ScaifeNet because we can't let Soros have all the fun...

Part 1 | Part 2 | Part 3

This article is Jim Harper's rebuttal in a larger debate on The Economist's website.

If privacy protection is the goal, we might want governments to do quite a bit less, not more.

Marc Rotenberg's opening statement catalogues many things governments could stop doing if they want to aid our privacy protection. His organisation, EPIC, indeed fought the American National Security Agency's "clipper chip" proposal, which would have given authorities a back door into encrypted communications. The Federal Bureau of Investigation's "Carnivore" system likewise would have given the government an ability to "sniff" e-mail and other electronic communications. Total Information Awareness was an American government plan to aggregate every scrap of data about people — internet surfing, e-mails, phone calls, purchases, payments, auto tolls, travels and so on — then sift through it all looking for wrongdoing.

As Mr Rotenberg notes, EPIC now leads the charge against deployment of "strip-search machines", devices that reveal the naked body to government officials at airports and other checkpoints. In respect of airports, few locations so bristle with government intrusions on privacy — intrusions that are not a balanced response to the threat of terrorism. For example, the Department of Homeland Security collects ten fingerprints from foreign visitors (potential terrorists, all!). The US-VISIT programme holds this biometric data for an astounding 75 years.

Under the Western Hemisphere Travel Initiative, US citizens now must show a passport when they return from shopping trips to border towns in Canada and Mexico. The American government was a prime mover behind the "e-Passport", a computer-chipped travel document that allows its contents to be read at a distance by radio. Governments are experimenting with other RFID-chipped cards that allow people's identifying information to be scanned and entered on a database as they traverse borders and internal checkpoints.

If government ID cards do not capture people's movements, perhaps surveillance cameras will. Here, the British government seems to have the lead. Reportedly, there is one camera for every 14 people in the country, and 20% of cameras globally are in Britain. Governments worldwide are collecting DNA from their subjects for a growing variety of reasons.

We need not think only of direct surveillance, of course. Governments have a large role in creating structural bias against privacy in the protocols and technologies around us. Take the American Social Security number (SSN). Akin to many social insurance and national ID numbers around the world, it is a national identifier that has propelled forward the tracking that Mr Rotenberg rightly worries about. Immediately after mandating workers to apply for an SSN in 1936, the American government began promoting it for more and more uses: first state unemployment insurance programmes, then taxpayer identification, purchase of savings bonds, various welfare and entitlement programmes, and so on.

In 1970, America's Federal Bank Secrecy Act required financial-services providers to obtain their customers' SSNs and use them in reporting information to the government. The financial-services industry made lemonade from these lemons. It got much better at tracking customers for marketing and promotional purposes. As it consolidated in the early 1970s, the credit-reporting industry similarly organised itself around the uniform national identifier that had been created, propagated and promoted by the government over the preceding 35 years.

The practices Mr Rotenberg objects to are not just facilitated and propelled forward by government regulation and programmes. Governments are leading participants in this information economy. As Mr Rotenberg points out: "Government agencies are often the top clients of those companies in the data broker business. And what governments cannot buy they can often obtain through legal authority and data retention mandates."

In June, Mr Rotenberg participated in a debate in which he faced Mike McConnell, former director of the National Security Agency (NSA) and director of National Intelligence. Mr Rotenberg was rightly flabbergasted to hear Mr McConnell deny that the NSA had illegally conducted warrantless internet surveillance, even though a federal judge found it illegal earlier this year, and even though Congress two years ago saw fit to immunise the telecommunications companies that participated in the programme.

The American government, like others around the world, is a voracious information collector. It facilitates and promotes private-sector tracking and surveillance. It skirts and sometimes violates laws intended to restrain its snooping, and it cannot be held accountable when it does.

This does not seem like the kind of institution one would turn to for privacy protection. "Independent privacy agencies" and government bodies like the tiny, well-meaning American Federal Trade Commission do not tip the balance the other way.

People who want privacy have no better resource to turn to than themselves. Being more careful with personal information — learning how internet communications work, withholding personal information more often and meting it out carefully when appropriate — is the only reliable privacy protection. The next most important step is limiting government access to private-sector information, something on which Mr Rotenberg and I agree, though he may not prioritise it as much, preferring to pursue regulation of private business instead.

The financial crisis, which began in the U.S. subprime mortgage market in 2007 and spread in 2008 to the global economy, raises a fundamental question: What is the role of government in creating financial harmony? The articles in the latest issue of Cato Journal shed light on the causes of the crisis, the proper balance between government and the market in bringing about financial stability, and the reforms needed to ensure that the too-big-to-fail problem does not destroy financial harmony in the future.

