– Peter Morici is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission. The views expressed are his own. –

Healthcare reform is in trouble, because President Obama and congressional leaders are not adequately addressing issues that trouble many Americans.

House of Representatives Speaker Nancy Pelosi and Health and Human Services Secretary Kathleen Sebelius caution Americans to ignore terrorist claims about death panels. Reasonable enough—unseemly critics on both the right and the left seek to stir up unwarranted hysteria.

Sebelius defends end of life counseling from physicians as a benefit families need when facing difficult treatment choices for elderly relatives. However, what worries people is such counseling in the context of government rationing.

All health insurers ration care—private insurers in the United States and government-run health services in Canada and Europe face tough choices and limited resources. U.S private insurers generally don’t deny or delay critical care that could cause death—officials implementing such a policy would land in jail.

Foreign public systems are noted for long waits for specialists and critical procedures like hip replacements and bypass surgery. In Sweden, for example, delays result in suffering and deaths that would not occur in the expensive, but more humane, U.S. system. No one is held accountable, the elderly are particularly vulnerable, and that is euthanasia, de facto if not de jure.

President Obama promises Americans they won’t lose private health insurance if they want to keep it. However, legislation moving through the House requires businesses to pay an 8 percent payroll tax if they don’t provide healthcare and creates a government-run alternative to private insurance. Moderate senators would like to create non-profit cooperatives instead but to gain support from liberals in Congress, those non-profits would operate much like government agencies.

It won’t be long before businesses that pay employees an average of $50,000, or even $75,000, annually figure out it would be cheaper and easier to pay the tax than continue providing private insurance. Many people who work in small businesses would be forced by employers to purchase insurance from a government or non-profit agency. Most Americans don’t want to rely on the Post Office or the United Way for their healthcare.

Healthcare costs at least 50 percent more in the United States than in Canada and Western Europe. Important factors include expensive malpractice suits, inefficient insurance company bureaucracies, poor staffing practices and dangerously low standards at many hospitals, and doctor fees and drug prices much higher than abroad.

Early on President Obama gave the tort lawyers a pass, and is busy cutting deals with drug companies and other healthcare businesses that won’t appreciably bring down U.S. costs. That is why his healthcare reform will require $1 trillion in new taxes.

The president promises to soak the rich to raise that cash, but he proposes to tax them for all his other initiatives too. Unless he wants all wealthy Americans to move to Switzerland, that is simply impossible.

Americans are losing patience. They want healthcare fixed but the president is not delivering what they want.

– Bernd Debusmann is a Reuters columnist. The views expressed are his own. –
Nobody ever landed on the moon, the televised images are a hoax. John F. Kennedy was murdered in a complex plot involving the Mafia and the CIA. Elvis Presley lives. Barack Obama was born outside the United States and therefore is ineligible to be president.

All these claims stem from conspiracy theories and myths born in the U.S. and they throw a question mark over the long-held view of experts that such ideas flourish most in societies where news is controlled, access to information difficult and barriers to independent inquiry difficult to overcome.

This kind of restrictive environment  applies to many Third World countries - conspiracy theories are particularly abundant in the Middle East and Africa — but not to the technologically and economically advanced United States. Yet there is a parallel universe inhabited by millions and millions of Americans immune to facts, logic and common sense.

Some of the myths are harmless, such as the notion that rock-and-roll king Elvis Presley did not die in 1977 and instead went into hiding. (The reasons vary depending on who tells the tale).

There have been thousands of supposed Elvis sightings and a 2005 book says there’s DNA evidence that he is still alive. While the Elvis-in-hiding theory appears to fading (though it is far from dead), the hoaxed moon landing continues to run long enough to prompt a Newsweek magazine article that debunked the story on the 40th anniversary of the Apollo mission to the moon in July. Perhaps not surprisingly, early skepticism about the moon landing came from the Flat Earth Society, based in California.

