AEI » Latest Content American Enterprise Institute: Freedom, Opportunity, Enterprise Thu, 29 Jan 2015 18:09:25 +0000 en-US hourly 1 Trade in 2015: Senate Finance Committee Chairman Orrin Hatch on how America can succeed in today’s global economy Thu, 22 Jan 2015 19:38:14 +0000 Event Description

International trade and the US economy are top issues in the 114th Congress. We welcome you to join us at AEI as Senate Finance Committee Chairman Orrin Hatch (R-UT) outlines his vision for how America can succeed in today’s global economy. Sen. Hatch will speak to his longstanding efforts to renew Trade Promotion Authority and will discuss what the Obama administration must do to get ongoing trade negotiations such as the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership successfully enacted by Congress.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

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America’s broken program for low-income children with disabilities — and what to do about it Thu, 29 Jan 2015 18:05:57 +0000 ...]]]> Children with disabilities who live in poor families are among the most vulnerable Americans. Caring for children with disabilities can be a difficult task for any family — but especially for families who, in the majority of cases, were poor and in need of social services even before the challenge of caring for such a child arose. For these families, the social and economic capital that allows many middle-class families to cope with the difficulties of raising a child with disabilities is often absent.

Our nation’s primary means of addressing this need is the Supplemental Security Income (SSI) program. SSI provides monthly cash payments to the families of 1.3 million children with disabilities from low-income households, as well as eligibility for health care through Medicaid. In 2013, SSI issued more than $10 billion in cash payments to the families of these children.

SSI is effective at alleviating material hardship — it comprises about half of the total income for the households of children in the program, reducing the poverty rate of this group by 26 percentage points. For many families, SSI plays a vital role in meeting the medical and financial needs of a child with disabilities.

But the program deserves scrutiny for what it does not do often enough: lead to positive long-term educational and employment outcomes for children in the program. For many children receiving SSI benefits, long-term or lifetime SSI benefit receipt at near-poverty income levels is a very real possibility.

Unacceptable outcomes

A substantial minority of child SSI recipients never finish high school. Using data from the National Survey of SSI Children and Families (NSCF), Jeffrey Hemmeter and others found that that more than 30 percent of child SSI recipients age 17- to 18-years-old had either dropped out of school entirely or were out of school; 42.7 percent of recipients had been suspended or expelled from school at one point or another.

This can lead to more negative outcomes as recipients transition into adulthood. By age 19, about half of former child SSI recipients had been arrested at least once.

Neither of these outcomes sets children on a path toward success in the labor market or society more broadly.

Another study using data from the NSCF indicated that among former child SSI recipients age 19-23, 39 percent had failed to complete a high school degree or equivalent and 21 percent were employed. For those who do not work, the maximum monthly cash benefit was $721 in 2014 ($8,652 per year).

Youth in the SSI program face many challenges — they hail from poor families, the majority of which are headed by single parents. About half live in households where another member receives disability benefits. About half live in households where their parent(s) have no employment income. On top of this, these youth must navigate life with an impairment.

For those who do not work, the maximum monthly cash benefit was $721 in 2014 ($8,652 per year).

We should expect more from a program that seeks to help these vulnerable Americans. Providing financial resources and healthcare benefits is important, but so is improving outcomes. The SSI program’s outcomes are at odds with the aspirations of individuals with disabilities embodied in the Americans with Disability Act — and the aspirations of all parents for their children.

What has worked?

At a recent AEI conference, top scholars and practitioners discussed these tough questions, focusing on the transition to adulthood of child SSI beneficiaries — an area ripe for reform given these poor educational and employment outcomes. They began by looking at what has worked.

One area of consensus quickly emerged: Work is good. Richard Luecking, president of TransCen (a nonprofit dedicated to improving education and employment for individuals with disabilities), noted a host of studies suggesting that early work experience “is the most compelling predictor of post-school success.”

Work isn’t just good for youth — it is also possible. The national Youth Transition Demonstration (YTD) project tested work-focused interventions for SSI youth, and the approach showed success. As Thomas Fraker of Mathematica observed, youth who received the employment-focused intervention were, after three years, working more and earning more than those who hadn’t. At most pilot sites, those in the treatment group were eight percentage points more likely to have had paid employment in the subsequent years than those in the control group.

And because the demonstration was conducted with a cross-section of SSI recipients with varying degrees of impairment, its positive results confirmed that even “individuals with significant disabilities are employable and can work,” according to Jamie Kendall of the Administration for Children and Families.

More than 30 percent of child SSI recipients age 17- to 18-years-old had either dropped out of school entirely or were out of school, according to one survey.

What else can be done?

The transition into adulthood is particularly difficult for children receiving SSI. Focusing on long-term life outcomes — especially work and basic educational attainment — should be a top priority. At the AEI conference, panelists offered several small-scale ideas for improving these outcomes.

Small, practical changes

One idea offered by David Wittenburg of Mathematica was simple: better data. Despite the program’s size, little data exist on life outcomes of SSI youth. What data do exist are gathered from one-off surveys. If the program is to improve key outcomes in a dedicated and strategic way, reliable administrative data is needed to show where the program stands and where it is headed. SSA should gather this information and incorporate it into the yearly report on SSI. As Wittenburg noted, doing so “reinforces a [message] of what is important to policymakers, administrators, as well as youth themselves and their families — that this is an outcome that we care about.”

Better financial education could also help, as the San Francisco Federal Reserve’s Jody Hoff argued. It is likely that many families fail to grasp the financial implications of work. They understand that benefits may be reduced as earnings increase, but don’t understand the particulars of the tradeoff. Some may respond to this fear by avoiding work.

Hoff described how a financial literacy calculator could help educate beneficiaries about how work can pay off. By demonstrating how an individual’s total income (benefits plus earnings) rises with hours worked, the tool can help beneficiaries make sound long-term financial decisions. Incorporating this tool into case management could be very helpful, as Hoff noted, “in helping young people think about their opportunities around work.”

Education about work’s payoff is important, but making work less burdensome would also be a step in the right direction. Some child SSI recipients may be deterred from work by the complex process of reporting earnings to the Social Security Administration, or out of fear of losing benefits. Only about 2,300 out of the 1.3 million child SSI recipients reported countable earnings in 2013. Wittenburg proposed a simple solution to this problem: do away with reporting youth earnings altogether. That would eliminate the fear of benefit reduction as a result of work, as well as the complicated process of reporting earnings. Costs would be modest because the number of children reporting earnings is minimal.

Advanced planning for transition off the child SSI program could also help. Currently, youth on SSI are reassessed for eligibility at age 18. About a third will not meet the adult program’s stricter criteria. Wittenburg described the situation this way: “They are coming to the office at age 18, and it is almost like they are going to the lottery.” Too few of those who lose that lottery have adequately prepared for life outside of the program.

Wittenburg proposed improving transition planning for youth facing the age 18 redetermination. One option would create a no-penalty redetermination process in the early teen years, providing children on SSI and their families a better idea of whether they will be eligible for the program when they turn 18, and allowing them to plan accordingly. Another option would require SSI youth to meet with an SSA counselor and, to retain eligibility for benefits, develop and demonstrate progress in following a plan for success in key areas, such as school, work, or training. Such a change would, as Wittenburg described, be “shifting the way we think about how we are providing supports and moving youth toward an orientation … that is focused on outcomes.”