• Issue Summary by Editor James A. Dorn
• Fall 2010 Issue of Cato Journal
• Spring/Summer 2010 Issue of Cato Journal

featuring J.P. Freire

The Consumer Financial Protection Agency is the new kid on the block, a stranger among many agencies regulating financial institutions. The new kid has an agreeable name, but may turn out to be a bothersome nanny or the school bully.

The CFPA is the brainchild of Elizabeth Warren, Harvard law professor, author and head of a TARP oversight panel. She is obviously eager to run the agency and, as a Washington Post article noted, "has received fervent backing from consumer advocates, labor unions, academics and scores of Democratic lawmakers. ... If Obama doesn't choose her, he risks infuriating his already-agitated liberal supporters."

Mother Jones added that "progressive groups" like MoveOn.org have "organized petitions and endorsement statements on her behalf."

All this liberal fervor and well-funded agitation looks suspicious. Why do liberals talk, write and petition as if it would make such a huge difference if one person rather than another ran this supposedly kind and gentle new agency? What do they know that you don't?

Warren's writing about the mission of the CFPA provides a preview of what she might try to do with that agency's capricious power. Her most serious effort to promote a CFPA appeared in a rambling 100-page article in the November 2008 Pennsylvania Law Review, "Making Credit Safer." Although it was co-authored with Oren Bar-Gill of New York University, it simplifies things to refer to it as Warren's paper.

Her thesis is that "many consumers are uninformed and irrational," so they need to be protected from themselves. For example, "over half of all African-American and Hispanic borrowers" suffer from "mis­placed trust in lenders and mortgage brokers."

Warren cites a newspaper article that suggested mortgage brokers steered borrowers toward subprime loans to collect kickbacks. A few pages later, borrowers are said to be irrational because of a survey that "revealed a significant bias against mortgages generated by brokers."

How dumb are we? Well, says Warren, "Many consumers do not know their credit scores." Count me among those irrational consumers. I vet yearly credit reports for errors, but do not pay the fee to see my scores.

Warren finds it irrational that "a majority of consumers who accepted a credit card offer featuring a low introductory rate did not switch out to a new card with a new introductory rate after the expiration of the introductory period," and then keep switching cards again and again. Such an endless flood of new credit application would, of course, threaten those credit scores.

Warren has repeatedly argued that the "most striking" evidence "that errors are prevalent" in the mortgage market is that "a substantial number of middle-income families (and even some upper-income families) with low default risk sign up for subprime loans. Because these families qualify for prime-rate loans, these data indicate a very costly mistake on the part of these middle-income borrowers."

This is the Warren Myth. Although Warren imagines "the evidence of prime consumers taking subprime loans is most striking," that was the first of "Ten Myths of the Subprime Crisis" debunked by economist Yuliya Demyanyk in a 2009 paper for the Federal Reserve Bank of Cleveland.

Contrary to Warren, Demyanyk explains that prime consumers taking subprime loans is not, in fact, "evidence ... that such borrowers must have been steered unfairly and sometimes fraudulently into the subprime market." What the Warren Myth fails to grasp is that "subprime mortgages are defined in a number of ways — not just by the credit quality of borrowers."

"A loan can be labeled subprime," Demyanyk notes, "because of the type of lender that originated it, features of the mortgage product itself or how it was securitized." Some types of mortgages were automatically labeled subprime, for example, such as "2/28 hybrids" that in 2005 started with average rates of 7.5% for two years but switched to an adjustable rate.

Many mortgages were also securitized into pools that defined risk differently, so a borrower with a high credit score but a low down payment could easily end up within a pool that became defined as consisting primarily of subprime loans — not of subprime borrowers (as gauged by credit scores).

Warren depicts all borrowers as innocent victims. She even includes the "liar's loan" as an example of "innovations that have exploited consumers' imperfect understanding of complex credit products."

Many borrowers who chose low-down-payment subprime loans in 2004-06 were spendthrifts who refinanced into larger mortgages in order to cash out equity and get more cash. The average down payment on subprime loans in 2006 was only 6%, according to the Dallas Fed, compared with 12% for near-prime loans.

Nearly all of those subprime loans were used for refinancing. The smaller the down payment or lower the documentation the higher the risk, which makes such loans worthy of a subprime designation regardless of the borrower's credit history. Speculators hoping to flip houses for a quick tax-free capital gain likewise had a powerful incentive to minimize down payments.

Warren offers a bizarre explanation of the foreclosure crisis. She thinks "the high rate of foreclosures in the subprime market suggests that not all consumers knowingly assumed such a high risk of foreclosure."

What happened is that many who knowingly became overleveraged did not expect to lose their job, or to see house prices collapse, or both.

Warren finds more proof of consumer stupidity from a survey finding "30% of Americans did not know what the letters 'APR' stand for." But most Americans, including blacks and Hispanics, can tell the difference between one year and two weeks.

