitzer would be foolish to play Sancho Panzo in that futile battle.

Shikha Dalmia is a senior analyst at the Reason Foundation. This article originally appeared in the New York Post.

Benazir Bhutto's Political Future

info@reason.com (Shikha Dalmia) — Mon, 31 Dec 2007 11:08:00 EST

Shakespeare famously wrote in connection with the assassination of the great Roman emperor Julius Caesar: "The evil that men do lives after them, the good is oft interred with their bones." The exact opposite might turn out to be the case with Benazir Bhutto. She was an exceedingly flawed figure whose death, ironically, might contribute more toward her goal of turning Pakistan into a secular democracy than her life.

There is little doubt that under President Pervez Musharraf, the military general who assumed power in a bloodless coup in 1999, Pakistan has become both less secular and less democratic. His support for the U.S. in its battle against Islamic terrorism has become a huge obstacle to secularism in Pakistan. It has antagonized Islamic fundamentalists and he largely acquiesced to their demands—even ceding territory to them in the northwest frontier provinces—to prevent them from destabilizing his regime. At the same time, he has resorted to ever more draconian tactics to suppress dissidents—such as the chief justice of Pakistan and lawyers' groups—who have questioned his political legitimacy. All while cashing in mountains of U.S. dollars in post-9/11 aid. These moves have deeply antagonized Pakistan's moderate and urban intelligentsia and fuelled widespread anti-American sentiment. More to the point, it has made it more difficult for Pakistan to reverse course and move toward democracy.

The great hope both in Pakistan and the U.S. was that Bhutto, as the leader of the closest thing to a genuinely liberal party in the country, the Pakistani People's Party (PPP), would unify Pakistan's secular forces ahead of the January elections and then win a voter mandate to beat back religious fundamentalists not just in mosques but in the nation's intelligence and armed services.

This was not a baseless hope. A former prime minister, Bhutto was a charismatic and courageous figure who, despite having spent the last eight years in exile in England, retained a strong following in Pakistan. Educated in the West, she was the only candidate in the upcoming elections who was making the case for fighting radical Islam—not in the name of a more moderate religion, but of the rule of law. Her pledge to respect the country's constitution, restore the separation of powers, and protect the political rights of ordinary citizens was a central part of her platform.

But articulating the case for a secular democracy is not sufficient for actually producing one. It requires political leaders of the right timber. And, it is doubtful that, in the end, Bhutto had what it takes. Indeed, the biggest obstacles to the creation of functioning democratic institutions in Pakistan, as in other emerging nations, are corruption and ambition. Bhutto had both, in abundance.

Her two stints as prime minister from 1988 to 1990 and 1993 to 1996 were corrupt even by Pakistani standards. She made her husband a cabinet minister and gave him free rein to use his position to bequeath favors on businesses for kick-backs, a practice that earned him the sobriquet of "Mr. 10 percent." Both times her administration collapsed amidst corruption scandals, which did much to pave the way for a takeover by Musharraf, who justified his dictatorial rule as necessary to clean house.

But Bhutto's overweening ambition was potentially even more of an obstacle to democracy than her corruption. She belonged to the political equivalent of the Rockefeller family. As the oldest and most brilliant of the four children of Zulfiqar Ali Bhutto, a flamboyant and populist prime minister who was hanged by his successor, she sincerely believed that she was the only legitimate heir to her father's political legacy. She bickered bitterly with her brothers and her mother over the leadership of the PPP, the party founded by her father. One of her brothers, who challenged her role in the party, was gunned down by the police outside his home while she occupied the prime minister's office. Soon after, she summarily deposed her mother as the president of the PPP and gave herself the position for life. "I had no idea I had nourished a viper in my breast," her mother wailed at the time. If Bhutto could not set aside her ambition for the well-being of her family, it is doubtful that she would have done so for the sake of democracy in Pakistan.

Yet her death might contribute more to that end than if she had actually won a third term. The perception that she martyred herself to rid the country of its jihadist reactionaries will force moderately religious opponents to at least pay lip service to her secularist convictions. Al Qaeda's possible involvement in her assassination will discredit Islamist parties that are already viewed as little more than fronts for extremist groups.

Equally important, her assassination will produce some unique and powerful benefits for her party that will greatly help the democratic process in Pakistan. The PPP will get a huge sympathy vote in the next election (even as it moved to contest their timing this weekend). More crucially, however, her murder allows the PPP to move beyond being an extension of the Bhutto family. The party has chosen Bhutto's teenage son—a student at Oxford who has had only minimal contact with his country growing up—as its president (and her husband as its co-chair). But given that her son's political talents are untested and his experience non-existent, the party has also declared that, if it wins the elections, it will name Makhdoom Amin Fahim, the current party vice president, to be the next prime minister of Pakistan. This is a very encouraging development.