The Flat Earthers have their own website, unlike the latest addition to America’s wide variety of conspiracy cults, the “birthers.”

They insist that President Barrack Obama was born in Kenya and that the certificate attesting to his birth in Hawaii is a forgery. Unlike the Flat Earthers, the birthers managed to find Congressional sponsors, all Republicans, to introduce a bill meant to block non-eligible Americans from becoming president in future.

H.R. 1503, introduced by Florida Republican Bill Posey, wants to “To amend the Federal Election Campaign Act of 1971 to require the principal campaign committee of a candidate for election to the office of President to include with the committee’s statement of organization a copy of the candidate’s birth certificate, together with such other documentation as may be necessary to establish that the candidate meets the qualifications for eligibility to the Office of President under the Constitution.”

TALK RADIO BOOSTS BIRTHERS

Weighty language for a weighty cause. First voiced during the presidential election campaign (when Obama opponents also aired suspicions that he is a Muslim), the birther conspiracy gained currency when a right-wing talk radio host, Rush Limbaugh, expounded on it and entertained his audience with the following line: “What do Obama and God have in common? Neither has a birth certificate. How do they differ? God does not think he’s Obama. And there’s another difference between God and Obama, and that is that liberals love Obama.”

This from a man with a reputation as the loudest and perhaps most influential conservative voice in American politics. Asked a few weeks ago whom he would chose as a political leader if the choice were between Limbaugh and former Secretary of State Colin Powell, former Vice President Dick Cheney opted for Limbaugh.

A conservative cable TV show host, Lou Dobbs of CNN, also boosted the birth certificate tale, inviting proponents of the theory on his program and raising questions over the authenticity of the certificate Obama’s campaign team produced before the elections.

Air time for the birthers, whose natural habitat is the Internet, clearly helped spread their claims. There are no reliable statistics on the number of American Flat Earthers, Moon Walk deniers or Elvis spotters but a poll in late July showed considerable Republican support for the birthers’ assertions and their conclusion that Obama is an illegitimate president.

According to the survey, by the polling institute Research 2000, there is a huge gap between Republicans and Democrats on the issue: 93 percent of Democrats believed that Obama was born in the U.S. while only 42 percent of Republicans thought so. Of the rest, 28 percent thought he wasn’t born in the U.S. and 30 percent were not sure.

“Far from being an isolated, on the edge movement, the birthers have planted deep a paranoid conspiracy seed about Obama’s legitimate right to sit in the White House among a wide body of Americans,” lamented Earl Ofari Hutchinson, a political analyst.

The debate, he says, has bestowed a kind of perverse legitimacy on the birthers. “They won’t quietly go away.”

Probably not. Conspiracy theories come in many forms but they have one thing in common: they survive against overwhelming factual evidence.

-Clara Gutteridge is renditions investigator at Reprieve. The opinions expressed are her own.-

The big surprise in Tuesday’s revelations of prisoner abuse at Bagram is how long these stories have taken to reach the international media, given the scale of the problem.

Bagram Airforce Base is Guantanamo Bay’s lesser known - but more evil - twin. Thousands of prisoners have been "through the system" at Bagram, and around 600 are currently held there. Meanwhile President Obama’s lawyers are fighting to hold them incommunicado; stripped of the right to challenge the reasons for their imprisonment.

In this way, Bagram Airforce Base is just the latest in a long line of U.S.-created legal black holes. And as evidence of abuse there has begun to leak out, the U.S. military has responded in exactly the same way as it did to similar allegations at Abu Ghraib and elsewhere: by insisting that the torture is just the work of a few low-ranking “bad apples” and repeating that the U.S. “does not torture”.

Sad to say, the truth has revealed itself to be just the opposite. Recently released U.S. government memos have shown the efforts of top U.S. lawyers to justify torture techniques to be used in prisons far from U.S. continental territory. Faced with such evidence, it is difficult to avoid the conclusion that prisons like Bagram were created in large part because the U.S. wanted to torture certain people held there.