Warren, by contrast, converts a $30 fee for a two-week $200 loan into "an annual interest rate of almost 400%." That would be true if anyone kept rolling it over all year, as some do with credit cards. In reality, borrowers understand they're paying 15% to get $100-500 a couple of weeks early. That can be cheaper than a bounced-check fee.

Warren says "paying a 400% interest rate ... is very difficult to rationalize when the borrower can draw on substantial liquid assets." The study she cites, however, is not about liquid assets, but about "$1,000 of credit card liquidity."

When it comes to credit cards, though, Warren finds "further evidence of seemingly irrational consumer behavior. The most striking data show that ... more than 90% of consumers with credit card debt have some very liquid assets in checking and savings accounts."

It is rarely prudent to empty your checking and savings accounts to pay off one bill out of many. Warren nonetheless finds it striking that "one-third of credit card borrowers hold more than one month's income in these liquid assets." Investment advisers suggest keeping enough cash on hand to cover three to six months of expenses.

What does Warren dream of doing with all the power that Congress has so capriciously bestowed on this new agency? She would most like to impose national usury laws.

Prior to a 1978 Supreme Court ruling, Warren notes, "The linchpin of consumer credit regulation was usury law. ... (State) usury laws regulated credit by imposing a cap on the interest rate that any lender could charge." Today, however, "any lender with a federal bank charter can locate its operations in a state with high usury rates (e.g., South Dakota or Delaware) and then export that interest rate to customers located anywhere else in the country."

Any economist will tell you that ceilings on interest rates would simply ration-out all but the most creditworthy borrowers, particularly hurting young people and business startups. But Warren is no economist. She's no investment adviser either.

Warren's writing about consumer irrationality in the markets for mortgages, credit cards and payday loans displays massive misinformation and unwarranted hubris. Her nostalgia about usury laws is economically illiterate and potentially disastrous.

The Financial Reform Act was commonly described as "rewriting the rules" of lending. But it was mostly about delegating vast new discretionary powers to regulators who can later make up rules by whim and enforce them with stiff penalties.

Nobody doubts Warren's personal charm or missionary zeal, but her qualifications and competence merit a much closer look.

Why is it that one government report after another "unexpectedly" bears more bad news about jobs? Last week, according to Bloomberg, "The number of unemployment claims unexpectedly shot up." Before that, Reuters reported, "Employers unexpectedly cut jobs." This "unexpectedly" bit has been going on for quite a while, suggesting that journalists continue to be surprised that President Obama's progressive agenda has failed to revive private-sector job creation. One might as well say, "Monday unexpectedly will come next week."

There's no secret about how to create private-sector jobs. Plenty of experience has shown how to do it, and a great deal has been written about it. The literature on the subject goes back a couple of hundred years, so Mr. Obama can't say he just missed a tweet.

The first step is to make private-sector job creation a top priority. That's vital, because the private sector pays all the bills. Government doesn't have any money other than what it extracts from the private sector. Well, Mr. Obama never made the recovery of private-sector job creation a top priority because he was busy pushing his progressive agenda, including a big "stimulus" bill for government employees, government-run health care, more compulsory unionism, carbon taxes and other policies that have a negative impact on private-sector employment.

Mr. Obama's hero Franklin D. Roosevelt never made the recovery of private-sector job creation his top priority, either. He was busy establishing big welfare programs, public works projects, compulsory unionism and the first big U.S. entitlement. He multiplied the number of regulations and tripled federal taxation during the 1930s. Those policies made it more expensive and difficult for employers to hire people — major reasons why FDR's New Deal was plagued by chronic double-digit unemployment despite the 60 percent expansion of gross domestic product between 1933 and 1937.

If private-sector job creation is a top priority, government must reduce the cost of hiring people and remove other obstacles to employment. Payroll taxes make it more expensive for employers to hire people, and Mr. Obama increased payroll taxes. Minimum-wage laws discourage employers from hiring people who are worth less than the legal minimum because of their limited skills and work experience — Mr. Obama didn't try to stop last year's minimum-wage increase. Mr. Obama backs labor unions that obtain above-market compensation and benefits, pricing employers out of markets (autos, steel, textiles, etc.) and destroying private-sector jobs. Obamacare imposes penalties on employers who hire more than 50 people. Mr. Obama is spending trillions of dollars the government doesn't have, which naturally leads employers to anticipate higher taxes, and they're reluctant to hire people before they know how high taxes are likely to be. Mr. Obama's financial "reform" bill authorizes government agencies to issue hundreds of costly regulations, and the resulting uncertainty further discourages employers from making financial commitments needed to hire people.