Education about work’s payoff is important, but making work less burdensome would also be a step in the right direction.

Larger changes should be explored: Three ideas

At its heart, SSI is an income maintenance program. It issues checks and provides Medicaid benefits to eligible individuals, the vast majority of whom are low-income. It also connects them with other services and supports, but it was never designed to ensure that children with disabilities would attain the greatest educational and workforce outcomes that their capabilities allow. Small changes could be positive — but larger ones could do more.

Two ideas involve exploring how the lessons learned from welfare reform apply to the SSI program.

So long as the eligibility criteria are looser for children than they are for adults, many child SSI recipients will leave the rolls at age 18. Rapid attachment to the labor force — or additional education — is critical at this juncture.

The Earned Income Tax Credit successfully encouraged thousands of recipients of Temporary Assistance for Needy Families — mostly single mothers — to work. It is worth exploring whether extending the EITC to transition-age youth in the SSI program would yield similar results. For those deemed ineligible for SSI as adults, a generous work support could make employment more appealing and bridge the resource cliff created by the sudden loss of benefits. This would cost money, but it should be discussed and further evaluated.

Welfare reform’s devolution of responsibility to the states created challenges for SSI — but it also provides a potential solution. The SSI/TANF interaction is concerning. By definition, both programs serve low-income families. However, states are required to enforce a work requirement for TANF recipients, TANF benefits are time-limited, and states fund them.

SSI is very different. It is a federal entitlement with no work requirement or time limit on benefits. And in many states, SSI benefits are more generous than TANF benefits. As a result, some families may be drawn to SSI — states with less generous TANF benefits tend to see higher rates of SSI receipt than states with more generous TANF benefits. And states have an incentive to move families from the TANF program to the SSI program — they no longer have to enforce a work requirement or fund the benefits for these individuals.

It is not clear that adult beneficiaries are better off on SSI than TANF. Work rates and exit rates for the former are much lower.

Devolving SSI to states could help address this issue by providing states with responsibility for both programs, as Mary Daly and Richard Burkhauser have proposed. This would eliminate the incentive for states to shift adult TANF beneficiaries onto SSI, because they wouldn’t save any money by doing so.

For families with children, states could use case management, with its combination of supports and requirements, to encourage working-age adults to work. States would have more flexibility to target the needs of the children, and could use these funds to provide services to the children directly rather than cash to their families.

Because states would bear the full cost of benefits for children with disabilities who remain on the program as adults, they would have a strong incentive to invest in the education, training, and accommodation that would enable more of these children to enter the workforce.

Many conditions are life-long. Because of this, SSI could not be time-limited, as TANF was. But many others want to work and can do so — they just need a program that shares their aspirations, and provides them with the accommodation and support that their conditions require. Providing states with a financial stake in supporting those goals could be a step in the right direction, especially for children.

When the record of bad outcomes becomes too hard to overlook, policymakers and administrators have a responsibility to consider new approaches.

Another idea for reform turns on the approval process. Evaluating whether or not an individual is eligible for SSI is difficult: conditions change — especially mental conditions — and objectively determining the status of subjective criteria is hard.

Despite these difficulties, initial determinations are fairly consistent.

More problems occur when individuals who have had their claim rejected choose to appeal the decision in a disability hearing. At the hearing, the individual is permitted to retain legal representation and present their case before an administrative law judge, or ALJ.

This process is problematic because the ALJ is tasked with representing the government’s interest and the claimant’s rights, while also playing the role of an impartial judge of the evidence. However, claimants are permitted their own legal representation, tilting the scales in favor of claimants. In part because of this structure, roughly half of all denied claims are overturned at this stage, though results vary widely between ALJs — some are much more likely to grant approval than others.

One’s chances of receiving disability benefits shouldn’t turn on which ALJ hears the case, and hearings with one-sided arguments are unlikely to lead to consistent and accurate outcomes.

One way of addressing this it to make the hearings adversarial, as Maura Corrigan of the Michigan Department of Human Services has proposed. An SSA representative would be permitted to make a case for why the claimant was justifiably denied benefits, the claimant would be permitted representation as well, and the ALJ would decide which case is more persuasive. This would likely reduce the variations in approval rates between ALJs. Hiring more lawyers to represent SSA would not be cheap, and few find the idea of more lawyers appealing. But it could result in more just and reliable decisions about who should receive benefits and who should not.

A way forward?

The SSI program is a backwater of American social policy for a host of reasons. Funded almost entirely by the federal government, states and localities have little skin in the game and occasionally treat SSI as a place to dump a hard-to-serve population. At the federal level, SSI can easily be overlooked when compared to programs with much greater cost. And the program’s constituency can be very hard to challenge for politicians who do not want to be labeled as being cruel to low-income individuals with disabilities.

But at some point, when the record of bad outcomes becomes too hard to overlook, policymakers and administrators have a responsibility to consider new approaches. SSI should be reoriented toward improving life outcomes rather than simply meeting material needs. Changes consistent with that goal should be carefully considered and undertaken. Doing so would recognize and encourage the many contributions that people with disabilities can make and want to make, instead of focusing on those that they can’t.

Robert Doar is the Morgridge Fellow in Poverty Studies at AEI, where Brad Wassink is the manager of the Program on Human Flourishing.

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Will the world America choose uncomfortable dynamism or cozy stagnation? Thu, 29 Jan 2015 18:02:57 +0000 MIT’s Andrew McAfee lists some ideas that his crowd — other “technologists, entrepreneurs, businesspeople, and economists at American universities,” as he describes them — believe and are really sure are correct: (a) creative destruction is good news, (b)  markets allocate better than bureaucrats do, (c) there is such a thing as too much regulation, (d) business is not the enemy, (e) the state can’t provide jobs to everybody. But maybe that’s just an American thing, as McAfee realized on his trip to the World Economic Forum, or Davos:

In Switzerland I moderated an open forum session titled “Employment: Mind the Gap?” I was the only American on stage, and there was only one representative from the private sector on the panel. Two European trade unionists, a French economist, and the prime minister of Sweden (himself a former trade unionist) made up the rest of the speakers.

I found the discussion fascinating because once we got past the initial uncontroversial remarks (yes, education is important; yes, we must all work together…) we got into a conversation about the right way to mind the gap. As it unfolded, I came to the conclusion that the majority of people on stage did not share my economic worldview as expressed in the statements above. Instead, they seemed to believe much more strongly in government planning, programmes, and protections as the best way to ensure good jobs and wages. And they seemed willing to sacrifice some flexibility, decentralisation, and innovation — perhaps a lot — in the pursuit of stability and prosperity for workers.

I pointed out that economic data from the European continent in recent years was not encouraging for this economic worldview, and my onstage popularity as a moderator dipped sharply. Panelists responded, correctly, that this was in part because of differing responses to the Great Recession. They seemed less willing to engage with the idea that it might also be because several European countries were trying to fight the uncomfortable dynamism of today by making sure those who had jobs yesterday would not lose them.