Fahim is widely regarded as a decent, progressive, and measured man who is every bit as secular as Bhutto. He had hitherto eschewed the job of prime minister because he did not want to cross swords with her. He lacks Bhutto's charisma and dynamism, but that won't be a problem for him this time because of the sympathy vote his party will draw. Bhutto's death, over time, will allow the PPP to shed her family's domination, while at the same time use its name to maintain continuity and coherence.

This is precisely what happened in neighboring India. After the assassinations of Prime Minister Indira Gandhi in 1984 and of her son Rajiv seven years later, many feared that their party, Congress (I), would never recover. Much like the PPP, for nearly 40 years, Congress (I) had been synonymous with the Gandhi name. Without a viable and visible Gandhi left to represent it, it seemed likely that the party would enter the political wilderness, never to return. Instead, over the years, Congress (I) forged a new arrangement with the Gandhi family that has allowed it to harness the clan's political capital while casting a much wider net for political talent. This has allowed Congress (I) to offer India two stellar prime ministers, including the current one, who became the architects of the country's economic liberalization.

The same thing might happen in Pakistan. Bhutto's assassination could well liberate her party from her flaws and give her country the push it needs to realize her vision. If that happens, Bhutto's most important legacy might still be ahead of her.

Shikha Dalmia is a senior analyst at the Reason Foundation.

The Tony Snow Show

info@reason.com (Shikha Dalmia) — Sun, 23 Dec 2007 09:58:00 EST

According to Karl Rove, ex-White House press secretary Tony Snow is to his former post what Mick Jagger is to rock stars (Rove meant it as a compliment). During his year-and-a-half-long tenure with the Bush administration, The New York Times congratulated Snow for "reinventing the job with his snappy sound bites and knack for deflecting tough questions with a smile." Snow even won plaudits from Daily Show host Jon Stewart, who told the one-time Fox News Channel host, "I really respect you as a person and I like what you bring."

How did Tony Snow—a 52-year-old movement conservative brought on board by a conservative administration to revive a conservative agenda—win over the liberal media? One answer is his deep-seated modesty, which made him serious even as it protected him from self-seriousness. He was able to put aside his own agenda and go to bat on behalf of an embattled president without appearing disingenuous, even though he had made mocking the president a daily sport in his previous job as a Fox News radio commentator and newspaper columnist.

In fact, Snow's daily briefings with the White House press corps—a crusty and confrontational bunch whom he called his "customers"—were so full of his patented brand of repartee that they were dubbed "The Tony Snow Show." During one such briefing last year, Helen Thomas, the curmudgeonly 86-year-old correspondent for the Kings Feature Syndicate, launched into a soliloquy chastising the administration for failing to stop Israel's invasion of Lebanon. Snow patiently waited until she finished, then smilingly thanked her for offering "the Hezbollah view" of the issue and moved on to the next question.

Snow has been battling colon cancer for several years and cited the need to make more money as the main reason he stepped down as press secretary. Just before he left the White House in September, Snow sat down in his West Wing office with Reason Foundation senior analyst Shikha Dalmia, his former colleague on the editorial board of the Detroit News from 1996 to 2000, for an interview about his experiences as press secretary. Comments can be sent to react@reason.com.

reason: How did you enjoy this job?

Tony Snow: I loved it. It's really been the most fun job I've ever had. This White House really operates more smoothly than any I've ever seen. A lot less back-stabbing, a lot more collegiality.

reason: That's contrary to what Robert Draper reports in his biography of the Bush presidency, Dead Certain. He said there was a lot of tension between President Bush's senior advisor Karl Rove and senior counselor Dan Bartlett.

Snow: Dan and Karl worked in close quarters for many years. They had a meeting every day with the president. The idea somehow that there was open warfare between the two of them is overdrawn. They cooperated very well. Are people going to have tensions? Of course. We have conversations and discussions where people disagree pretty vehemently when they're talking in front of the president. But the president ends up making the call and then everybody goes along with it. So perhaps he misconstrued the way the White House operates as dysfunctionality.

reason: Is it true that the president really only likes to hear from people who agree with him?

Snow: This is wrong. That's just wrong.

reason: Especially when it came to the Iraq War, Draper says George W. Bush didn't even consult his father, the former president, because he knew his father wasn't going to agree.

Snow: There were a number of occasions when we brought in scholars and outsiders to discuss Iraq policy and the president participated fully. I guarantee you on that: Draper is just flat-out wrong. People like to draw a caricature of the president as lacking curiosity. The fact is he's one of the most aggressively curious people I've ever known.

reason: There's a strong sense, borne out by action or the lack thereof, that the president is impervious to his critics. So for a long time, people had been telling him that the Iraq war wasn't going well, but he was not listening.