Mr. Obama has similarly throttled private-sector investment. He threatened to increase taxes on dozens of the top U.S.-based multinational companies, which would tend to depress their shares that are in individual securities accounts, pension funds, endowment funds and other portfolios. Mr. Obama repeatedly has demanded "soak-the-rich" taxes on private-sector job creators. He raised taxes on interest, dividends, annuities and rents. And of course, Mr. Obama wants the George W. Bush tax cuts to expire at the end of this year, which, in effect, means tax increases, including a top federal income tax rate of 39.6 percent, a dividend tax of 39.6 percent, a long-term capital gains tax of 20 percent, a return of marriage-tax penalties, a return of the death tax (55 percent on estates over $1 million) and a phaseout of itemized deductions for private-sector job creators — all this in addition to applicable state and city income taxes. Bottom line: less private-sector capital available to create private-sector jobs.

Mr. Obama could supercharge the economy if he eliminated all these policies that make it more expensive and difficult for employers to hire people, but that would mean dumping his progressive agenda. Does anybody expect him to do that?

On August 5th, Social Security trustees released their report showing that permanent annual Social Security deficits will begin in 2015, when next year's high school seniors graduate from college.

Since there are more than 50 million Social Security beneficiaries, and their numbers are growing faster than the number of taxpayers, there will be intense, politically irresistible pressure to continue paying benefits by raising payroll taxes and income taxes. But taxes won't be enough to save Social Security, because Medicare and Medicaid are also going broke, and payments on all the debt are skyrocketing.

Social Security was set up to have each person pay for somebody else's benefits. Current payroll taxes go to pay current Social Security benefits, and nothing is set aside for the future retirement of people working now. In the past, when current payroll taxes exceeded current benefits, the Social Security Administration used the surplus to buy special issue U.S. Treasury bonds. The surplus was mingled with the government's general funds and immediately spent on other programs. Now that Social Security is in deficit, the Social Security Administration will start redeeming those bonds, and the Treasury will draw on current revenues other than payroll taxes. Current Social Security beneficiaries believe they are entitled to their checks, but their total benefits tend to exceed the taxes they paid, and in any case their taxes were spent years ago. The money is long gone. There is no investment fund, no lockbox.

The flash point for Social Security could come when hard-pressed taxpayers conclude that even though they're paying monstrously high payroll and other taxes to support current beneficiaries, Social Security will be broke before they get any benefits. Nobody will be supporting them as they supported other people.

Outraged taxpayers will probably realize that they cannot both provide for themselves and continue paying for everybody else. It's a good bet that they will start trying to make up for lost time by building up their savings as rapidly as possible. Since it would be hard to increase income dramatically, it would be necessary to dramatically cut taxes they're paying for other people. Probably increasing numbers of taxpayers will work off the books, in the underground economy, beyond the government's greedy hands. By the time these things are happening, there could already be a flourishing underground economy due to inflation, price controls, wage controls, profit controls, exchange controls, import restrictions, rationing and other regulations. More people will do business in cash to avoid leaving a paper trail. There could be a resurgence of barter.

When most people hear about the underground economy, they tend to think of drugs, weapons or other disreputable things. But as government expands its power over our lives, all sorts of good things become contraband. Perhaps the most perennially sought after are compact, high-value goods that could be used as money. One smuggler moved Swiss francs across a border, hidden in Polish sausages. Or diamonds — James Bond's creator Ian Fleming wrote a book about diamond smuggling. Gold and silver coins are more popular, since less expertise is needed to determine their value. For decades, private gold ownership was restricted in the U.S. and other countries. Journalist Timothy Green reported that "gold travelled amid a clutter of goats and pilgrims on Arab dhows in the Arabian Gulf, or hidden in the engine casing of freighters outward bound from Hong Kong. One shipment of movie projectors into India was ingeniously filled with canapé-sized bars of gold, while 560 cans of motor grease swung ashore in Yokohama docks — laced with gold."

At one time or another, contraband goods have included coffee, cigarettes, watches, whiskey, spices, perfume, silks, motor oil, rare stamps and sex hormones. Whatever the principal reason for such illegal trade, it's unreported, and taxes aren't paid. The point here is that as the years go by, more taxpayers are likely to conclude that Social Security won't be around for them and that they must start providing for their old age by paying less in taxes. Federal revenues will fall as a result, accelerating the collapse of Social Security.

Such a scenario will remain a serious possibility as long as Social Security continues to be a system where a declining percentage of the population must pay ever higher taxes to cover everybody else's benefits.

The attempted attacks by would-be airline bomber Umar Farouk Abdulmutallab and would-be Times Square bomber Faisal Shahzad opened a debate over the wisdom of reading a terrorism suspect his rights to remain silent and to an attorney under Miranda v. Arizona. Now U.S. Rep. Adam Schiff (D-Calif.) has proposed legislation that "allows unwarned interrogation of terrorism suspects for as long as is necessary to protect the public from pending or planned attacks."