In case I wasn’t clear enough in Davos, let me be clear here: I don’t think this will work. To paraphrase Churchill, countries today have a choice between turbulence and anaemia. If they choose anaemia, they will still have turbulence.

That’s right. Economic security without a dynamic economy is illusory. Indeed, a society that tries to prevent all failure is actually increasing its fragility and odds for a major breakdown and massive insecurity. Ashwin Parameswaran:

This fleeting and illusory stability that benefits the short-term interests of the currently employed workers in a firm leads to the ultimate loss of bargaining-power and reduced real wage growth in the long run for workers as a class. In the pursuit of stability, the labour class supports those very policies that are most harmful to it in the long run. …  Just like a fire that burns down tall trees provides the opportunity for smaller trees to capture precious sunlight and thrive, new firms expand by taking advantage of the failure of large incumbents. But when the incumbent fails, there must be a sufficient diversity of small and new entrants who are in a position to take advantage. A long period of stabilisation does its greatest damage by stamping out this diversity and breeding a micro-stable, macro-fragile environment.

And Nassim Nicholas Taleb:

When you ask people what is the opposite of fragile, they mostly answer something that is resilient or unbreakable—an unbreakable package would be robust. However, the opposite of fragile is something that actually gains from disorder. In the book, I classify things into fragile, robust, or antifragile.

The American economy must be made more antifragile in that it should prosper from the messy disorder of the free enterprise system. No safety net for business, a modernized, pro-work, fiscally sustainable one for workers to better shield them from the worst ups and down of a more competitively intense economy.

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The return of North Korea Thu, 29 Jan 2015 16:57:11 +0000 The computer screens at Sony Pictures Corporation went dark and then flickered back to life with a ghoulish image and threatening message on November 24, 2014, and thus began the most brazen cyberattack in memory. Two weeks later, a shadowy group called The Guardians of Peace, which claimed responsibility for the attack, demanded that the company pull its release of the upcoming film The Interview, a dark comedy about assassinating North Korean dictator Kim Jong Un. The group’s demand immediately led to allegations that the government of the world’s most isolated totalitarian state had started a new chapter in its long history of aggression against the outside world.

The North Korean government had condemned the movie back in June, employing its usual threatening bluster in a letter to the United Nations that vowed to take a “decisive and merciless countermeasure” if the movie were released. Pyongyang’s later denial of responsibility was dismissed in the wake of the FBI’s conclusion that North Korea was indeed the cyber culprit, and new sanctions were announced by the Obama administration in January 2015.

The alacrity with which the American government and public accepted North Korea’s culpability revealed the degree to which the hermit dictatorship has carved out a unique role for itself as the nation-state equivalent of a psychotic—a ruthless and dangerous enigma seemingly insulated from being held accountable for its actions thanks to American and Asian fears that pushing it too far might result in carnage on the Korean peninsula. That is not to say that North Korea yet represents an existential threat to America or to any of its neighbors, or that it has the capability to act wholly unrestrained. Rather, the North Korean government has perfected its ability to confound and disorient its antagonists and thereby achieve its single, overriding goal: the continued survival of the regime.

In traditional Confucian political theory, a dynasty was deemed legitimate only if it reached the third generation. This was the feat achieved by the Kim family in December 2011 with the accession to power of Kim Jong Un, grandson of the founder (and now “Eternal President”) of the Democratic People’s Republic of Korea, Kim Il Sung. He was a Soviet agent put into place in 1948 in response to the establishment of the Republic of Korea by the United States south of the 38th parallel. The danger posed by the North was made clear by its 1950 invasion of the South and the ensuing three years of devastating warfare. That conflict, still officially only temporarily ceased through an armistice, froze in place the political division of the peninsula and led to a six-decade standoff that sees no hope of ending anytime soon.

Throughout the Cold War, Moscow was the North’s primary patron. China, which had disengaged from Pyongyang in the 1970s when Mao Zedong opened relations with the West, stepped in to replace the Soviet Union after its collapse, thereby tying itself to a regime widely seen as one of the most destabilizing actors in the world. A short list of North Korea’s acts of aggression and atrocities include the use of mass starvation as a means of population and policy control, operating concentration camps for dissidents, assassinating South Korean officials, sinking a South Korean naval vessel, kidnapping South Korean and Japanese citizens from their own countries, pursuing a nuclear-weapons and ballistic-missile program while proliferating both technologies and conducting three nuclear tests, and counterfeiting U.S. currency while smuggling drugs and illicit tobacco.

The allegations that Pyongyang was responsible for the cyberattack on Sony Pictures fit squarely into the regime’s history of provocation and served as a reminder to the world that North Korea is relentless when it comes to posing a threat. Yet Barack Obama, like Bill Clinton and George W. Bush before him, still struggles to come up with a viable policy toward Pyongyang. The question many ask is why this Lilliputian state continues to tie down the American Gulliver.

One answer to that question may be found in a reassessment of U.S. strategy and policy toward North Korea. The foundation of Washington’s policy toward the Korean peninsula is the assumption that only the presence of both American troops and the U.S.South Korean alliance deters Pyongyang from risking war to unify the peninsula. From that perspective, a case can be made that U.S. policy has been successful, in that North Korea has not invaded the South since 1950. Yet as South Korea has modernized over the past 30 years, its strength relative to the North has dramatically increased, making a North Korean victory in any war far less likely. Pyongyang has responded to this trend by trying to develop the ultimate safeguard, nuclear weapons, which not only ensure its survival but also have prompted an endless round of negotiations leading to numerous concessions that have wound up strengthening the regime.

Pyongyang understands that America is a status quo force in its region, committed to preventing change in Asia’s balance of power. Its strategic success came in getting the Clinton administration in the mid-1990s to commit to an open-ended negotiating policy, with the chimera of denuclearization tied to an equally unrealistic hope that relations between North Korea and its liberal neighbors could be “normalized.” Once an American president had adopted the course of negotiation, no matter how unfruitful, future administrations risked being seen as confrontational and destabilizing if they did not follow the same course. Successive U.S. administrations seem to have convinced themselves that negotiating is a prudent policy not only because it might one day achieve our goal of denuclearizing the peninsula, but also because it’s a delaying tactic that gives time for the odious Kim regime to collapse under its own brutality.

Such hopes have now gone unfulfilled for more than 20 years. Instead, the patient waiting of both parties’ administrations has led to no change in the North’s nature. Worse yet, the last two decades of negotiations have left us with a nuclear-capable North Korea, the exact opposite of Washington’s goal. The former U.S. general in charge of NORAD recently stated that he treated the nation of 25 million people as a “practical threat,” and the commander of U.S. forces in South Korea testified before Congress in the autumn of 2014, saying that Pyongyang could build a nuclear weapon and mate it to a ballistic missile. Recent reports indicate that North Korea already has several rudimentary nuclear weapons and could have as many as 70 by the year 2020. A former high-ranking diplomat who negotiated directly with the North Koreans recently told me that he now believes the North will never give up its weapons, something outside observers have been arguing for years.

The history of U.S. relations with North Korea thus offers a sobering lesson on the limits of diplomacy, the trap of wishful thinking, and the danger of misunderstanding an adversary.