The Obama administration argues that the prisoners in Bagram are not entitled to challenge their imprisonment because Afghanistan is in a state of war, and that therefore different legal rules apply. But many of the former Bagram prisoners, such as British residents Jamil El-Banna and Bisher Al-Rawi, were captured in countries far from the Afghan “battlefield”, and forcibly transferred into the war-zone. It seems wholly unfair that prisoners be denied rights simply because they have been kidnapped and rendered into a legal black hole.

In such renderings, the U.S. has not acted alone. The British government has recently admitted to capturing two men in Iraq who were handed to the U.S. and subsequently rendered to Afghanistan. Reprieve’s investigations suggest that these men were taken out of Iraq because the Abu Ghraib prisoner abuse scandal was breaking, and Afghanistan represented a safer, darker place to hold them indefinitely. Yet the British government refuses to assist us in our efforts to offer the men legal representation, preferring to allow them to languish in Bagram.

And this is the story of Bagram: 600 virtually unknown men are being held “beyond the rule of law” in desperate conditions, whilst the US government seeks to obstruct lawyers who seek to represent them, and other complicit governments such as the British bury their heads in the sand. Does any of this sound familiar?

Related commentary: Britain’s torture memos -- keeping up appearances

– Robert R. Bench, a former Deputy Comptroller of the Currency in the Reagan administration, is a senior fellow at the Boston University School of Law’s Morin Center for Banking and Financial Law. The views expressed are his own. –

“Le laissey faire, c’est fini” – French President Nicolas Sarkozy

There indeed is a French flavor to the administration’s proposals for reforming the structure of regulation and supervision of financial institutions operating across the United States. In many ways the proposals resemble the “Commission Bancaire,” the French regime for financial oversight.

Perhaps the proposals reflect commitments the U.S. has been making at the meetings of the G20 countries, consisting of countries which finance much of U.S. government operations and American consumer credit.

If we want those countries to continue to be our banking lifeline, we need to engage in reforms to satisfy their expectations for financial discipline and integrity. We cannot restore confidence and trust in our financial institutions and markets until investors feel again that U.S. financial transactions are on the “up and up.”

The same goes for domestic investors and savers. Financial institutions made promises to U.S. pension funds, municipalities, and trusts. Those promises were broken, as losses of 20, 30, and 40 percent have been incurred. U.S. financial institutions sold “dreams” to American financial consumers: first house, vacation house, student loans, secure retirements, etc. For some, those dreams are totally broken. For many, the dreams have turned into nightmares.

U.S. customers of U.S. financial institutions rage at those institutions’ lack of performance and executives’ performance bonuses. U.S. financial leaders sit on the beach while American taxpayers are stuck on a treacherous fiscal sandbar.

In essence, this financial crisis has reminded us all that the financial system is a public utility and the U.S. financial institutions are chartered by the government because of their social utility to the commonwealth.

In recent years, unfortunately, financial institutions became less involved in financial service and consumed by financiering for the sake of volume — because volume drove individual compensation up and down the executive ladder. Splendid financiering is the work of rascals and humbugs, wrote Hugh McCullough, the first Comptroller of Currency in 1863. President Obama’s new proposals are dealing with 21st century rascals and humbugs.

The proposals are for getting back under the umbrella of government charters the financial transactions that escaped the regulatory umbrella in recent years. They are intended to show global investors and U.S. taxpayers that Washington intends to return U.S. finance to a safe-and-sound enterprise first and foremost, but should something go wrong in the future the losers will be private capital and not taxpayer capital.

The proposals call for a return to a “trust but verify” regime in which significantly more federal examinations will be carried out across all elements of U.S. finance. This will include a stronger advocacy for consumers of financial products.