There are two serious problems with this proposal, one constitutional and one practical.

The constitutional issue is that even if this bill passes, it wouldn't mean much. Congress has tried to legislatively overrule Miranda before. The Supreme Court ruled in 2000 that the decision was a constitutional one, and therefore cannot be papered over by Congress. If the protection of Miranda is constitutional, presumably the scope is as well.

The practical objection is that Miranda doesn't need fixing.

The existing "public safety exception" to Miranda, approved in the 1984 Supreme Court case New York v. Quarles, is broad enough to cover emergencies created by terrorism plots.

The Quarles precedent comes from police officers responding to a rape call in Queens. The victim gave a description of her assailant, and told the officers that he was carrying a gun and had just entered a supermarket. One of the officers spotted the suspect, Benjamin Quarles, chased him down and discovered an empty shoulder holster that had held Quarles' revolver.

After handcuffing Quarles, the officer asked him where the gun was. Quarles nodded in the direction of some empty cartons and said, "The gun is over there." The Supreme Court subsequently ruled that this statement, made while Quarles was in custody but before police read him his rights, was admissible. The Court recognized that the exigency of a loose gun is a situation "where spontaneity rather than adherence to a police manual is necessarily the order of the day."

Supporters of Schiff's proposal to take Miranda out of play in terrorism cases will likely tell us that terrorism plots create dilemmas more serious than a revolver lying idle in the produce section.

What if the police had a bomb on their hands and only a recently captured terrorist knows knew how to defuse it? That's not a hypothetical, and the answer isn't to call Jack Bauer.

In 1997, NYPD officers raided an apartment where two men had constructed pipe bombs and planned to detonate them on a subway or bus terminal. During the raid, the police shot and wounded the bomb maker as he lunged for a black bag containing the explosives.

After bomb technicians discovered that a switch on one of the pipe bombs had been flipped, officers questioned the wounded bomb maker about the number of bombs, how many switches had to be flipped to set them off, whether there was a timer, what wires to cut to disarm them, and whether they were intended as suicide devices. The Court of Appeals for the Second Circuit let all of the answers come into evidence via the public safety exception.

The public safety exception is settled law and has been ruled on by every federal circuit and over half the states, allowing police to deal with all manner of emergencies. Courts have allowed questions about the existence or location of guns, bombs, assault or kidnapping victims still in danger, accomplices and their identities, and plans for future crimes.

Add to this the fact that statements given before Miranda warnings are still admissible to impeach a suspect who changes his story when he gets to court, and that physical evidence obtained without Miranda warnings remains admissible.

So, here's a practical proposal: the above list ought to be distributed to counterterrorism task forces across the nation. Instead of spending time and energy on a measure that is out of Congress' power, have government lawyers create a pamphlet to educate the local, state and federal officers who will capture tomorrow's aspiring terrorist. Boil down the law to bullet points and put it on a business card so that they have it on hand when the next emergency unfolds.

That's a tool first responders can use.

Save taxpayers the election-year posturing, and perhaps a few lives in the process.

The Commerce Department last week revised its estimate for U.S. GDP growth in the second quarter from a 2.4 percent annual rate to 1.6 percent. The Washington Post puts the blame squarely on the trade deficit. But Cato scholar Daniel Griswold argues, "The fatal flaw of the story line is that it assumes that rising imports slow economic growth. That view neglects the supply-side role of imports. More than half of what we import consists of goods consumed by producers. Those imports help us produce more, not less."

• "Is the Trade Gap to Blame for Slowing GDP Growth?," by Daniel Griswold
• "Media Feeds America's Skepticism about Trade," by Daniel Ikenson

Federal Reserve Chairman Ben Bernanke on Friday indicated that while economic growth was "less vigorous" than expected, the Fed would likely not take additional action unless "the outlook were to deteriorate significantly." The Washington Post had reported that Bernanke was "under rising pressure to offer solutions" to the floundering economic recovery. Cato scholar and former vice president at the Federal Reserve Bank of Dallas Gerald P. O'Driscoll argues, "The Fed has done the heavy lifting and responded more than adequately to liquidity issues. Now there is little further it can do that is beneficial."

• "The Fed Can't Solve Our Economic Woes," by Gerald P. O'Driscoll
• "How Mortgage Market Should Be Fixed," by Mark A. Calabria
• Cato Journal: Restoring Financial Stability (Part 1 | Part 2)

featuring Daniel J. Ikenson

Despite occasional conciliatory language, the overall tone of the Pentagon's just-released annual report to the US Congress regarding China's military power seems more worried and confrontational than its predecessors, with the exception of the extremely hawkish version released in 2006 during the Bush administration's most militant phase. While American commentators generally have not interpreted the tone in that fashion, scholars and journalists in East Asian countries, especially Japan, certainly are doing so, and they express concern about a further deterioration in relations between Washington and Beijing. Such a prospect understandably agitates nations in East Asia, since it would inevitably raise tensions throughout their region.

