Today POLITICO Arena asks:

Given that May reports show that Romney raised more money than Obama, does the president still have a shot at victory even though he’ll likely be outspent, and is there no chance that his record could speak louder than cash?

My response:

More than a few of the adventurous initiatives of today’s nanny state emerge from federal-local partnerships in which Washington ships federal tax money to selected local governments for the purpose of launching new campaigns or ordinances against things that are bad for us. Thus it has been with Michael Bloomberg’s anti-food and ‑drink activism, which the Obama Administration persistently subsidizes by way of grants from the Centers for Disease Control and other agencies.

As Michael Greve points out in his new book The Upside-Down Constitution, arrangements of this sort epitomize some of the most dysfunctional aspects of our system of federalism. They hide political accountability, since the favored local governments need not make a case to their own budgetary decision-makers for the expenditure as the highest and best use of scarce funds (hey, this is free federal money, why turn it down?). At the same time, the amounts involved are small enough in relation to the vast sea of overall federal spending that they generally escape close scrutiny in Congress. They allow federal incumbents to develop politically fruitful alliances with like-minded local political elites. And they often result in splashy, news-making local initiatives which go farther than Washington could politically permit itself to go: for example, given the importance of farm-state votes, the Obama administration has prudently avoided head-on vilification of the American diet, even as it funnels money to mayoral allies in farm-free Gotham and other cities to engage in just such vilification.

Fortunately, some in Congress are seeing through the charade. As The Hill reports, and Marc Scribner relates in more detail at CEI “Open Market,” some House members are determined to block a nascent grant program in which uber-Nanny Ray LaHood, Secretary of Transportation, would be empowered to send money to states to bribe them into taking steps against “distracted driving.” As we have argued in this space before, decentralized state and local rulemaking — un-distorted by a federal thumb on the scales — is the most promising way of figuring out which regulatory approaches to driver cellphone use genuinely improve safety at an acceptable cost in convenience, expense and other factors. Constitutionally and otherwise, it is simply not the role of the federal government to arm-twist states on their policies regarding driving on local streets and roads far from any Interstate.

Rep. Diane Black (R‑Tenn.) is reportedly offering a motion to instruct conferees to stand fast on the House’s disapproval of the grant program, which will be argued today. This would make a good place to draw the line against the continued expansion of the centrally directed nanny state.

The House Government Oversight Committe has voted, on party lines, to hold Attorney General Eric Holder in contempt for failing to turn over documents related to the bizarre “Fast and Furious” gun sting operation (which program/​issues Dave Kopel helpfully summarizes). The committee, headed by Rep. Darrell Issa (R‑CA), took this action despite President Obama’s assertion of executive privilege over the documents.

Now, I haven’t been following the Fast and Furious scandal that closely — seems like a dumb idea to give guns to criminal gangs, but what do I know about law enforcement? — but this latest development, raising the Holder-Issa impasse to a constitutional battle between the executive and legislative branches, is worth noting. I can’t add much to the excellent and concise analysis provided by the Heritage Foundation’s Todd Gaziano (a member of the U.S. Commission on Civil Rights who formerly served in the DOJ’s Office of Legal Counsel and also as chief counsel to the House Oversight Committee), but I will highlight three points:

1. Executive privilege is a qualified, not absolute, doctrine that is meant for certain circumscribed purposes — such as to allow the president to receive candid advice from his advisers — not a blanket protection of anything in the executive branch the president wants not to be disclosed. (And it certainly can’t be invoked to shield wrongdoing.) Because it is qualified, the president must identify the documents not disclosed and provide a description of the privilege asserted, what attorneys call a “privilege log.” This has not been done here.
2. For executive privilege to apply here, the documents at issue have to be related to something the president is involved in, most likely in this context communications to/​from the president regarding the Fast & Furious policy. If Obama knew nothing about F & F, I have trouble seeing the basis for the privilege. 
3. If the president did know something, let alone have a hand in the decision making, Congress is entitled to learn at least something about it. Even when there’s a sound basis for invoking executive privilege, the American people’s need for information often outweighs whatever presidential interest is at issue. As Todd puts it, “the President is required when invoking executive privilege to try to accommodate the other branches’ legitimate information needs in some other way. For example, it does not harm executive power for the President to selectively waive executive privilege in most instances, even if it hurts him politically by exposing a terrible policy failure or wrongdoing among his staff. The history of executive–congressional relations is filled with accommodations and waivers of privilege. In contrast to voluntary waivers of privilege, Watergate demonstrates that wrongful invocations of privilege can seriously damage the office of the presidency.” (The mention of Watergate is doubly fitting because this past Sunday marked 40 years since the break-in that ultimately brought down the Nixon presidency.)