Snow: The critics quite often have criticisms but they don't have recommendations. The new narrative is that somehow the Iraq war has been a failure for a long time and that everybody knows that it's been a failure for a long time. The period when Iraq went sour was from the bombing of the Golden Mosque in Samara in February 2006 until really the surge in 2007. Fifteen months, maybe? During that time, by June 2006, the president had already taken a good, fresh look. The National Security Council that involves both the State Department and intelligence agencies had done a review and the plan for the surge was laid out in the State of the Union address in January and rolled out from February through June. And it's producing results. I think what you've seen is the president actually responding pretty nimbly.

reason: So what has fed the idea that Bush is stubborn and unwilling to admit his mistakes?

Snow: I'm not sure. What often happens is that people ask these open-ended questions, "What mistakes have you made?" But that's gratuitous. The president makes mistakes. Everybody here constantly evaluates this. But when somebody asks a question like that, it's not because they want a balanced response, they want to write a gotcha piece. The president's job is not to sit around and put himself on a couch.

reason: Run through how the messaging works in this White House. If a particular story or disaster breaks, how does the White House decide what it is going to say about it?

Snow: This is not like some previous administrations where people are running around with talking points. You're not going to find—I guarantee you—people using exactly the same phrase because that's not a very convincing way to do public diplomacy. What you've got to do is allow people to speak honestly in their own words. You've just got to do it in a way that is not jarring or inconsistent with what the president is saying. The last thing you want is somebody saying, "Tony Snow said this." I once said that embryonic stem cell research is murder. That was giving my views, not the president's. And so I had to step back and say, "You know what, I gave my opinion."

reason: One of the curious things about your tenure was that you got consistently high marks on your performance from people all over the ideological map. Your approval rating, so to speak, is high. But the president's rating has remained where it was when you took office. Or worse. At various points, it's approached Nixonian levels.

Snow: People have a natural anxiety about the war and that gets visited on the president. But he does not descend into self-pity. He understands the importance of developing public support but he also understands that if, for the sake of getting a slightly better numbers in some public opinion poll, he backed away from Iraq in some dramatic way and the long-term result is that this country is less secure, nobody 25 years from now is going to care about what the public approval ratings. They're going to say, "Why didn't you do your job?"

reason: Are you saying that if a president's policies are unpopular, there's not much that a press secretary can really do to change public perception? How do you see your own contributions to the White House?

Snow: My job is to answer questions pretty much. And to try to make sure that we get the administration's view out. Consider the surge in Iraq: There has been recently some pretty significant change in the public perception about Iraq. That's because the press office has tried to communicate the good news there. But ultimately we live in the reflected glory of the president.

reason: Has press bias contributed to the negative public perception about the president and the war?

Snow: It's clearly a factor. If you went out and gave every reporter a truth serum and asked them if they were Democrat or a Republican, you'd find out that most of them are Democrats. Reporters don't deliberately try to carry the water for political parties but sometimes they don't see your side of the argument. So it's incumbent upon a press secretary to make sure that they do see your side and quite often that is a long-term project. Again, take the case of Anbar. Now it is accepted wisdom that things have changed in Anbar for the better. Four months ago it wasn't. When things started changing, you'd hear the press say that there are no guarantees. It took time, but you have to be persistent.

reason: How do you think the president's relationship with his base has changed over the last year?

Snow: I think he goes up and down. What's interesting is that a lot of people got very skittish about the war and then all of a sudden, what you've seen in the last month is this sense of reassurance because the surge has been working, and there is a sigh of relief. There was a lot of tension over immigration, but if you take a look at the numbers in terms of base Republican support, they're pretty high. If you disaggregate the data, his numbers with the base are about the same as Ronald Reagan's.

reason: The support for the president among Republicans is running at 65 percent [as of the interview]. But according to polls, fewer people identify themselves as Republicans now than before President Bush began his second term. So has the president driven people out of the Republican Party?

Snow: No. Democratic numbers have fallen, too. If you take a look at people's natural party affiliation, that's fallen off dramatically. We've had a really volatile political period where party loyalty has fallen off on both sides on the left and the right. In some ways, this is an artifact of [the McCain-Feingold campaign finance laws] because what that did was it reduced the power of the national political parties. You don't have that ability to kind of create this sort of operational coherence that you used to have.

reason: You had been extremely critical of the president before you became press secretary. You made a lot of negative statements about the president, called him a "cipher" on domestic policy, a "classic dime-store Democrat." His policies haven't changed, but your estimation of him has changed quite a bit. Why?

Snow: Well, a couple of things. One is when you get to see somebody in action you get a different view, totally different. Also, we haven't had a lot of the issues on which I was critical that have arisen since I've been here. For instance, on an issue like immigration that I was really passionate about, he took on a lot of Republicans and I'm very proud of what he was doing. When it comes to the war, he's been incredibly steadfast in the face of a lot of people who would like him, really for the sake of polling reasons, to change the way he conducts the war. During my time, it's come down to a handful of key issues such as energy, education, immigration and retirement reform. On all of these, the president didn't do half measures. He's pushing for the right things—regardless of whether he accomplished them or not. I'm fully confident that over time immigration and retirement and all those things, those are the right policies and we'll end up with them.

reason: How has the advent of new media such as bloggers complicated your job as press secretary?