In terms of substance, most of the major observations and complaints contained in the report are familiar ones. Washington once again objects to lack of "transparency," both with respect to the level of China's military spending and the nature of China's security doctrine.

The point about spending is entirely warranted. Beijing habitually understates the amount of its military budget. No credible Western analyst takes the official figure (some $71 billion in 2009) seriously. Numerous items, including research and development costs for major weapon systems — normal features in nearly every other country's defense budget — are not included in China's. Most independent estimates of Beijing's military spending conclude that the actual level is anywhere from 20 percent to 100 percent higher. The Pentagon's own estimate is that spending was approximately $142 billion in 2009, and will be "over $150 billion" in 2010. Interestingly, previous reports included both "low end" and "high end" estimates. In the current document, the low-end figure seems to have disappeared.

The complaints about the lack of transparency in China's defense doctrine are less legitimate. China does not give much detail about its military's goals and purposes, but that reticence is not all that different from most other major countries. Indeed, the same allegation could be directed at the United States, which Chinese officials and policy analysts have done from time to time.

Even less justifiable are the concerns expressed that China's overall military expenditures, and the development of certain weapon systems, seem to be more than necessary for the country's legitimate defense needs. That objection is especially in bad taste coming from the United States. Even if one accepts the Pentagon's estimate of PRC military outlays, they are still dwarfed by the more than $700 billion US military budget. China has a stronger case that it is Washington's spending and capabilities that are wildly out of proportion to America's legitimate defense needs.

With regard to China's apparent strategic objectives, the new assessment intensifies the warning in last year's report that while Taiwan remains the core issue for Beijing, China's ambitions now seem significantly broader. Specifically, the Pentagon notes the growing efforts to project power farther out into the Pacific and, increasingly, into the Indian Ocean. Perhaps the greatest worry expressed in the document concerns China's development of a new anti-ship ballistic missile with a projected range of nearly 1,000 kilometers. Such a weapon could put the US naval fleet, including the vaunted aircraft carriers, in the Western Pacific within striking distance.

That development would, at a minimum, complicate Washington's implicit commitment to intervene on Taiwan's behalf if Beijing sought to use force to compel the island's reunification with the mainland. Such a potent weapon, combined with the rest of China's military modernization program, could even raise the probable cost of any US intervention so high that no rational American president would incur the risk.

It is unsurprising that China would seek to expand its reach out from its homeland. Historically, that is what rising great powers do, and China is clearly a rising great power. It is also unsurprising that Beijing appears intent on developing the military wherewithal to settle the Taiwan issue on terms favorable to China. Both the Chinese people and the regime regard Taiwan as rightfully Chinese territory, and they view the return of the island to China's possession as the last remaining major piece of unfinished business from their country's long period of humiliation during the nineteenth and early twentieth centuries.

Although Beijing clearly prefers to use economic incentives and other peaceful measures to entice Taiwan into accepting eventual reunification, the threat of force lurks in the background if a conciliatory strategy proves unsuccessful. Washington must face that reality, and US leaders must ask themselves whether preserving Taiwan's de facto independence is ultimately worth the risk of a nasty confrontation with China.

The new Pentagon report merely confirms that China is a rising great power with ambitions to match. That is an uncomfortable development for the United States as the incumbent hegemon in East Asia. And perhaps that accounts for the somewhat grumpy tone of the latest document. But China does not appear to be a malignantly expansionist power akin to Nazi Germany, Imperial Japan, or the Soviet Union. Instead, it seems to be a conventional great power seeking to shape the international system in a prudent way to its own advantage. Although that understandably creates some anxiety for the United States — and for China's neighbors in East Asia — it is an anxiety that can and should be managed. Unfortunately, the Pentagon report does little to advance such a goal.

The Invention of the Jewish People
by Shlomo Sand, Trasnlated by Yael Lotan
Verso, $16.95, 344 Pages

When I visited Greece in the summer of 2000, that state was in the midst of a heated debate about its national identity, closely tied historically to its national religion. Indeed, about 97 percent of Greece's native-born population is baptized into the Orthodox Church, which sees itself as the true guardian of Greek identity and traditions. But, in 2000, the European Union (EU) — Greece has been a member since 1981 — was putting pressure on the Greeks to follow in the footsteps of the secular members of the EU and take the historic step of accentuating the non-religious elements of its national identity.