More specifically, the president’s reforms call for a dramatic extension of federal regulation and supervision of financial markets and financial institutions, while also calling for a status quo and/or expansion of financial supervision in state governments. All significant financial holding companies will fall under regulation and supervision of the Federal Reserve. So will all significant clearing and settlement systems for financial products.

Financial institutions will have to have more capital reserves and liquidity, cushioning the taxpayer from risks. Those cushions will be managed in a counter cyclical way, i.e., the institutions put away more earnings in good times so it is available when things go wrong. And they’ll have to put it away in protection before they can pay it out in compensation. This process will involve the accountants coming up with revised policies for marking-to-market and for loss reserves, further dampening any chance for irrational exuberance in the future.

Significantly, the president’s proposals provide for special bankruptcy proceedings to deal with sick, large financial institutions. The FDIC has those proceedings for sick banks and this year is deploying those proceedings just about weekly. But big problems arise when the bank is owned by a holding company and that holding company is large, complex, and likely multinational. For an enormous amount of reasons, normal bankruptcy rules cannot be used because that involves freezing activity at the holding company, which in turn would freeze the entire financial system because of interconnectedness. So, new, customized wind-up processes need to be devised for large, systemically important financial institutions, not just banks.

The president requests new processes because without them the government remains stuck in the rut of using taxpayer monies to keep the sick company afloat. And trust and confidence in finance will not be restored until sick financial companies are resolved.

If this reads as if we have entered “old Europe” somewhat, perhaps we have. The financial system and institutions in it have failed the “test of the marketplace.” The “invisible hand” of the marketplace has needed the guiding wallet of the American taxpayer. Financial managers have privatized their profits but socialized their losses. Reforms are necessary to restore the balance between the government and its government-chartered institutions.

Personally, I would have liked the president’s proposals to have spoken more about restoring integrity in private-sector governance. That also must come in order to regain confidence. Maybe we need a simple proposal to change “CEO” to that European “Governor” to remind executives on whose behalf they really work for every day.

The big winner in the Obama administration's financial regulatory reform package is the beaten-up hedge fund industry.

Hedge funds get a particularly "light touch'' when it comes to government oversight in the Obama plan. Essentially, the administration is calling for a reinstatment of a Securities and Exchange Commisison rules that requires managers to register with the agency as investment advisors.  The rule was overturned by the federal courts, but many large hedge funds remained registered with the SEC--even though they weren't required to do so.

The registration requirement would give the SEC the authority to conduct periodic inspections and require hedge funds to report information on trading positions. But the information reported by the hedge fund would remain confidential and not shared with the general public.

Some in the $1.1 trillion hedge fund industry feared managers might be required to publicly report "short'' positions on stocks. But there's nothing of the sort in the administration's proposal.

In short, the registration requirement is no big deal and don't expect much squawking from the hedge fund industry. Obama gave them a great a big kiss.

– Christopher Swann is a Reuters columnist. The views expressed are his own –

Obama’s tax cuts were meant to be the first strike force of the stimulus package. The main selling point — other than political popularity — was speed.

Higher take-home pay in April and May would be the first evidence many Americans would see of their government’s broad effort to rescue the economy. The hope was that this would prop up spending long before lumbering public work projects could get under way.

Yet the financial impact already looks set to be swept away. The recent run-up in gasoline prices and a surge in personal savings have provided an uncomfortable reminder of the diminutive size of the tax cuts.

The cuts are just part of a broad government campaign to revive the U.S. economy — along with fresh infrastructure projects, help to the states and bank bailouts.

Even so, boosting take home pay has been an important part of the White House strategy to prop up spending.

But the “Making Work Pay” deduction in withholding tax will amount to an estimated $116 billion spread over two years.

In April — the first month in which Americans would have noticed the extra take-home pay — the annual infusion was just shy of $50 billion. Even if you add a one-time payment to Social Security recipients and extra unemployment benefits, you still only reach about $80 billion over the year.