If Washington is to avoid committing the same mistakes in the future, a review of its past failures is a necessary exercise. The template for North Korean extortion and U.S. accommodation was set right at the beginning of the nuclear crisis, with the 1994 Agreed Framework. The very idea of entering an agreement with perhaps the world’s last remaining totalitarian state should have raised eyebrows, but at the time, it was considered a diplomatic coup. After all, U.S. bombers were said to have been on their way to take out the Yongbyon nuclear facility when former President Jimmy Carter, acting as an intermediary, hammered out the agreement in June with Kim Il Sung, who turned around and died suddenly the following month.

The agreement to halt Pyongyang’s nuclear program promised over $4 billion in aid to North Korea in the form of building light-water reactors to replace the illicit Yongbyon plutonium reactor, as well as the delivery of 500,000 tons of heavy fuel oil each year until the first light-water reactor was built. Just months after the signing of the pact, however, North Korea shot down a U.S. military helicopter over the Demilitarized Zone (DMZ), killing an American pilot. As if this act of war was not enough, by the late 1990s, the North was receiving uranium-enrichment technology from Pakistan and the A.Q. Khan network. Simultaneously, Pyongyang used the excuse of a delay in some of the promised oil supplies, and the long time required to start construction of the light-water reactor, to threaten a resumption of nuclear development.

When the Bush administration confronted the North in 2003 with evidence that Pyongyang was pursuing a covert enriched-uranium program, the U.S. got the UN to impose sanctions. Yet after Pyongyang announced it was withdrawing from the Nuclear Nonproliferation Treaty, the American desire to avoid a crisis once again won out, and the Bush team doubled down on the diplomatic option with a new set of negotiations. It created an entirely new forum, the so-called Six Party Talks, to present North Korea with a multilateral diplomatic front alongside South Korea, Japan, China, and Russia.

It was during the Six Party Talks that Pyongyang perfected its strategy of delay, cheating, and blackmail. Enmeshed in the war on terror after 9/11, Washington seemed all too happy to let negotiations drag on. The Six Party Talks began in 2003, but it was not until four years later, during its fifth round, that any significant agreement on closing down Yongbyon was reached. This came after North Korea had conducted its first nuclear test, in October 2006, a form of intimidation that should have scuttled the talks. Instead of concluding that Pyongyang would never give up its nuclear program once it successfully demonstrated a breakthrough capability, the Bush administration continued to pin its hopes on the increasingly irrelevant negotiations.

So desperate were the Americans to keep up diplomacy that the White House acquiesced in surrendering one particularly potent piece of pressure: the freezing of North Korean assets held in dollars in a Macau bank. What seemed to be a possible Rosetta Stone to putting pressure on the regime itself was sacrificed on the altar of good faith in an attempt to get the North Koreans to live up to their promise to close Yongbyon. Sweetening the deal was a U.S. decision later in 2007 to remove Pyongyang from the State Department’s list of state sponsors of terrorism, thus handing the North a moral victory, as well as removing the threat of certain financial sanctions. The North indeed closed Yongbyon in mid-2007 but continued to enrich uranium and failed to provide a full accounting of all elements of the nuclear program.

Six years of labor were scuttled in 2009 when the talks collapsed. Pyongyang was probably testing the new Obama administration when it announced in early 2009 a ballistic-missile test, an activity prohibited by a 2006 UN Security Council resolution. The April launch was a failure, but UN condemnation gave the North the excuse to expel inspectors of the International Atomic Energy Agency from the shuttered Yongbyon plant and to announce the restart of the nuclear program. The following month, the North conducted its second nuclear test, resulting in yet another UN Security Council resolution banning such behavior.

To its credit, the Obama administration did not rush into trying to get the North Koreans back to the table after the events of 2009. Yet lines of communication were kept open even as the dying Kim Jong Il lashed out during 2010 with two atrocities: the sinking of a South Korean naval vessel, resulting in the deaths of 46 sailors, and the artillery bombardment of a South Korean island near the maritime border with the North. Pyongyang had come as close to the point of no return as possible, but again, in desiring to avoid a confrontation, pressure from Washington was reported to have kept the South Korean government from militarily retaliating.

The events of 200910 should have put paid to any thoughts of further engagement with the mercurial and dangerous North Korean government. Yet the Obama administration decided to gamble that the new leader, Kim Jong Un, who had succeeded his father at the end of 2011, might prove to be more tractable. Despite repeated North Korean violations of past agreements, the Obama team rushed into a February 2012 Leap Day Agreement, by which the North pledged a moratorium on missile tests and uranium processing.

There should have been no surprise in Washington when North Korea violated the agreement. The ink was barely dry on the deal when Pyongyang launched a “satellite” in April in a thinly disguised missile test. The Obama administration made an even worse calculation when it tied food aid to the missile-moratorium agreement in the 2012 Leap Day Agreement, and then cut off that aid when the North broke the agreement. Pyongyang simply scored another propaganda coup. This most recent series of provocations was capped off in February 2013, when the regime concluded its third nuclear test, one registering 7 kilotons, double the size of the 2009 test.

Given this history, how should we judge America’s North Korea policy? Is it misguided? Unrealistic? Outmatched? Or is it a prudent and calculated response to an unpredictable foe?

American policymakers surely understand that staying in power is the raison d’être of the Kim regime, and yet they apply a different calculus, at least in their public statements, when they promote negotiations. They talk about helping North Korea end its isolation, for example, or becoming a member of the international community, as if these are goals that hold any interest for Pyongyang. Worse yet, committed American negotiators seem honestly to believe that they can get the regime to bargain away the very card that ensures its continued existence. Somehow, the thinking goes, America can make the deal just sweet enough to override the self-preservation instinct inside Kim’s inner circle.

If Washington is to break the cycle of being played by the North, then a new realism must replace the old policy. Experts are wont to say that there are no good options when it comes to dealing with North Korea. That may well be so, but there are certainly bad options. One bad option was taking Pyongyang off the list of state sponsors of terrorism, as the Bush administration did in 2008. Even if Pyongyang proves ultimately not to have been responsible for the Sony hack, it should be put back on the list—which not only makes a moral statement, but also would trigger some financial sanctions that could have a more meaningful impact on the regime. Ending such financial sanctions, like those placed on the Macau-based Banco Delta Asia, was another bad option chosen by the Bush administration. Reinstituting serious sanctions seems an effective way to pressure the regime for any future provocation.

But even if we credit Pyongyang for playing its weak hand spectacularly well, it has not achieved all its success alone. American policymakers seem allergic to recognizing, or at least publicly acknowledging, that other powerful states are frustrating U.S. attempts to isolate and punish North Korea. Russia and China, in particular, have consistently watered down UN sanctions against North Korean individuals and companies.

The Obama administration must also drop the wishful thinking deriving from the Bush era that China will somehow put pressure on Pyongyang to rein in its destructive behavior. In truth, Beijing appears satisfied to have a North Korea that keeps knocking the United States and its allies off balance. That is one reason it has become North Korea’s chief food supplier and has accounted for nearly 90 percent of its energy imports, as well as running a $1.25 billion trade deficit as a de facto subsidy to Pyongyang. More dangerously, there is abundant evidence that Beijing has helped facilitate, or at least ignored, the North’s proliferation of banned technologies and possibly illicit economic activities. Recent calls by former chief American negotiator Christopher Hill for a “strategic reengagement” with Beijing over North Korea thus promise to lead the U.S. down the same path of wishful thinking and being tactically outmaneuvered.

