Cato Daily Dispatch for November 3, 2005
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Less Volatile Inflation with "Inflation Targeting"Katrina: A Government Failure
U.S. Should Engage North Korea
Less Volatile Inflation with "Inflation Targeting"
"[Ben] Bernanke, [nominated by President Bush to become the new Federal Reserve chairman,] has supported measures to make the Fed's workings less secretive, including a policy of 'inflation targeting' that makes it clearer how much prices can rise before the Fed will raise rates to constrain them. [Alan] Greenspan prefers a more flexible approach that allows for improvisation, as do other Fed officials," reports Newsweek.
In his keynote address at Cato's 23rd Annual Monetary Conference, "Monetary Institutions and Economic Development," Rodrigo Rato, the Managing Director of the International Monetary Fund, praised inflation targeting, arguing that countries adopting such targeting experience less volatile inflation. He also maintained that generous unemployment insurance, strict employment protection and high labor taxation in Europe have contributed to the continent's remarkably persistent unemployment rates.
Katrina: A Government Failure
"Officials responsible for doling out billions in Hurricane Katrina relief contracts told lawmakers yesterday that they still don't have answers to central questions about why certain recovery efforts have stalled, whether money is being wasted and what's keeping Gulf Coast firms from getting a bigger share of the work," according to The Washington Post. "In nearly three hours of questioning by the House committee investigating the government's sluggish response to one of the worst natural disasters in the nation's history, top procurement officials repeatedly said they would need to do more research into exactly how government money is being spent."
In "When the Catastrophe is Government," Radley Balko, a Cato policy analyst, writes: "September 11 is no longer the most catastrophic failure of government in my lifetime. Its response to Hurricane Katrina is. Government at all levels, run by both parties, regardless of race, inexcusably failed to secure the safety of the people of New Orleans. The lesson here is not the failure of one party or the other. The lesson here is the failure of government.
"There should certainly be accountability here. The bureaucrats who failed should be fired. The political appointees who didn't live up to their responsibilities should be dismissed. And one can only hope that the negligent politicians will be punished at the ballot box. But more fundamentally, we need to recognize that this is not so much a failure of individuals as it was a fundamental failure of government -- at its most basic and important responsibility, no less. The last time government failed on so large a scale, we reinvigorated our trust in that same government to protect us. We do so again at our peril."
U.S. Should Engage North Korea
"The United States will offer details of its proposal to retrain thousands of North Korean nuclear scientists and engineers for more peaceful pursuits when six-country negotiations resume later this month," Reuters reports. "Joseph DeTrani, U.S. special envoy for North Korea, said he expected the talks to be productive as negotiators focus on the 'actions for actions' needed to make progress toward an agreement aimed at ending Pyongyang's nuclear weapons program." Mr. DeTrani made his comments at a seminar at the Cato Institute.
In "North Korea Calls for Engagement, Not Isolation," Ted Galen Carpenter, Cato's vice president for defense and foreign policy studies, writes: "[E]ngagement has been a much more successful approach than either forcible regime change or isolation. A substantial number of authoritarian U.S. allies have become democratic, and one-time adversaries like Vietnam and China have made significant progress toward liberalization. Engagement was at least a catalyst for many of those changes.
"That record suggests that instead of attempting to isolate and browbeat North Korea we should see if engagement is possible. There is little doubt that Pyongyang wants to have normal relations with the United States. We should oblige. Kim Jong-il's regime might well portray the offer of such a carrot as a boost to its prestige. But engagement would likely be a poisoned carrot -- one that would help create subtle pressures for reform within the North Korean system. It is certainly preferable to the nearly six-decade-old and utterly bankrupt strategy of isolation."
In the book The Korean Conundrum: America's Troubled Relations with North and South Korea, Ted Carpenter and Doug Bandow, a Cato senior fellow, take a look at the twin crises now afflicting U.S. policy in East Asia: the reemergence of North Korea's nuclear weapons program and the growing anti-American sentiment in South Korea. They question whether Washington's East Asia security strategy makes sense with American forces spread thin by the Iraq war and with the looming prospect of U.S. troops stationed in South Korea becoming nuclear hostages. Carpenter and Bandow put forth the most provocative solution yet to this gnarled and dangerous situation.
Greg Garner, editor, ggarner@cato.org