Compare this with the impact of rising prices at the pump. Americans have been spending roughly $240 billion a year to fill up their cars. A 38 percent increase in retail gasoline prices since the first quarter — if sustained — will increase their yearly bill by more than $90 billion.

This alone would be enough to swamp the tax element of the stimulus.

A second imposing obstacle has been the increasing desire of Americans to save. Early estimates suggested that jittery consumers stashed away two thirds of Bush’s 2008 tax rebate, turning a bazooka for spending into a pea-shooter.

Obama’s package was drafted with precisely this danger in mind. Behavioral economists, like Richard Thaler, believe that one-off bonanzas are more likely to be hoarded, while consumers will spend inconspicuous monthly sums.

Again, this clever policy making may be overwhelmed by the sheer scale of the problem. Americans are scrambling to pay down debt. In April consumers paid down around $15.7 billion — once again more than double the monthly impact of personal tax cuts.

People with any ability to replenish their savings seem keen to do so. Americans squirreled away an extra $130 billion in April compared with March — a total of $620 billion.

To be sure, the outlook would be even grimmer were it not for this well-timed help to the consumer. An increase in take-home pay may also have a psychological effect that outweighs its financial impact. But little should be expected from the tax cut portion of the “stimulus package”.

Indeed, it might more accurately be called a “damage limitation” package.

– James Pethokoukis is a Reuters columnist. The views expressed are his own –

Sorry, Larry Summers. It’s looking more and more likely that you’re going to be stuck in the West Wing for the duration.

See, if your boss fails to reappoint Ben Bernanke as Federal Reserve chairman come January, it would be a public betrayal worthy of the television reality show “Survivor.” For President Obama has no greater ally: Bernanke is truly the gift that keeps on giving.

The latest evidence came on Wednesday during Bernanke’s testimony before the House Budget Committee. The Fed chairman offered a stern warning about America’s huge budget deficits.

“Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance,” Bernanke said.

Tough, but hardly atypical Fedspeak.

Then Bernanke went a step further. He gave significant credence to the view that the recent rise in long-term Treasury yields and mortgage rates was caused by deficit jitters:

“These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings.”

Bingo! We have Fed confirmation: those inflation-hating “bond vigilantes” have time warped to 2009 from 1994 and are hot on the hunt for countries that can’t manage their finances.

Now when talk about the return of the bond vigilantes got louder last week, some were quick to declare it bad news for Obamanomics.

Rising rates, the theory goes, could force the White House to trim its future spending plans and return more quickly to a sustainable fiscal path. So long, universal healthcare. Bye-bye, green investments. And Bernanke playing deficit hawk only adds to that momentum, right?

Not really. Chatter about budget deficits and fiscal responsibility is exactly what Team Obama needs right now.

Here’s why: If you buy the theory of bond vigilantism — that credit markets will force interest rates higher in reaction to unsustainable national budget deficits — then you also have believe the White House needs to raise taxes sharply to pay for all its spending programs or risk a bond revolt.

Indeed, plenty of White House staffers, particularly if they worked for Bill Clinton, probably do believe in the theory. It was Clinton, after all, who chucked his investment agenda in favor of a “bond market strategy” to boost growth by persuading credit markets that the administration would balance the books.

As Clinton nicely boiled it down, “You mean to tell me that the success of the program and my re-election hinges on the Federal Reserve and a bunch of [expletive] bond traders?”

Now Obama has no intention of following a Clintonesque bond market strategy. Rates are already low. He just needs them to stay there until the economy recovers. And he also needs more tax revenue to pay for healthcare reform, alternative energy investments and his other investment priorities.

Maybe even a carbon tax to keep gas prices high enough so consumers will want to buy General Motors’ pricey electric vehicle, Volt.

Unfortunately for the White House, there are few signs that Americans want to pay higher taxes, especially during a recession that has eviscerated their net worth even if they have stayed employed. California voters, for instance, just voted down their state’s efforts to raise taxes to close a yawning budget deficit.