And, even if Beijing were suddenly for some reason to begin working in concert with Washington, then Kim Jong Un might find a new patron in Russia’s Vladimir Putin, who in December invited the North Korean leader to Moscow right as tension between Washington and Pyongyang was heating up over the Sony incident. In short, Washington must face up to the fact that it alone must deal with North Korea.

Given the regime’s success so far, we should have no expectation that North Korea will change its tactics. It will surely conduct more nuclear and missile tests, and the West has long known that Pyongyang has its own cyber-hacking department, which has undoubtedly seen the initial reaction of U.S. companies whose computers were hacked, and learned lessons for the future.

Like the Lilliputians, North Korea will continue to tie down the world’s Gulliver. Both, in their own way, are status quo powers. The longer Washington waits for the Kim regime to collapse under its own weight, the more dangerous Northeast Asia becomes. Perhaps the American bet is right. But it currently appears that U.S. diplomatic miscues and unrealistic policies have made it seem more likely than not that the Kim regime will survive for years to come.

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Seriously, Steven Brill? Hospitals make “gluttonous’ profits? Thu, 29 Jan 2015 16:32:31 +0000 Lawyer, journalist and media entrepreneur Steven Brill is at it again, railing against “gluttonous” profits in the hospital sector. As we’ll see, actual profits in the hospital sector are quite modest. Moreover, such profits almost assuredly will plummet drastically were policymakers foolish enough to follow the letter of law under Obamacare by implementing the draconian cuts in Medicare payments to hospitals that are required by that misguided law.  Worse, if we accept Mr. Brill’s flagrantly inaccurate premise that hospital profits are “ gluttonous” how in the world will we label the profits earned by physicians, lawyers and media companies–each of which have profit levels that are 2 to 3 times as high as the “gluttonous” levels that he decries?

In the Real World, How Profitable Are U.S. Hospitals?

As I tried to explain two years ago when Mr. Brill first started disseminating mountains of myths about U.S. health care, hospital profits are quite modest compared to most other industries.


Medical facilities are one of the least profitable sub-sectors within health care. Moreover, since 2010, health facilities profits have been declining rather than increasing–a reality that no reader of Mr. Brill’s hyperbolic prose is likely to deduce. Admittedly, these figures combine results for both hospitals and nursing  homes, but in reality, Kindred Health is the only one of 10 corporations included in this category that predominantly offers nursing home rather than acute care hospital services.  That said, the figures are restricted to the very largest for-profit companies (e.g.,HCA Healthcare, Tenet HealthcareCommunity Health Systems) and do not necessary paint a picture of the entire hospital industry.

But the most recent available figures from the American Hospital Association for the entire hospital industry confirm this picture of relatively modest profits. The difference between the for-profit picture above and the total industry picture below confirms one of Mr. Brill’s points, that “nonprofit” facilities actually do quite well relative to their for-profit counterparts. But even so, overall total margins averaged only 7.8% in 2012 (and more than one-fifth of hospitals that year had negative total margins!). Profits of less than 8 percent are “humongous” in Mr. Brill’s book?


Profits Elsewhere in the American Health Economy

Hospital profits pale in comparison to the rate of return earned by doctors, MBAs and lawyers. The typical primary care doctor earns an annual rate of return north of 15% on their investment in medical education (this investment includes both what they spend for tuition, books, room and board etc. to get through medical school, but also the earnings they foregone in the process of spending 4 years in medical school and then 3 or more years as low-paid medical residents).


Specialists earn even more than this, so doctors as a profession are generating profits that are roughly double those in the hospital industry (I hasten to add that I don’t think these figures necessarily imply that U.S. doctors are overpaid for reasons I’ve explained here).  The rate of return for lawyers is 23%–about triple the “humongous” profits in the hospital sector.  So where is Mr. Brill’s outrage over such obscene profits? And does he recommend the same sort of top-down highly regulated system for getting lawyer profits under control that he does for hospitals?

Mr. Brill’s solution for healthcare–”regulated oligopolies or heavily regulated monopolies” sounds suspiciously like the U.S. education system. Given the decades of experience with that highly flawed delivery model and its rather dismal performance (high costs, mediocre performance), it’s astonishing to think that Mr. Brill views that as a promising solution to U.S. health care.[1]  That’s especially true given the growing body of evidence that school choice (i.e., giving dollars to families) offers great promise as a strategy for fundamentally transforming American education. Patient-centered health reform offers the prospect of a similar transformation to give Americans a health system worthy of their great nation. But we will never get there if ”reformers” such as Mr. Brill succeed in convincing Americans that the only problem with Obamacare is that it didn’t go far enough in centralizing a health system that can deliver best-in-the-world health only if freed of such misguided regulatory shackles. American physicians best look out: if Mr. Brill and like-minded reformers get their way in overregulating hospitals, physicians almost assuredly will be next on the chopping block.


[1] Avik Roy has done a thorough job of dissecting just how misguided Mr. Brill’s prescription is: it, like Obamacare itself, will drive up hospital prices rather than hold them down. He also has marshaled the evidence that competition, rather than regulation, offers the most promise for injecting some economic discipline in an industry rife with crony capitalism.  To his credit, even Mr. Brill seems to recognize his prescription may not make sense. Consider this parting response to a lengthy Q&A conducted by HealthLeaders Media:

HLM: If your approach makes sense, why have none of the policy analysts or healthcare leaders who have been working on this for years come to the same conclusions?

Brill: I don’t know. Maybe it’s a bad idea. This is what happens when someone who didn’t know much of anything about this two and a half years ago looks at it with a fresh eye.

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My mistakes about 2016 presidential race Thu, 29 Jan 2015 16:14:26 +0000 Some columnists write New Year’s columns chronicling the mistakes over the last year. I don’t, but as this January has rolled on, it’s become clear I’ve made many about the 2016 presidential race.

One is that I assumed Mitt Romney and Jeb Bush wouldn’t run. Now it seems both are. I thought that Romney would not mistake the affection Republicans have shown for his debate performances and now-vindicated criticisms of President Obama’s foreign policy for a yearning for a third Romney candidacy. Evidently he has.

And I thought that Bush would be deterred by concerns about his family, business ties and his rustiness (his last campaign was in 2002). I thought he would be deterred by the unease over nominating the son and brother of former presidents and the overshadowing, for many Republicans, of his fine conservative record as governor by his stands on immigration and Common Core. Wrong again.

Similarly, I’m somewhat surprised that Marco Rubio and Mike Huckabee have apparently entered the race. Jeb Bush gave Rubio support when the national party establishment tried to make him drop out of the 2010 Senate race. But Rubio seems to be running nonetheless.

And Huckabee in 2008, despite his articulateness, good humor and solid debate performances, never got more than minimal support from non-evangelical primary voters or caucusgoers. It’s not clear why he thinks he can do better this time.