Snow: Not much. I've been a little bit surprised because I've always been an advocate of blogs but, at this juncture, they don't affect things too much. The interesting thing about blogs is that they tend to be serial. They get into an issue and really dig into it, hit it hard. Then they play a very important role, but, on a day-to-day basis, story-to-story, they don't have much of an impact.

reason: Do you wish you could have stayed longer?

Snow: Yeah, sure. I'd love to be able to stay to the end. But my wife and I had known for a good six or seven months that this wasn't possible. I'm sure I'm going to go through intense withdrawal.

Shikha Dalmia is a senior analyst at Reason Foundation.

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Indira and the Islamists

info@reason.com (Shikha Dalmia) — Wed, 14 Nov 2007 15:10:00 EST

The Bush administration has so far taken only perfunctory steps to prod Pakistani President Pervez Musharraf to lift "emergency rule," reinstate the constitution and hold elections. Doing anything more, the United States seems to fear, might produce an Islamist victory at the polls—and undermine a key ally in its war on terror. In effect, the old foreign policy bogeyman of the "fear of the alternative" is back in the White House.

But at least with respect to Pakistan, this fear ought to be banished. If anything, the longer Mr. Musharraf is allowed to suspend democracy, the more politically powerful Pakistan's religious extremists are likely to become. Those who doubt this thesis should peer across Pakistan's southern border and examine what happened during India's two-year flirtation with emergency rule in 1975.

Like Mr. Musharraf, India's then Prime Minister Indira Gandhi declared emergency after a state high court invalidated the elections that had brought her to power, on grounds of corruption and fraud. But instead of stepping down, she gave herself extraordinary powers and launched a massive crackdown on every democratic institution that India had painstakingly built since its independence from the British in 1947. She threw leaders of opposition parties behind bars and clamped down on the press, threatening to cut off the power supply to newspapers that refused to submit to her censorship. She also banned political activity by grassroots organizations.

Shutting down these institutions had a perverse side effect from which India's secular democracy has yet to fully recover: It left the field of resistance open to Hindu extremist groups such as the Rashtriya Swayamsevak Sangh (RSS) and its then political front Jan Sangh, allowing them to regain the political legitimacy they had lost after one of their erstwhile recruits assassinated Mahatma Gandhi. The RSS was banned shortly after the assassination, but once the ban was lifted, it decentralized its organization further, making it harder for authorities to keep track of all its activities. The RSS maintained a public face of a charitable social organization, but beneath that facade lay a more sinister side that engaged in communal sectarian incitement and other subversive activities.

The RSS's quasi-underground character proved to be a vital asset after Gandhi choked off all regular channels for political organization. Unlike the other parties, Jan Sangh was quickly able to mobilize the nationwide network of RSS's "shakhas," or highly disciplined cadres, and take over the mantle of resistance. It temporarily suspended its ideology of "Hindutva," or Hindu nationalism, to make common cause with what it dubbed the "second struggle for independence." It played an important role in producing and disseminating underground literature chronicling Gandhi's excesses, publishing speeches by her opponents and reaching out to families of arrested dissidents.

The upshot was that once the emergency was lifted and elections called, Jan Sangh declared itself the savior of Indian democracy—a boast that its successors like the Bharatiya Janata Party still make—and won a prominent place in the coalition of secular parties that ultimately defeated Gandhi. This alliance collapsed in less than two years, thanks in no small part to Jan Sangh's sectarian demands. Nevertheless, as New York University Professor Arvind Rajagopal has noted, this brief stint in power proved an invaluable launching pad for the group's virulent ideology and did lasting damage to the country's commitment to secularism.

Indeed, although Gandhi, like her father, Jawaharlal Nehru, was an ardent secularist, after she returned to power she assiduously tried to build her Hindu bona fides, even accepting an invitation by a Hindu fundamentalist group to inaugurate the Ganga Jal Yatra, an annual event under which Hindus gather in a show of unity and collectively march to the mountains to get water from the holy Ganges river. Gandhi's gesture was significant because it legitimized the use of Hindu symbolism for political mobilization, something that subsequently produced immense tensions and ugly confrontations among Hindus and Muslims.

A similar political mainstreaming of radical Islamist groups might occur in Pakistan if Mr. Musharraf is allowed to prolong his power grab. In fact, the situation could be worse, given that, unlike India, Pakistan has never been a secular country and Islamists have always exerted considerable behind-the-scenes influence on government. They have infiltrated the Pakistani intelligence services and are well represented in the ranks of the civil bureaucracy. And there has always been close cooperation between Pakistan's generals and mullahs because of their common interest in cultivating Pakistan's Islamic identity and playing up the threat that Hindu India poses to it. The one government institution where Islamists have only a minority presence is the Pakistani Parliament.