Yet the recent experience on the national level is that gigantic budget deficits often lead to higher taxes. That was true in 1982, 1990 and 1993. So if Team Obama wants a value-added tax, higher payroll taxes to fix Social Security or higher incomes taxes on wealthier American, it needs Americans to start fretting more about America’s fiscal condition.

Bernanke’s sharp warning contributed to that effort. So not only has Bernanke’s unprecedented monetary stimulus allowed Obama to focus on pushing forward his policy agenda rather than a pure stimulus effort (such as a temporary suspension of payroll taxes), but the weight of his authority is now being used to help persuade Americans that the budget deficit is the Next Scary Problem.

In short, Bernanke is effectively preparing the battlefield for Obama tax initiatives to pay for Obamacare and who knows what else. What more could a Fed chairman do for a president?

– Bernd Debusmann is a Reuters columnist. The opinions expressed are his own –

The U.S. case for isolating Cuba and keeping it out of international meetings such as this week’s Summit of the Americas sounds simple: the country doesn’t have democratically elected leaders, it holds political prisoners, it violates human rights and its citizens can’t travel freely. All perfectly true.

But if the logic used for isolating Cuba were applied consistently, neither China nor Saudi Arabia, for example, should have taken part in the London G20 summit. The U.S. State Department estimates China has “tens of thousands” of political prisoners and describes it as “an authoritarian state in which the Chinese Communist Party … is the paramount source of power.”

That has made little difference to the close relationship of mutual dependence between the U.S. and China, the largest creditor of the United States. During U.S. Secretary of State Hillary Clinton’s February visit to China, pragmatism triumphed over human rights concerns as she urged the Chinese to keep buying U.S. treasury bonds.

In comparison to China’s “tens of thousands,” the State Department’s latest human rights report quotes a Cuban human rights group as saying the government there held at least 205 political prisoners at the end of 2008, down from 240 at the end of 2007.

The Saudi monarchy, according to the State Department report, denies its citizens the right to change the government peacefully, holds political prisoners, curbs free speech, restricts religious freedom, tolerates violence against women, and sanctions corporal punishment. The list goes on and includes lack of due process in the judicial system.

If the logic applied to Cuba were consistent, U.S. citizens should be banned from traveling to North Korea, an “absolute dictatorship” where the State Department noted extrajudicial killings, disappearances, arbitrary detentions, and political prisoners. Instead, the only country to which the U.S. government restricts travel by its citizens is Cuba.

In advance of making his first appearance at a Hemispheric summit this week, U.S. President Barack Obama eased restrictions his predecessor, George W. Bush, had imposed to make it more difficult for Cuban-Americans with relatives on the island to travel and send money there. Obama also allowed U.S. telecommunications companies to bid for Cuban licenses.

These are small steps that fall far short of lifting the 47-year-old U.S. trade embargo on Cuba, a Cold War measure that demonstrably failed in its aim to bring down the communist government of Fidel Castro, who defied 10 successive U.S. presidents, both Democrats and Republicans, before he formally handed power to his brother Raul last February due to a long illness.

HAVANA-WASHINGTON THAW?

Raul Castro, who is 77 and was Cuba’s defense minister for almost five decades, has since made several key changes in the leadership. They included firing foreign minister Felipe Perez Roque, one of a group of young officials whose dedication to Fidel Castro was so fierce they earned the nickname “tropical Taliban.” He was replaced by Bruno Rodriguez, a less doctrinaire foreign service veteran.

Some Cuba watchers saw this change as a move to facilitate efforts to thaw relations between Havana and Washington. How far and how fast Obama will go is certain to be a topic at the summit in Trinidad and Tobago where Cuba is the only country in all the Americas not invited.

Advocates of lifting the embargo, a policy change that would finally bring the United States in line with the rest of the world, see light at the end of the long tunnel. “This is the beginning of the end of the worst, least successful foreign policy experiment in the history of the United States,” in the words of David Rothkopf, head of a consultancy who blogs at Foreign Policy magazine.