The lesson, I think, is that potential presidential candidates make a calculation. If I run this time, especially in a cycle like 2016 in which there are many candidates and new rules, my chances of becoming president may not be great. But if I don’t run, my chances are zero.

Similar calculations seem to be made by others.

Rand Paul’s non-interventionist foreign policy (let’s not call it isolationist) seemed a year ago to have a sizeable constituency among primary voters and the general electorate. But after Islamic State terrorists took over much of Syria and Iraq and started beheading Americans, that constituency seems to have shrunk. Paul is plugging on nonetheless.

Ted Cruz is a brilliant appellate lawyer and as articulate a debater as any politician in my lifetime. But his push for the October 2013 government shutdown did not kill Obamacare and, briefly, hurt the party by taking the spotlight off the rollout. He’s clearly running nonetheless.

Chris Christie seems to have weathered the Bridgegate supposed-scandal. But New Jersey’s fiscal and economic woes undercut his appeal, as do those pictures of his post-Sandy embrace of Obama. No problem: He was out at the Steve King-Citizens United Iowa Freedom Summit last weekend. 	

The big star there by most accounts was Scott Walker, who stirred the crowd by recounting his three victories over the liberal/public employee union mobs in Wisconsin and his pocketful of coupons for shopping at (Wisconsin-based) Kohl’s. But he shows little foreign policy chops.

His fellow Wisconsinite Paul Ryan did bow out — the exception, not the rule. Rick Perry comes well prepared to avoid another “oops” moment this time; Bobby Jindal speaks rapidly of faith as well as policy; Rick Santorum promises to run as doggedly as he did last time; Dr. Ben Carson speaks softly to his clamoring admirers; Carly Fiorina proclaims that she has as many frequent flier miles as Hillary Clinton but has also accomplished something.

Largely, though not entirely, missing from the debuts of the Republican candidates are detailed discussions of public policy or a set of priorities for their putative presidencies.

Congressional Republicans, if the Supreme Court rules against the Obama administration in King v. Burwell this spring, will have to grapple with how to alter Obamacare. The choices are laid out in my Washington Examiner colleague Philip Klein’s e-book Overcoming Obamacare. Congressional Republicans are far from consensus and aren’t getting much guidance from the would-be presidential candidates.

There’s not much policy guidance either from Hillary Clinton, who currently towers above potential rivals — Jim Webb, Bernie Sanders, Martin O’Malley — for the Democratic nomination.

Mike Allen of Politico has a typically well-sourced preview of the Clinton campaign effort, chock full of names of experienced advisers and the 1970s singer Carole King.

But the tipoff comes in the last sentence: “Now that the architecture of the campaign is clear, the two [advisers] are helping with the next critical task: developing her message.”

Oh, that. My mistake: I thought she’d have developed one by now.

Michael Barone is a senior political columnist for the Washington Examiner. This column is reprinted with permission from

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What would a Jordan-ISIS prisoner swap mean for anti-ISIS campaign? Thu, 29 Jan 2015 14:12:39 +0000 On December 24, the Islamic State (ISIS) captured Jordanian pilot Muath al Kasasbeh when his F-16 fighter jet crashed near Raqqa, Syria. After failed efforts by the United States and Turkey to secure Kasasbeh’s release, Jordan proposed a prisoner swap: one convicted al Qaeda terrorist in exchange for a captive Jordanian pilot.

Jordanian support for the anti-ISIS campaign has been tentative. Many Jordanians feel the campaign risks Jordanian lives and suggest the anti-ISIS fight serves US and Israeli goals rather than Jordanian ones. When ISIS published an interview with the captured pilot in its English-language Dabiq magazine, Jordanian officials began to walk back their commitment to the coalition. Jordanian MP Rula Al Hroob announced Jordan’s participation in the campaign against the Islamic State was “temporarily frozen.”

The convicted terrorist whom Jordan may exchange is Sajeda Al Rishawi. Jordanian authorities arrested Rishawi in 2005 following terrorist attacks on three hotels in Amman which killed 60 people, and injured more than 100. She was supposed to detonate herself at the Radisson hotel, but her bomb vest malfunctioned. Many Jordanians saw the attacks as blowback from Jordan’s support for the United States, then embroiled in a war in Iraq.

The Washington Post wrote that Sajeda Al Rishawi “is neither well-known nor well-remembered.” That may be true for some Western journalists, but it is certainly not true among Jordanians. Rishawi’s brother was an aide to Abu Musab al-Zarqawi, the Jordanian who led Al Qaeda in Iraq until 2006, when he was killed by US forces. Zarqawi’s family went to great lengths to distance themselves from his actions, but his story is (in)famous, and the controversy surrounding Rishawi has continued. Although sentenced to death in 2006, Rishawi’s sentence has never been carried out.

Al Kasasbeh’s family has publicly criticized Jordan’s response to their son’s capture, and demonstrations Tuesday night in support of the pilot’s release descended to criticism of the King. While a prisoner swap will grant the Islamic State a public relations coup, Jordan will put its own politics first.

Perhaps herein lies the problem with the Obama administration’s emphasis on broad-based coalitions: allies bring legitimacy to military operations, but their own domestic politics present weaknesses the Islamic State can exploit. If the Islamic State senses a successful strategy and works overtime to kidnap Arab nationals from allied countries, then the damage done by Jordan’s deal-making with terrorists might only be the tip of the iceberg.

Tara Beeny is a Research Assistant at the American Enterprise Institute.

Follow AEIdeas on Twitter at @AEIdeas.

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Three takeaways from Obama’s India trip Wed, 28 Jan 2015 22:27:28 +0000 This week, President Barack Obama became the first U.S. president to preside as the chief guest at India’s annual Republic Day celebrations. What does this mean for U.S.-India relations? Coming on the heels of Indian Prime Minister Narendra Modi’s successful visit to the U.S. last September, Obama’s latest trip to New Delhi reiterates the intention of friendship on both sides. Marked by drift and disagreement less than a year ago, ties between the world’s largest democracy and the world’s oldest democracy are now on the upswing.

So what was achieved on this visit? Three signs show growing optimism for this partnership.

First, Obama’s visit was marked by strong symbolism. He is not only the first U.S. president to be the chief guest at India’s Republic Day – a grand celebration of India’s democratic constitution and military might – but also the only U.S. president to visit India twice. Obama even moved the date of his State of the Union address just so he could accept Modi’s invitation. Breaking from New Delhi’s obsolete foreign policy of nonalignment, Modi’s invitation to Obama signals that India is unafraid to show that a closer U.S.-India partnership is in India’s national interest. Dismissing protocol, Modi received Obama at the airport with a warm bear hug. Both leaders announced a string of agreements, jointly addressed the Indian masses on national radio (another first time for a U.S. president visiting India), and engaged with top business leaders. Finally, the signing of the Delhi Declaration of Friendship clearly highlighted their common goals and commitments.