I doubt that President Obama’s assertion of privilege in this episode has yet risen to Nixonian standards of contempt for the rule of law, but it is a dangerous bit of political gamesmanship designed to delay and push back on the Oversight Committee/​Congress’s demand for documents. As the committee showed in its vote today, however, both sides are ready to play this high-stakes game of chicken. 

Holder’s contempt citation now goes to the floor of the House, where I’m sure many Republican members are salivating at the chance to score political points against an unpopular president and attorney general. (Recall that the House found former White House counsel Harriett Miers and Chief of Staff Josh Bolten in contempt of Congress for failing to answer questions regarding the firing of U.S. attorneys during the Bush administration.) We may also see a lawsuit regarding the executive privilege claim, and even, if no agreement on document-production is reached, articles of impeachment drawn up against the attorney general.

Suffice it to say, what began as a head-scratchingly bad policy that cost many lives (including border patrol agent Brian Terry) has now become a large stonewalling and possibly coverup operation. As with Watergate, Iran-Contra, the Clinton-Lewinsky affair, and so many other presidential scandals, the obstructive aftermath seems to be eclipsing the initial wrongdoing in legal and political importance.

The Senate’s “vote-a-rama” on amendments to the farm bill continued yesterday. Thus far, almost all of the amendments that would have cut spending have failed. One failed amendment in particular is worth highlighting because it demonstrates the blatant disregard for taxpayers that exists in the Senate.

Sen. Tom Coburn (R‑OK) introduced an amendment that would have cut the $200 million Market Access Program by 20 percent. MAP uses taxpayer money “to help U.S. producers, exporters, private companies, and other trade organizations finance promotional activities for U.S. agricultural products.” In other words, it’s textbook corporate welfare.

According to a new report produced by Coburn’s office, promotional activities that MAP has subsidized include advertising for pet food and animal spa products, wine tastings, and reality television shows. To make a point, Coburn’s amendment would have also prohibited MAP from funding those four items in particular.

The vote count on Coburn’s amendment was 30 “yes” and 69 “no.” Eighteen Republicans joined all but two Democrats in making sure that MAP can continue to spend taxpayer money promoting hair care products for dogs, cats, and horses. Who says bipartisanship is dead?

There’s no proof yet, but it looks an awful lot like Medicare might be subsidizing the Castro brothers.

I, for one, was not surprised to read that Medicare payments for non-existent medical services are ending up in Cuban (read: government-controlled) banks. Nor that “accused scammers are escaping in droves to Cuba and other Latin American countries to avoid prosecution — with more than 150 fugitives now wanted for stealing hundreds of millions of dollars from the U.S. healthcare program, according to the FBI and court records.”

In fact, I have been wondering for some time when we would see evidence that foreign governments have been stealing from Medicare. The official (read: conservative) estimates are that Medicare and Medicaid lose $70 billion each year to fraud and improper payments, a result of having almost zero meaningful controls in place. That’s practically an open invitation to steal from American taxpayers. Kleptocratic governments—and other organized-crime rings—would be insane not to wet their beaks.

In this National Review article, I explain how easily it could happen:

Last year, the feds indicted 44 members of an Armenian crime syndicate for operating a sprawling Medicare-fraud scheme. The syndicate had set up 118 phony clinics and billed Medicare for $35 million. They transferred at least some of their booty overseas. Who knows what LBJ’s Great Society is funding?

I also explain how these vast amounts of fraud aren’t going to stop without fundamental Medicare and Medicaid reform. Give the National Review article a read, and tell me if you share my suspicion that Medicare is bankrolling other governments.

Before the news of Hosni Mubarak’s impending death dominated the news cycle, the real issue on Egypt was what happened in the past week. On Thursday, Egypt’s Supreme Constitutional Court effectively dissolved parliament. On Sunday, Egypt’s Supreme Council of the Armed Forces issued a supplementary constitutional declaration that stripped the presidency of most of its power and gave itself temporary legislative authority and a strong hand in writing the country’s new constitution. Egypt’s democracy now hangs by a thread after what amounts to a de facto coup. U.S. policymakers ought to reassess Washington’s aims with Cairo and weigh the supposed value of American military and economic aid against the outcomes actually reached. Evidence suggests that U.S. aid can and should be phased out, providing Egypt the domestic political shake-up its young democracy desperately needs.