Wishful thinking? Lifting the embargo would require repealing legislation — including the controversial 1996 Helms-Burton law - that penalizes companies doing business with Cuba. In one of its more bizarre interpretations, U.S. pressure resulted in Mexico City’s Sheraton hotel expelling a 16-strong Cuban delegation attending an energy conference there a few years ago.

The beginning-of-the-end school of thought points to legislation now pending - The Freedom to Travel to Cuba Act - which would allow all Americans, not only Cuban-Americans with family on the island, to visit. If that act were passed, a study for the International Monetary Fund estimates that up to 3.5 million Americans could visit annually.

Cuba is not on the official agenda of the Trinidad summit (the fifth in a series that began in Miami in 1994) but Venezuela’s left-wing, anti-American president, Hugo Chavez, is certain to bring it up, along with a demand that the 34-member Organization of American States readmit Cuba. Its membership was suspended in 1962.

The guideline that only democratically-elected leaders can take part in summit meetings dates from the 1994 gathering - and even then, the logic was flawed. The Miami meeting’s participants included then Peruvian President Alberto Fujimori, a leader of dubious democratic credentials whose acts in office included dissolving Congress and closing the country’s courts.

He then won elections boycotted by the opposition. This month, a Peruvian court sentenced Fujimori to 25 years in jail for human rights abuses and involvement in two military massacres during a campaign against left-wing guerrillas.

Obama campaigned for president on a platform of “change we can believe in.” His moves on Cuba will provide a good indicator of how much of a change agent he really is.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. –

It’s welcome news that President Obama will turn his attention to immigration reform this year, as was announced on Wednesday by Deputy Assistant to the President Cecilia Muñoz. Economic recovery will happen more quickly if both high- and low-skill immigrants are permitted to enter the United States and work legally.

Two years ago, when Congress was considering comprehensive immigration reform, both President Bush’s Council of Economic Advisers and the Congressional Budget Office, headed by Peter Orszag, an economist closely identified with the Democratic Party, estimated that the benefits of additional immigrants outweighed the costs. If Congress allowed more immigration, then American taxpayers would come out ahead financially.

Yet, after Congress refused to pass President Bush’s plan to allow most undocumented workers to receive work visas and wait in line for citizenship, the Bush administration’s immigration policy deteriorated into a series of arbitrary raids on different companies, rounding up undocumented workers and deporting them, in many cases separating husbands and wives, parents and children.

We can do better. Although the unemployment rate reached 8.5 percent last month, the jobs are going to come back, and, as has been the case in the past, native-born Americans will want jobs that are different from those of immigrants, according to economics professor Giovanni Peri of the University of California at Davis.

Congress needs to overhaul immigration law and create an expanded temporary worker program with a path to citizenship, along with more verification to prevent workers from working illegally, and monitoring of tourists and students so that they do not overstay their visas.

A rational immigration policy would have numerous advantages:

• Undocumented workers would pay taxes to federal and state governments rather than to grey-market check cashing services.

• Payments for health care through insurance could be collected more easily, rather than burdening hospital emergency rooms with immigrants without health insurance.

• Foreigners who want to work here could pay the government for visas rather than pay smugglers for unsafe, illicit transportation.

• Improvements in security. Legal visas and bank accounts would make it far easier to identify and track potential terrorists, dubious financial transactions, and those who simply overstay visas.

A rational immigration policy would solve several real problems the United States faces with regard to immigration. The international economy is tremendously dynamic; our immigration system is not. Temporary workers must spend months applying for admission, and due to the pile-up in April of every year, may not even get a visa.

Few low-skilled workers have a legal and reliable method to enter this country and work legally, and few Americans want to do the jobs, such as fruit picking and cleaning, that these workers want to pursue. And even high-skilled workers trained at U.S. colleges and universities, often at taxpayer expense, might have to wait years and spend thousands of dollars to become permanent residents of the nation.