But that might change if Mr. Musharraf continues to postpone elections and crush political opponents. Under such circumstances, Jammat-e-Islami (JI), Pakistan's oldest religious party with ties to the Taliban -- and an organization that harbors a long-standing desire to impose Shariah, or Islamic law, on the country -- and its sister organizations might well become useful to secular parties such as former Prime Minister Benazir Bhutto's Pakistan People's Party. JI and its cohorts command even bigger powers of mobilization than Jan Sangh did during India's emergency. They run madrassas, or religious schools, publish newspapers and have sizeable cadres that can be quickly deployed for street protests. These resources might prove vitally important in resisting Mr. Musharraf.

"Instead of the secular and religious parties working against each other, they will start working together," fears Prof. Hasan-Askari Rizvi of Punjab University in Lahore. Indeed, the Associated Press has already reported that Ms. Bhutto is inviting the Islamist parties, many of whose members too have been thrown in jail, to "join hands" with her. All of this will allow the Islamists to mask their real agenda and piggyback on a popular cause to win more representation in parliament when elections are held. Even if secularists like Ms. Bhutto prevail in these elections eventually, it will be much harder for them to resist Islamist demands if they are beholden to them for beating back the emergency. In effect, the Islamist reach will not only gain in depth—but legitimacy as well.

If Mr. Musharraf were prodded to call off the emergency and honor his commitment to hold genuinely free and transparent elections in early January, would that lead to an Islamist victory, or at least significant gains, as the Bush administration fears? Not at all.

Islamist parties had their best showing in the 2002 general elections, when they secured 11.1% of the vote and 53 out of 272 parliamentary seats—a major gain over the pathetic three seats they won a decade before. But this gain was less serious than it seems. Most of the additional seats came not from Pakistan proper, but a few border provinces in the West that were experiencing a resurgence of anti-Americanism given their deep cross-border ties with the Taliban in Afghanistan. More crucially, however, Mr. Musharraf banned Ms. Bhutto and leaders of other secular parties from running, making it hard for these parties to secure a decent voter turnout. If free and fair elections were to be held today, Prof. Rizvi estimates secular parties would win handily, with the Islamists commanding no more than 5% of the national vote.

Islamist victory at the polls is not a real threat in Pakistan right now. The Bush administration should not allow that fear to deter it from applying maximum pressure on Mr. Musharraf to hold elections posthaste. The U.S. can, for instance, threaten to cut off Pakistan's supply of F-16 fighter jets and other nonterrorism-related aid.

India's example shows that even one vacation from democracy can be a huge setback for secularism. Yet another prolonged suspension of democracy will leave Pakistan few resources to beat back its Islamists. This is one instance where the Bush administration's avowed commitment to democracy is not just the more principled—but also the more practical—way of countering the threat of Islamic extremists.

Shikha Dalmia is a senior policy analyst with the Reason Foundation.

Lessons from Abroad

info@reason.com (Shikha Dalmia) — Wed, 31 Oct 2007 12:57:00 EDT

Read this column in the Chicago Tribune.

Going Protectionist Over a Fantasy Highway

info@reason.com (Shikha Dalmia) info@reason.com (Leonard Gilroy) — Mon, 24 Sep 2007 06:30:00 EDT

The U.S. is known for its "paranoid style" of politics, so brace yourself for the next Big Scare coming down the pike (literally) -- the Trans-Texas Corridor. Isolationist conservatives, emboldened by their jihad last year against the Dubai Ports World deal, have identified this road project as the spearhead of a conspiracy to dissolve the United States of America.

The corridor is a proposed two-phase project meant to ensure that the Lone Star State has the transportation infrastructure necessary to handle the growing international commerce coming across the border. The 1994 North American Free Trade Agreement has doubled U.S.-Mexico trade, three-fourths of which flows through Texas. And the movement of goods through the state is expected to increase exponentially in the near future as Asia routes more exports through the newly expanded Panama Canal.

Texas awarded a planning contract in 2005 for the first phase of the corridor to Cintra, a Spanish multinational company, and its San Antonio partner, Zachry Construction. (Cintra also won a $1.3-billion contract last year to build a 40-mile extension of Highway 130, a state toll road connecting Austin to San Antonio that was conceived separately from the corridor, although conspiracy activists claim otherwise.) The first 600-mile section, planned to include such features as tollways, freight-rail and truck-only lanes, will run parallel to the cramped, north-south Interstate 35 from the border town of Laredo to Oklahoma. Construction contracts for that portion haven't been awarded.