Second, Obama and Modi reportedly broke the seven-year-old impasse on a civil nuclear deal. In 2008, former President George W. Bush and former Prime Minister Manmohan Singh created a landmark in U.S.-India ties by signing a civil nuclear deal that paved the way for India to buy nuclear reactors to produce fuel. With this in hand, India became the only country with nuclear weapons that wasn’t party to the nuclear Non-Proliferation Treaty to be allowed to access civilian nuclear technology from other countries. However, India’s passage of a liability law in 2010 compromised the deal by calling for foreign suppliers to shoulder all risks from potential accidents. Ending this logjam, both the U.S. and India agreed to float the notion of an insurance pool to cover liabilities, leaving the decision with partner companies to share risks.

Third, Obama and Modi renewed the U.S.-India defense framework agreement for another 10 years. For the first time since its inception in 2012, the Defense Trade and Technology Initiative is set to become fully operational with four distinct projects – including unmanned Raven drones, equipment for C-130 transport planes, and military gear – selected for codevelopment and coproduction. In the past, India complained about America’s failure to reliably supply technology parts on time and the U.S. was wary of India’s close defense relationship with Russia. However, last year, America surpassed Russia as India’s largest arms supplier. The scale of the initiative’s projects outlined above may be modest, but they will mark a concrete start to lead on to codeveloping more high-end weapons, such as jet engines.

Obama and Modi also set goals to increase two-way trade from $100 billion to $500 billion in the coming decade. Obama ended the trip by pledging to invest a total of $4 billion in India to further business ties, including $2 billion to develop the country’s renewable energy sector. In a veiled reference to rising Chinese aggression, both sides also agreed to beef up maritime security in the South China Sea.

Symbolism makes for a great start, and the potential break to the impasse on defense and civil nuclear energy cooperation is commendable. But now comes the tough part – actually following through. The U.S. and India may have identified distinct projects for codevelopment in defense. But India still needs to fix its corrupt procurement process and lengthy bureaucratic procedures. New Delhi also needs to invest more into research and development to modernize its defense industry in order to attract serious foreign capital if it desires joint development of high-end weapons to replace its Russian-supplied Soviet-era equipment. Both sides have characterized the nuclear deal as “done,” but no one has seen the fine print that will operationalize the agreement to prove it is any different from the short-lived glory of 2008. India’s local component requirements, and tough land acquisition and labor laws, stand in the way of the U.S. supplying solar energy panels or setting up factories to produce them as part of bolstering India’s renewable energy capacity. Moreover, Americans are wary of India’s policy flip-flop on investment rules and consequent economic slowdown under the previous government.

Last year, the Indians bet on Modi to revive the economy by awarding him the biggest electoral mandate in three decades of Indian history. Now he has his work cut out for him. His economic messaging shows that he wants the U.S. to be a part of his reform plan and vision for India. With economic growth starting to pick up at 6.3 percent, and the IMF predicting that India will beat China’s growth by next year, Obama is also betting on Modi’s ability to build a stronger India and forge a deeper strategic partnership with the U.S. One hopes that the symbolism from this visit matches the promises made. The world will be watching closely as these democratic giants take the leap forward, together.

Hemal Shah is a researcher for India and South Asia studies at the American Enterprise Institute. Follow her on Twitter: @hemalshah_7.

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No, the feds can’t make college free for everyone using existing aid Wed, 28 Jan 2015 21:44:27 +0000 In light of President Obama’s free community college proposal, Slate’s Jordan Weissmann recently rekindled an idea he’s mentioned before: instead of just providing two years of free community college, the federal government could “zero out tuition at all of our public colleges” without spending any more than it already does on student aid. Here’s how (emphasis mine):

With what it spends on its various financial aid programs today, including money that goes to private and for-profit schools, the feds could cover the cost of tuition for every single public college student in the country. According to the State Higher Education Executive Officers, four-year state schools and community colleges took in $61.8 billion worth of tuition dollars, including money from federal loans and grants, in fiscal year 2013. Meanwhile, according to the New America Foundation, Washington currently dedicates $67.7 billion to grants, tax breaks, and work-study money. If you took the money out of the private sector and put back it into the public sector, it could cover all of today’s undergrads, and then some.

The idea that we already spend enough on higher ed to make public colleges tuition-free, at least for today’s undergrads, is a fun policy talking point… But it’s mostly just an illustration of how wildly inefficient our current system of funding higher education already is.

While I agree completely that the federal student aid system is wildly inefficient, it’s not true that redirecting those funds would be enough to make public colleges tuition free—at least not in the way that most people would interpret Weissmann’s headline.

To see why, consider that there are roughly 21 million students pursuing some form of postsecondary education. Of that total, 15 million students are enrolled at public institutions and the remainder at private institutions.

Weissmann is right that $61.8 billion is enough to pay the tuition bills of the 15 million students currently attending public institutions. Note, however, that he’s not arguing that this would be enough to provide a free education to any of the other 6 million students in the system. Nor, as he points out, would it cover students who are not currently enrolled anywhere but who might choose to pursue an education because tuition has been zeroed out. This is not how most people interpret the idea of free college, which typically means that any qualified student should be able to attend public institutions tuition free.

Worse, however, is that the money he’s using to pay for that free tuition—the $67.7 billion the federal government currently spends on student aid—goes to all 21 million students currently enrolled in a postsecondary program, public or private. Therefore, to actually do this would leave the 6 million students attending private institutions without their Pell grants, tax benefits, and other aid—and with no option for free tuition at public institutions.

To be sure, Weissmann says this is just a “fun policy talking point.” But while he is fairly careful with his language, most people who cite him aren’t. For example, a ThinkProgress piece citing his work carries the headline “How Obama Could Make College Free For Everyone Without Spending a Dime.” Writing in March 2013 for Washington Monthly and referring to an earlier piece by Weissmann on this topic, Daniel Luzer states that “while it’s true… we could…provide free public college to all…Any attempt to move all federal aid directly into state universities would result in a vast and angry outrage…from America’s private universities.”

In his 2013 book “Why Public Higher Education Should Be Free,” Robert Samuels also uses roughly the same methodology to determine “how much it would cost to make all public higher education free in the United States.”

There’s no doubt that the federal financial aid system is wildly inefficient. But taking aid from some students and using it to provide free college to others doesn’t increase the system’s efficiency—it just leaves some students out in the cold.

Follow AEIdeas on Twitter at @AEIdeas.

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Iran commends Hezbollah attack that killed 2 Israeli soldiers Wed, 28 Jan 2015 20:29:18 +0000 This blog series analyzes the most important Iran news events of the past week and provides an outlook of the regime’s strategic calculus.


Iran and Lebanese Hezbollah’s desire for additional retaliation against Israel for the airstrike that killed IRGC Quds Force Brigadier General Mohammad Ali Allah Dadi and several Lebanese Hezbollah senior officers puts Hezbollah in a difficult position. Hezbollah is focused on supporting Bashar al Assad in Syria, where it has deployed thousands of fighters, and on relieving increasing Israeli military pressure on its position and logistics in the Golan Heights. Hezbollah will attempt to limit the scale of the current operations against Israeli Defense Forces to avoid a wider conflict while still satisfying its need—and Tehran’s—for revenge.