U.S. officials must consider the precise purpose of military aid programs, particularly their usefulness with respect to Egyptian-Israeli peace. Proponents of aid stand the region’s geopolitics on its head, arguing that aid dissuades Egypt’s military from initiating war against Israel. Little to no attention is paid to the fact that Washington advances interests that Egypt already has, as war with Israel would be disastrous for Egypt, aid or no.

Throughout the Cold War, Egypt and Israel fought a war nearly every decade: 1948–49, 1956, 1967, 1969, and 1973. Egypt’s military realized long ago—and more importantly, on its own accord—the hazards of its perpetual confrontation with Israel. Its adherence to the U.S.-brokered Camp David Peace Agreement of September 1978 was the culmination of lessons learned from its devastating military defeats.

Egyptian-Israeli peace is assured not by Washington’s largesse to Cairo, but by the memory of its humiliating military losses and the desperate economic conditions in Egypt. Nevertheless, Cairo continues to wage covert measures against Israel—again, despite receiving U.S. assistance. Earlier this year, pro-military fliers distributed in Egyptian taxis blamed the United States, Israel, and other foreign powers for causing the country’s crisis. In addition, under Mubarak, Israeli authorities complained that Egypt was failing to effectively control the smuggling of arms and explosives in tunnels under Egypt’s Rafah border crossing with Gaza. Other material was also being transferred by sea and above ground by smugglers with the complicity of Egyptian soldiers and officers. Israeli Security Agency director Yuval Diskin believed that Egyptian leaders lacked the will to crack down on these weapons networks because they viewed Israel as a safety valve that channeled extremists away from Egypt.

Recent tensions in the Sinai could have serious implications. As Amman-based journalist Osama Al Sharif writes:

Sinai will remain a critical point of friction between Israel and Egypt. Since the collapse of the Libyan regime, huge caches of weapons have found their way from Libya into the Sinai Peninsula. For Israel, the fact that Hamas has now access to new armaments represents a huge security challenge. It is a situation that neither Israel nor Egypt can control. The former may decide to carry out a preemptive strike against Hamas and loyal cells deep within Sinai. Such unilateral action could easily develop into a regional conflict. [Emphasis added]

Even if structural factors between Israel and Egypt do not change, and Israel retains its overwhelming military superiority, the potential for overreaction or miscalculation could spiral into conflict. Such a scenario would put U.S. officials in an embarrassing position, having supplied massive amounts of military hardware and economic assistance to both belligerents for over three decades.

Presently, Washington supports a regime in Cairo that continues to view Israel as an enemy and entrenches its power through brutality and political repression. Until recently, Cairo’s Islamist government was intent on incorporating Sharia law and cooperating (for more U.S. aid) with America. Moreover, many Egyptians—angered by lack of progress on Palestinian self-determination through the creation of an autonomous Palestinian state—are increasingly frustrated with an America that sends massive military and financial assistance to their regime (over $60 billion in military grants and economic assistance since 1975).

Decades of U.S. aid has done nothing to turn Egypt into a democracy or a market economy. Unfortunately, as made clear by the transfer of power in February 2011 from former president, Hosni Mubarak, to the Supreme Council of the Armed Forces (SCAF), Egypt has not undergone a revolution, but rather a thinly veiled attempt by the armed forces to perpetuate their six decades in power.

Months ago, the Obama administration resumed funding to Egypt, even though Congress restricted military aid until and unless the State Department could certify that Egypt progressed toward democracy, basic freedoms, and human rights. A senior Obama administration official said at the time that there would be no way to certify that all conditions were being met. Today, however, with thousands of activists being detained and tried in military courts, overwhelming evidence shows that Egypt’s military junta has not met any of the aforementioned obligations. The military, which commands an array of commercial enterprises in industries such as water, olive oil, cement, construction, hospitality, and gasoline, limited democracy to advance their narrow self-interests.