The second phase of the corridor, whose planning contract has yet to be handed out, would build a similar highway from the western edge of the Mexico border to east Texas. This might one day link to a separate, federally initiated eight-state expansion of Interstate 69, which currently runs between Port Huron, Mich., and Indianapolis.

This is all too sinister for Jerome Corsi, the Vietnam War veteran who helped lead the Swift Boat charge against John Kerry. Corsi has knitted disparate strands of each of these separate road projects to help convince fellow xenophobes such as Pat Buchanan, Phyllis Schlafly, Lou Dobbs and the John Birch Society that the corridor is the first leg of a secret federal project called the NAFTA Superhighway, a four-football-field wide monstrosity that would run from Mexico's Yucatan to Canada's Yukon.

Never mind that I-69 originated in a 1991 federal transportation law -- pre-dating NAFTA -- and that the planning for the Trans-Texas Corridor has been fully documented on the Web.

Yet even Texas Rep. Ron Paul, a libertarian Republican candidate for president, has fallen for the paranoia. You'd think that Paul would be chanting hosannas to anything that facilitates free trade, but he too fears that the "superhighway" is part of a scheme by foreign companies to erode U.S. borders and create a North American Union combining the United States, Mexico and Canada -- complete with a single government and a common currency called the "amero."

Superhighway opponents regard even routine dialogue between the three neighbors as a treasonous assault on U.S. sovereignty. They are apoplectic about the Security and Prosperity Partnership of North America (SPP), a forum created in 2005 for bureaucrats to discuss such radical topics as how to snag terrorists before they enter the continent and how to speed up cross-border traffic for just-in-time deliveries.

All of this could be dismissed as the paranoid rantings of a protectionist fringe -- except that it is beginning to have a tangible negative effect on public policy.

Montana's Legislature this summer overwhelmingly passed a resolution condemning the superhighway and any union of the three countries, and 18 other states are considering similar legislation. El Cajon Republican Rep. Duncan Hunter successfully amended the 2008 Transportation Appropriations Act to prohibit use of federal funds for any SPP working group. Virginia Republican Rep. Virgil H. Goode Jr. has introduced a House resolution against both the mythical superhighway and the fantasy union.

After the Dubai Ports debacle, in which anti-terrorism hysteria forced Congress to thwart the transfer of U.S. port management leases held by a major British ports operator to a company based in Dubai, the atavistic idea that foreign investment erodes American sovereignty is back into vogue.

Hunter, for instance, has added hoops to the review process that foreign bidders for U.S. companies must go through to prove that they're not a national security threat. This limits the pool of buyers for U.S. companies, thereby lowering their value and the value of 401(k) plans that invest in them. Hunter has also extended the review process to foreign companies vying to build "critical infrastructure." Should his definition include transportation projects, state governments would be deprived of crucial capital and knowledge to modernize their infrastructure.

The paradox of protectionism is that it damages the very thing it seeks to protect. Labor unions, for example, almost killed U.S. auto and steel companies by helping erect barriers against foreign companies, which made domestic products globally noncompetitive. But the impact of today's isolationists threatens to affect the entire economy. If unchallenged, these ideologues of fear will kill the United States' prosperity in the name of protecting its sovereignty.

Shikha Dalmia is a senior analyst and Leonard Gilroy is a senior policy analyst at the Reason Foundation.

All Politics, No Principle

info@reason.com (Shikha Dalmia) — Tue, 28 Aug 2007 06:00:00 EDT

President Bush came into office promising to fix the country's broken immigration laws that, he said, were preventing willing American employers from hiring willing foreign workers. Nothing could be further from this vision than the employer crackdown that his Department of Homeland Security recently announced.

Why has the administration so totally reversed course?

It is not like it does not understand that the "problem" of illegal immigration is purely a function of existing immigration laws, not "evil doers." These laws don't exactly roll out the welcome mat for high-skilled immigrants that California's Silicon Valley badly needs. But they are downright hostile toward "unskilled" workers who form the backbone of the agricultural, landscaping and hotel industry in the Golden State and elsewhere.

On paper, there are two types of visas available for unskilled workers: H-2A for campesinos, or farm workers, and H-2B for other seasonal jobs. But thanks to copious red tape, these visas rarely ever arrive on time for the job. Even worse, they are usually good for less than a year and can only be renewed a few times. Once they expire, workers have to return home because neither they, nor their employers, can apply for a green card or permanent residency. Such a dead-end process leaves workers no choice but to work illegally.

The White House tried to get Congress to pass comprehensive immigration reform with a guest worker component to create a way for future foreign workers to legally live and work in this country—and also regularize the status of undocumented aliens already in the country. But GOP nativists—aided by conservative talk radio and some Democrats - killed the bill as "amnesty," insisting instead on a tough, enforcement-only approach.