Iranian regional policy encountered another complication in Yemen, where Tehran wants to ensure its allied al Houthi rebels have a dominant role in a unified state, but where the recent al Houthi coup d’état risks escalation that could damage the al Houthis’ position. Yemeni President Hadi’s January 22 resignation and the continued degeneration of the Yemeni situation could encourage southern secessionists, al Qaeda in the Arabian Peninsula, and other groups to confront the al Houthis more directly.

In Iranian domestic politics, the five-year sentence handed down to former Vice President Mohammad Reza Rahimi indicates the regime’s anti-corruption campaign may be more serious than previously assessed, although the campaign is still expected to focus on figures from President Mahmoud Ahmadinejad’s administration, rather than current senior officials. Russia will continue to use the potential delivery of the advanced S-300 air defense system to Iran as political leverage against the West, but its eventual transfer to Tehran remains doubtful.

IRGC praises Lebanese Hezbollah following attack on Israel:

The IRGC released a letter expressing support for Lebanese Hezbollah after Hezbollah claimed responsibility for an attack against Israeli Defense Forces in the Shebaa Farms region on January 28 which killed two Israeli soldiers. Tehran warned Israel, via the United States, that Israel crossed a redline with Iran by killing IRGC Quds Force Brigadier General Mohammed Ali Allah Dadi in an airstrike near Syria’s Golan Heights on January 18. Deputy IRGC Commander Brigadier General Hossein Salami vowed revenge for the attack and stated earlier that opening a new front with Israel in the West Bank would be part of its eventual retaliation. Several senior Iranian officials signaled last week that Lebanese Hezbollah will take the lead for executing any retaliation.

Tehran navigating new political vacuum in Yemen:

Foreign Ministry Spokeswoman Marzieh Afkham called on all Yemeni parties on January 21 to practice “self-restraint” and remain committed to a peace deal in which the Iranian-backed al Houthi rebels would withdraw from the capital in exchange for greater inclusion and power-sharing in the country. The al Houthis rejected former-Yemeni President Hadi’s implementation of the deal, which prompted the abrupt dissolution of the government on January 22. Rebel leader Abdel Malek al Houthi reiterated Afkham’s message on January 27, urging all factions to work together to solve the crisis, and released Hadi’s chief of staff whom they had abducted last week.

Iran putting positive spin on latest nuclear discussions:

The P5+1 partners are attempting to meet a March 24 deadline to outline the political framework for a final nuclear agreement. Deputy Iranian Foreign Minister Abbas Araghchi described a series of bilateral talks with US officials in Switzerland last week as “useful” and said the P5+1 showed seriousness during negotiations. Iranian Parliament Speaker Ali Larijani also hinted on January 26 that a nuclear agreement was not far from reach, although Western sources have not reported any progress.

Former Iranian vice president sentenced for corruption:

Former President Mahmoud Ahmadinejad’s first Vice President, Mohammad Reza Rahimi, was sentenced to five years in prison on corruption charges. He is the highest-profile current or former government official to be convicted in Iran’s current anti-corruption campaign.

Will Iran finally get the S-300 advanced air defense system?

Russian state media has reported that Moscow may finally deliver S-300 (SA-20) missile defense systems to Tehran in retaliation of Western economic and political pressure. Russia reached a deal with Iran in 2007 to provide the air defense system, which would significantly upgrade Tehran’s ability to protect key military and nuclear facilities from US or Israeli airstrikes. Moscow cancelled the contract in 2010 under pressure from the West.

J. Matthew McInnis is a resident fellow at the American Enterprise Institute. This report was produced in cooperation with the Iran Team of the Critical Threats Project. It analyzes the most important Iran news events of the past week and provides an outlook of the regime’s strategic calculus.

Follow AEIdeas on Twitter at @AEIdeas.

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Court will kick Obamacare to Congress Wed, 28 Jan 2015 20:27:39 +0000 Conservatives in Washington are increasingly confident that the Supreme Court will rule this summer that the White House has gone beyond its legal authority in implementing the Affordable Care Act. Any such decision would enrage liberals. They would accuse the Republican-appointed justices of putting a stake through Obamacare to suit their partisan preferences.

They would be wrong. The legal case against the administration is strong, and ruling accordingly won’t kill the health-care law.

Obamacare authorizes federal subsidies for health-care plans purchased on state insurance exchanges. In states that decline to establish those exchanges — 34 of them have opted out — the law says the federal government can run an exchange instead.

The hitch is that nowhere does the law authorize subsidies for plans purchased on those federally run exchanges. The Internal Revenue Service, which administers the subsidies, has acted as though it does. The court has to decide whether the IRS is acting legally.

Supporters of the IRS’s policy say that the case — King v. Burwell — makes too much of a mere drafting error. They say that Congress can’t have intended to withhold subsidies from most of the country. And they say it would be disruptive and cruel to take away people’s tax credits now that they’re counting on them.

Congress surely didn’t want the subsidies to be geographically limited. Most members of Congress who voted for the law surely wanted it to be more popular and wanted states to set up exchanges. And the vast majority of them surely had no thoughts in particular about how to treat states that didn’t go along. They’re generally not detail-oriented people when it comes to policy.

But the law Congress passed tied subsidies to a state’s behavior in a way that is not at all absurd in principle. The subsidies create an incentive for states to set up exchanges. Congress uses such incentives all the time, taking the risk that states will balk and laws will not achieve all of their ambitions. Much of Obamacare’s coverage expansion comes from enlarging Medicaid. The method of the law was to offer extra money for states that went along, and not all of them have.

It’s true that taking away the subsidies now would be disruptive, but the court can’t let itself be swayed by that argument. Otherwise, it would be saying that the more people a lawless presidential action affects, the more untouchable it should be. Congress and state legislatures are the proper forums for resolving this problem. Both will be under enormous pressure to do so if the court rules against the IRS and people lose their subsidies. That’s why a lot of the commentary about the case as a death knell for Obamacare is overstated.

Even one of the judges who ruled in favor of the administration in earlier stages of the case has noted the strength of the argument against it. Fourth Circuit Court of Appeals Judge Roger Gregory said that the administration had an “only slightly” stronger case than its critics, whose position had a “common-sense appeal.”

A lot of conservatives think the Supreme Court whiffed the last time it considered Obamacare, in 2012, when it upheld the law’s constitutionality. This time might be different, though, because this isn’t a constitutional case. In 2012, Chief Justice John Roberts argued that the court had an obligation to try to read the law in a way that made it consistent with the Constitution. That reading didn’t have to be the most natural one so long as it was plausible. In this case, though, the Constitution is not at issue and is therefore not a reason to read the law one way or the other.

The fact that it isn’t a constitutional case also makes it easier for other branches of the government to adjust their policies in reaction to a ruling. In 2012, the court was being asked to rule that the federal government had no power to mandate that individuals obtain health insurance and strike down the law entirely. If the court rules against the administration this time, it won’t be saying that Congress can’t offer subsidies in states without their own exchanges; it will just be saying that Congress did not, in fact, make that choice in writing the law. It might further ease the justices’ minds that it’s entirely possible that Congress and state governments will move to shore up Obamacare after its decision.

So the court may decide that the law simply says what it says. Ruling that way won’t doom Obamacare. It will, however, reopen the law in Congress. This time, let’s hope lawmakers pay more attention to the details.

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