The constitution of Greece recognizes the Greek Orthodox faith as the "prevailing" religion of the country; in fact, the blue canton in the upper hoist-side corner of the Greek national flag bears a white cross that symbolizes Greek Orthodoxy. And while the constitution guarantees freedom of religious belief for all, Greek citizens had for years carried government identity cards that stated their religion. So, by the end of the twentieth century, Brussels was demanding that Athens remove "religion" from the government's identity card.

During my visit, the debate over religion was reaching a climax of sorts. One Greek newspaper editorialized that Greece was experiencing "a profound identity crisis as it wrestles with what it means to be Greek, fundamental ties between church and state, and how Greek traditions fit in with the rest of Europe."

An American Jewish tourist from Marin County, California, whom I met at a hotel in Athens, was furious. "Could you imagine American citizens being required to carry government identity cards that name their religion?" she asked during one of our breakfasts. "And Greece is one of our closest allies," she noted. I surprised her when I mentioned that Israeli citizens also have to carry official identity cards that identify their religion and nationality. "But I thought that Israel was very much like us," she responded.

I recalled that exchange after reading Shlomo Sand's The Invention of the Jewish People, a study of Jewish historiography that has ignited a lot of interest and some controversy in Israel and abroad. Sand, a professor of history at Tel Aviv University, challenges the biblical and conventional history of the Jewish people. He attempts to prove that Israeli Jews as well as those Jews who are citizens of other states are not the direct descendants of the ancient people who inhabited the Kingdom of Judea during the First and Second Temple period but include peoples that converted to Judaism during the course of history, mostly in the Mediterranean Basin and its periphery.

Countering official Zionist historiography, Sand questions whether the Jewish People ever existed as a national group with a common origin in the Land of Israel/Palestine. He concludes that the Jews should be seen as a religious community comprising a mishmash of individuals and groups that had converted to the ancient monotheistic religion but do not have any historical right to establish an independent Jewish state in the Holy Land. In short, the Jewish People, according to Sand, are not really a "people" in the sense of having a common ethnic origin and national heritage. They certainly do not have a political claim over the territory that today constitutes Israel and the occupied Palestinian territories, including Jerusalem.

An intellectual committed to the secular and liberal traditions of the West, Sand criticizes the Zionist historians and ideologues — he suggests that Zionist historians are ideologues — who introduced a mythical conception of the Jewish People as an ancient race. He charges them with racist thinking. "Today, if anyone dares to suggest that those who are considered Jews in the world ... have never constituted and still do not constitute a people or a nation — he is immediately condemned as a hater of Israel," Sand writes. He contrasts the Zionist dogma that legitimizes the classification of Israeli Jews as members of the Jewish "religion" and "nation" in the government's identity cards with "civic" or "contractual" nationalism. This latter concept, developed by Enlightenment philosophers like John Locke, defines the nation as an association of people with equal and shared political rights and allegiance to similar political procedures. This sort of civic nationalism excludes religious, racial and even ethnic origins from the definition of the collective identity of Americans or, for that matter, the French and other Western societies. It is celebrated by liberal American-Jews (and non-Jews) like the one I met in Athens in 2000. They recognize that any attempt to impose a more exclusive definition on American identity that reflects the white, Anglo-Saxon and Protestant origin of the founders would result in the political and cultural marginalization of American Jews.

But, as Sand demonstrates in his study, the ideology of Zionism is exclusivist — having more in common with the kind of "organic" (or romantic) nationalism under which the collective identity of the nation is based on a mix of language, race, culture, religion and customs of the "people." It excludes those who do not share them. An ideology of organic nationalism, reflected in the work of German philosopher Johann Gottfried von Herder, had an enormous influence on the nationalist movements of Eastern and Central Europe as well as the Balkans. Zionism was clearly a product of that kind of organic nationalism, a popular intellectual trend in Vienna at the end of the nineteenth century, where Theodor Herzl, the founder of the Zionist movement, was trying to "invent," or more likely to reinvent, the Jewish People and create a national mythology. According to this story line, Sand writes, the people "who wandered across seas and continents, reached the ends of the earth and finally, with the advent of Zionism, made a U-turn and returned en masse to their orphaned homeland."

Is the development of that specific national mythology very different from those embraced by other national movements in Europe (and later in the Third World)? They fantasized about a lost Golden Age through which they could invent a grand historical narrative to help mobilize their people to action against the "other" — foreign occupiers and enemies — and provide political legitimacy for the establishment of a separate nation-state. In truth, contemporary Greeks and Germans are no more the descendants of, respectively, the ancient Greeks or the Teutonic tribes than Israeli Jews are the offspring of the Biblical Hebrews.