The Homeland Security Department's employer crackdown effectively embraces their approach. In 30 days, the Social Security Administration (SSA) will start sending letters to employers alerting them to any discrepancy in the Social Security numbers their employees are using and government records. Employers who discover that employees have given them false numbers—something that undocumented workers often do—will be required to fire them within 90 days—or face up to $10,000 in fines per employee. Repeat violations could bring jail time.

Michael Chertoff, the Secretary of Homeland Security and the architect of the crackdown, noted that the SSA expects to send 140,000 of these "no-match" letters covering more than 8 million people. But how precisely any of this will enhance national security, the core reason why his department exists, he has yet to explain. Does he really believe that Al Qaeda operatives are holding jobs illegally and will drop their plans to scurry for the border once these letters start rolling in?

This crusade won't improve national security, but it will disrupt the economy. To the extent that it succeeds in slowing the tide of foreign immigrants, it will cause labor shortages and raise prices of produce—and other goods and services in immigrant-dependent industries. California employers, especially farmers, will be among the worst hit given that they employ 2.5 million illegal immigrants—the highest of any state. Even before the crackdown, California's farmers were projecting 30 percent crop losses because intensified border patrolling had already shrunk the labor pool this year. Dianne Feinstein, California's Democratic Senator, expects the situation now to be nothing short of "catastrophic."

Curiously, Commerce Secretary Carlos Gutierrez, who joined Chertoff in announcing the crackdown, doesn't deny any of this. "We do not have the workers our economy needs to keep growing," he readily admits.

So why drive out the workers we have? Employer sanctions have been on the books for years. Why enforce them if there are no upsides for national security—only downsides for the economy?

One explanation is that the administration is hoping that this campaign will prove to Congress how much the economy depends on undocumented workers and force it to once again tackle comprehensive immigration reform. However, it is highly doubtful that the administration can genuinely believe that driving California farmers out of business will convince a determined immigration foe like Republican Rep. Tom Tancredo of Colorado to see the light.

The only plausible reason is that the administration has not just abandoned rational immigration reform, which would be understandable under the circumstances. It has actually made a conscious decision to embrace its opposite to win back its lost base before next year's elections. In short, its immigration policy now is driven neither by conviction, nor the needs of the economy—but naked political calculation, even if that involves targeting "willing employers" and "willing foreign workers," the very victims of that policy.

That is a new low.

Shikha Dalmia is a senior policy analyst with the Reason Foundation. An archive of her work is here. Reason's government reform research and commentary is here.

The UAW's Health-Care Dreams

info@reason.com (Shikha Dalmia) — Fri, 03 Aug 2007 12:09:00 EDT

It is not within the power of United Auto Workers President Ron Gettelfinger to save GM, Ford and Chrysler. But it is certainly within his power to kill them. Whether he chooses to do so will soon become clear. What are arguably the most critical contract negotiations in the history of Motown's auto industry began this week.

America's former Big Three auto makers are teetering on the brink of bankruptcy—Ford's second-quarter profit notwithstanding. And one big reason for their dire state, apart from collective amnesia over how to make hit cars, is their ever-escalating health-care expenses. Every car they produce, they plaintively assert, contains $1,500 in health costs that their Japanese competitors don't face.

But Mr. Gettelfinger has already declared that he is not in a "concessionary mood." UAW workers at Ford and GM agreed to a health-care cost-sharing deal during an unusual round of mid-contract negotiations in 2005. Closing the competition gap with Japanese auto makers now, Mr. Gettelfinger insists, requires not more concessions by auto workers—but a Japanese-style government health-care system for all workers.

"We pay more, but get less," he thundered to roaring applause at a recent NAACP luncheon.

Doubtless, some of Mr. Gettelfinger's tough talk is posturing, calculated to extract the best possible deal from auto companies. Yet his perennial calls for a national health-care system -- echoed by leading Democratic presidential candidates -- affect the dynamics at the bargaining table: By feeding the notion that Japanese workers are getting a better health-care deal than UAW workers, they make it harder for Mr. Gettelfinger to make reasonable compromises and sell them to his rank-and-file.

But do Japanese workers really live in some single-payer, health-care heaven where all their medical needs are covered by general taxpayers with no cost to them? Hardly.

The Japanese system comprises three basic insurance plans: one for the self-employed and the unemployed, including retirees under 70; one for the elderly over 70; and one for all private- and public-sector employees. The employee plan is not just completely self-financed, with no taxpayer support. It actually subsidizes the other two, an arrangement that is becoming increasingly unsustainable as Japan's population ages. (Both Toyota and Honda declined to give an estimate of their current or future health-care premium burden.)

The employee plan requires a premium equal to 9.5% of a worker's annual income. Employees themselves pay about 45% of the premiums from their paychecks, their employers the rest. This works out to $1,557 for an employee with an annual income of $36,500—average wages for a blue-collar Japanese auto worker—according to figures provided by the Japanese Ministry of Health and Labor Welfare.