Mr. Obama might want to consider transferring the authority of setting quotas from Congress to the Labor Department. The Labor Department already has the presumptive authority to judge whether demand for foreign labor is justified, through its foreign labor certifications. If the Labor Department is allowed to determine whether or not a foreign worker would displace a native one, it could also be allowed to calculate visa quotas.

High-skilled workers educated in America ought to be able to stay; otherwise, our investment in their education becomes lost to another country. If the Labor Department determines that a foreign worker would not displace Americans, that worker should not be barred from entering the country due to an arbitrary quota. And people who want to enter this country in order to work in jobs Americans are not willing to take ought to have an easy, legal way to do so.

Mr. Obama has the opportunity to craft a sensible and dynamic immigration system. All Americans should wish him success.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. —

The economy is in a painful slump. Growing numbers of people need help, charities are facing a decline in donations and states are cutting back on services. The April employment report from the Labor Department will show a further increase in the number of unemployed.
Yet, rather than harnessing the generosity of Americans to help out, President Obama has proposed to reduce the tax incentives for charitable giving. He wants Congress to limit to 28 percent the tax saving from contributions for taxpayers who itemize their deductions.

Mr. Obama proposed to use the revenue gained to fund universal health care. He would make the 28 percent cap on the tax saving for contributions take effect in 2011, when he contemplates letting the Bush 2001 tax cuts for upper-income people expire.
The combination of higher rates and a 28 percent cap on the value of deductions for charitable contributions (and mortgage interest) would diminish donations to charities ranging from local churches to national opera companies. Cutbacks on charitable giving would be more pronounced among the well-to-do, not only because they have more to give, but because their tax rates would rise at the same time as their deductions would be limited.

Mr. Obama’s proposal has resulted in opposition from not only charities, but also Republicans and Democrats in Congress.

According to Senate Finance Committee Chairman Max Baucus, a Montana Democrat: “I’m a little – especially concerned about the 28 percent limitation, which has nothing to do with health care.” And Senate Republican Leader Mitch McConnell said, “Congress should preserve the full deduction for charitable donations and look for additional ways to encourage charitable giving, not discourage it.”

Under the law now, if a taxpayer in the 35 percent federal tax bracket gives $100 to charity, he can subtract the $100 from his taxable income, reducing his total tax bill by $35. The after-tax cost of his gift is $65. (Relief from state income taxes might bring the net cost still lower.)
If the value of the deduction is limited to 28 percent, the after-tax cost of the gift rises to $72, and the net result would be diminished giving.

In a March 24 news conference Mr. Obama argued that his change would add fairness to the tax system because the tax saving for those in the 33, 35 or 39 percent brackets should not exceed the saving for people taxed at 28 percent.

Research has shown that charitable contributions are price sensitive, and the gifts of higher-income taxpayers are more sensitive to price than are the gifts of those lower on the income scale, according to George Washington University economics Professor Joseph Cordes. So reducing tax savings will shrink giving, hurting recipients.

In 2007, Americans gave $306 billion to charity, with 88 percent coming from individuals and the remainder from foundations. As a percent of GDP, Americans are the most generous in the world, giving twice as much as the British and over 10 times as much as the French.

Without undiminished deductions, the government would gain billions in tax revenue, but charities and others would lose. That would lessen the ability of charities to help the neediest, not what the president intended.

In fact, on February 5, in an executive order expanding the role of President Bush’s Office of Faith-Based Initiatives, Mr. Obama stated that “few institutions are closer to the people than our faith-based and other neighborhood organizations. It is critical that the Federal Government strengthen the ability of such organizations and other nonprofit providers in our neighborhoods to deliver services effectively.”

But tax policies that move funding from charities and towards the government would hurt those organizations that Mr. Obama wants to help. The full deductibility of charitable deductions enhances our national generosity, and we should leave that tax provision alone.