In Cairo, a freely elected civilian government will always be powerless against a deeply entrenched military. The flourishing of a secular-minded liberal democracy would of course be ideal, but guided by the belief that picking sides in the Arab world advances U.S. strategic interests, senior officials endorse a policy that in the short-term could stymie Islamists, but in the long-run discredit reformers and increase the credibility of extremist hardliners. That central paradox plagued America’s counterterrorism policy under Mubarak. As an unclassified U.S. Department of Defense report from 2004 acknowledged:

If it is one overarching goal they [Muslims] share, it is the overthrow of what Islamists call ‘apostate’ regimes: the tyrannies of Egypt, Saudi Arabia, Pakistan, Jordan and the Gulf States…Without the U.S. these regimes could not survive. [Emphasis added]

Here, however, a caveat is needed. The Muslim world is expansive, and radicals are only a small part. As Thomas H. Kean, chair of the 9/11 Commission, said in July 2004 before the U.S. Subcommittee on National Security:

The small number of Muslims who are committed to Osama bin Laden’s version of Islam, we can’t dissuade them. We’ve got to jail them or we’ve got to kill them. That’s the bottom line. But, the large majority of Arabs and Muslims are opposed to violence, and with those people, we must encourage reform, freedom, democracy and perhaps, above everything else, opportunity. [Emphasis added]

Even as many in Washington—including this author—strongly reject the Islamists who rose to power in Cairo, it is well past time for us to step back and allow Egyptians to shape their own destiny. Egypt is deterred from attacking Israel not because of U.S. aid or love of the Jewish state, but rather because it has little prospect of gain and much to lose. If tensions erupt in the Sinai and spiral into war, that development would perhaps serve as the greatest indictment against the assumption that decades of U.S. assistance produced a sustainable peace.

Egyptians must judge for themselves whether Islamists or the military can deliver on promises of economic and political reform, especially after decades of substantial U.S. assistance has failed to live up to its aims. Sadly, it seems that given the conventional wisdom in Washington, phasing out U.S. aid to Egypt might be more difficult than phasing out Egypt’s old dictator.

Cross-posted from the Skeptics at the National Interest.

The Commerce Department always seems to have more tricks up its sleeve when it comes to increasing the protectionist impact of existing antidumping law. Yesterday, Commerce announced a new rule that will increase antidumping duties on imports from China and Vietnam if the goods were charged export taxes when they left their country of origin. The new policy is another example of Commerce cherry-picking how to recognize that these countries are no longer “nonmarket economies” in a way that ironically enables it to increase the discriminatory impact of the inaccurate label. Moreover, although the move increases pressure on China to decrease or eliminate market-distorting export duties, it does so by ignoring the economic rationale for opposing such duties in a way that highlights the incurable folly of the U.S. antidumping regime. Antidumping duties supposedly offset the detrimental impact of foreign trade distortion, but this new rule will actually magnify the distortions caused by export taxes.

When China and Vietnam negotiated their accessions to the WTO, they accepted that other members could ignore certain rules in the WTO Antidumping Agreement when using such measures against Chinese or Vietnamese imports and instead apply what is known as nonmarket economy methodology. The practice of treating nonmarket economies differently for antidumping purposes originated during the Cold War when some Soviet-bloc countries controlled all commodity prices within their territories. This frustrated both the traditional antidumping methodology as well as the countervailing duty regime designed to offset the benefits of foreign government subsidies. For decades, Commerce applied a highly subjective and discretionary methodology in antidumping investigations on imports from these countries while, for practical reasons, exempting them from anti-subsidy laws.

This balance was altered in 2007 when the United States decided that China’s economy was sufficiently market-driven so as to be subject to the anti-subsidy regime despite the fact that China was still exposed to use of the nonmarket economy methodology in antidumping investigations. Now Commerce has reasoned that if it can determine the level of a subsidy in China, then it can measure the level of a tax too. But because of how nonmarket economy methodology ignores actual domestic prices, taking an export tax into account will simply result in an increase in the duty without regard to the tax’s mitigating effect on the competitiveness of China-based manufacturers. The bizarre consequence is that both an export subsidy and an export tax can result in higher duties on Chinese imports.

By using the antidumping regime to impose a tax on goods based on the amount of tax they’ve already been charged upon export, the new policy reveals the absurdity of the entire antidumping law. The United States has been challenging China at the WTO over its export duties on certain rare earths and pointing out that these duties increase the cost of those minerals, making it more difficult for U.S. industries that rely on imports to compete with Chinese firms. If an increase in the price of imports due to Chinese export taxes is detrimental to U.S. competitiveness, then an increase in price due to U.S. import taxes via antidumping duties is equally detrimental. (See here and here for Dan Ikenson’s take on this dizzyingly obvious hypocrisy.) The new policy has the possible effect of making counterproductive import taxes even worse by doubling up the effect of the already harmful export tax. Rather than creating a “more level playing field,” the result will be an increase in market distortion caused by overlapping taxes, benefiting some inefficient, politically-connected industries at the expense of everyone else.