But that's not all Japanese workers are on the hook for. Working families also face a 30% co-pay—capped at $677 per month for a mid-income family—for medical expenses such as in-patient and out-patient hospital charges, drugs, doctor's visits and diagnostic tests. Because these services are exceedingly cheap, thanks to massive price controls, in practice the average Japanese family pays only about $720 a year in co-pays. This adds up to total out-of-pocket annual expenses of about $2,300 for every Japanese household, which is comparable to what active UAW workers pay after the 2005 deal in absolute dollars. But relative to their income, Japanese workers bear a far bigger burden than UAW workers.

Even that isn't the full story. In the event of a catastrophic or chronic illness requiring prolonged hospitalization, a UAW worker faces no further expenses. A Japanese worker who hits his co-pay cap each month would be out of pocket up to $10,000 a year—about 25% of his annual pay-check and five times more than a UAW worker under similar circumstances. This puts a huge strain on some Japanese families, forcing them to default on their hospital bills. Asahi Shimbun, Japan's respected national daily, reported that Japanese hospitals lost $180 million in unpaid patient bills in 2004.

UAW workers get a better deal not only than Japanese workers, but other American workers as well.

Before the 2005 "givebacks," the Detroit Three companies picked up the entire health-care tab for all their hourly workers—active, retired, dependents and, incredibly, even laid-off workers till they found other jobs. Workers were not required to pay any premiums, deductibles or co-pays-except for routine physical exams and prescription drugs. The 2005 deal left these benefits virtually untouched for retirees with pension incomes below $8,000. But for the first time ever it began requiring more well-off retirees to cough up $252 in annual premiums for family coverage and another $500 in total annual deductibles. In short, for a grand total of $752 in out-of-pocket annual costs, UAW retirees and their spouses get full medical coverage for life. Given the huge retiree population that the Big Three support—GM has three times more retirees than active workers—this has saddled them with a combined unfunded health-care liability exceeding $100 billion.

By contrast, 90% of retirees in other American companies don't get any employer-provided coverage after 65, when they become Medicare-eligible. Such couples, according to an analysis by Fidelity Investments last year, are typically on the hook for $10,000 in out-of-pocket annual costs for Medicare co-pays and other expenses not covered by the program, or 10 times more than UAW couples.

Meanwhile, the only concession that active UAW workers made in 2005 was to defer $1 an hour of their 2006 pay raise toward a UAW-controlled Voluntary Employees' Beneficiary Association (VEBA) fund. On average, this translates into roughly $2,000 in VEBA contributions per UAW worker per year. Some of the returns from the fund's investments subsidize the coverage of current retirees. But the rest are tucked away for the workers' own retirement coverage. In other words, by setting aside about 4% of their current wages annually, UAW workers secure not just all their medical needs now, but for life. In comparison, salaried workers with families contribute more than twice as much as UAW workers—$2,500 in premiums and another $1,600 in deductibles and co-pays—for just their current health care needs, according to two separate surveys conducted by Kaiser Foundation and Hewitt Associates last year.

What all of this shows is that the so-called competition gap that Motown auto makers and the UAW complain about is created by the lavish health-care and pension deals they wrote themselves—not by Japan's nationalized health care system. Indeed, it is often overlooked that Japanese auto makers import less than 45% of the cars they sell in the U.S., and the percentage will likely drop further, as Toyota plans to expand its share of U.S.-made cars to two-thirds of all vehicles sold in America in the next three years.

Active hourly workers at Japanese "transplants" face out-of-pocket costs not much higher than their UAW counterparts. The big difference, however, is that upon retirement they don't get limitless medical coverage. Instead, they get a fixed amount of money to buy supplemental Medicare coverage.

American auto makers too are hoping to cap their health-care liability to retirees by convincing Mr. Gettelfinger to accept a deal under which they would put a lump sum of money into a fund that the UAW would use to buy coverage for its members. Mr. Gettelfinger signed off on a similar arrangement with Dana, a large auto supplier, when it went into bankruptcy last year, but is reportedly not convinced that this would be advantageous for Big Three retirees.

UAW workers still enjoy a health-care deal that no one else in America or Japan—or quite possibly the planet—does. Yet Mr. Gettelfinger said last week that the 2005 health-care givebacks were the toughest decision he ever made in his entire career. This is a startling admission that reflects the depth of the UAW's entitlement mentality, and its detachment from the world that its fellow Americans inhabit. But such lavish expectations are unsustainable under any system—American or Japanese. This is a reality that Mr. Gettelfinger must accept. Otherwise, he may well push U.S. auto makers over the cliff—and his comrades with them.

Shikha Dalmia is a senior analyst at the Reason Foundation. This article originally appeared in the Wall Street Journal.