As a materialist who attaches more importance to the role of "real" political and economic factors in shaping history — as opposed to the ideologies that they produce and that leaders use as instruments to advance their interests — I am a bit skeptical about the power of ideologies or national myths to transform reality. Therefore, I find Sand's preoccupation with the topic less than useful and some of his historical research less than convincing. He does not really prove that the Ashkenazi Jews are the descendants of the population of the kingdom of Khazaria, who converted to Judaism in the Middle Ages. And his dismissal of new genetic studies that try to trace the ethnic origins of contemporary Jews (and other peoples) is not persuasive.

At the end of the day, the successes and failures of various national movements are determined by political and economic forces. Hence, notwithstanding their inspired national myths, the Basques and the Kurds have yet to win political independence, something that the people of Panama, a superficial entity created by the United States, have achieved. In the case of Zionism, it was the rise of anti-Semitism in Eastern and Central Europe and the ensuing Jewish Holocaust, coupled with the collapse of the Ottoman Empire and the British occupation of the Middle East that made the creation of a Jewish state possible.

Without buying into Sand's entire thesis, one could recognize (as I do) the devastation that Zionism and Israel have inflicted on the Palestinian people and endorse a post-Zionist vision of Israel under which it would become a state of all its citizens by embracing a more liberal conception of its collective identity, including by eliminating the archaic classification of religion and nationalism in Israeli identity cards. I will not be surprised, when Israelis and Palestinians resolve their conflict and create the foundations for new political entities and identities, if they also end up inventing new national myths to legitimize their projects.

The angry national debate over Imam Feisal Abdul Rauf's intention to build a mosque two blocks north of the horror of 9/11 at Ground Zero has been further fueled by supporter Nancy Pelosi declaring, "I join those who have called for looking into how ... this opposition to the mosque is being funded."

If one of her sleuths knocks on my door, this opponent will readily state that I need no outside funding as a reporter who is deeply investigating the motivation of Imam Rauf's choice of this site of mass murder for the mosque. I will add that, of course, all American Muslims have their First Amendment right to exercise their freedom of religion in their place of worship. There have been other mosques in New York City built without opposition. That freedom is not at stake here.

As for Rauf's inflammable site choice, however, one of a growing number of construction workers pledging they will not work on this mosque (New York Daily News, Aug. 20), Dave Kaiser, a blaster, explains:

"I wouldn't work there, especially after I found out about what the imam said about U.S. policy being responsible for 9/11."

Imam Rauf said was interviewed on CBS' 60 Minutes (Sept. 30, 2001) by Ed Bradley. (I have the transcript.) Asked how he felt as a Muslim "knowing that people of your faith committed this act," Imam Rauf spoke about Muslim reaction throughout the world "against the policies of the U.S. government, politically, where we espouse principles of democracy and human rights and where we ally ourselves with oppressive regimes in many of these countries."

"Are you in any way suggesting that we in the United States deserved what happened?" Bradley asked.

"I wouldn't say that the United States deserved what happened," Rauf answered, "but the United States' policies were an accessory to the crime that happened. ... Because (the United States has) been an accessory to a lot of — of innocent lives dying in the world. In fact, it — in the most direct sense, Osama bin Laden is made in the U.S.A."

Were the heads of government in Iran, Hamas and Sudan also "made in the USA?"

Imam Rauf has refused to call Hamas a terrorist organization and had no comment when, on Aug. 15, Mahmoud al-Zahar, its co-founder, strongly supported the Imam's mosque near Ground Zero, saying, Muslims "have to build everywhere" (Associated Press, Aug. 16). Sen. Charles Schumer, D-N.Y., said the support by Hamas of the Imam's mosque carried no weight because "Hamas is a terrorist organization."

Why, yes, it is, Imam Rauf, with its suicide bombers and endless rockets into Israel. How else can suicide bombers be characterized?

This imam — widely lauded in much of the press as "a moderate" Muslim — is not reticent, however, in his firm commitment to Sharia (Islamic law), which regards women as far less than fully human. In the Dec. 9, 2007 Arabic newspaper Hadi el-Islam, Rauf insisted:

Throughout my discussions with contemporary Muslim theologians, it is clear an Islamic state can be established in more than just a single form or mold. It can be established through a kingdom or a democracy. The important issue is to establish the general fundamentals of Sharia that are required to govern.

I would greatly appreciate it if Imam Rauf explained, maybe Pelosi will ask him, more fully what he meant in his 2004 book, "What's Right With Islam is What's Right With America." In it he declares: "American Constitution and system of governance uphold the core principles of Islamic law." Rauf says Sharia law is a core principle of Islamic law. Does that also include a core principle of our Constitution?

This 2004 book's title in the English-language edition yields to a different title for non-English-speaking readers in Malaysia, reports Andrew McCarthy ("Rauf's Dawa from the World Trade Center Rubble," nationalreview.com).

This alternate title in Malaysia brings us right back into the civil war here about the imam's mosque near Ground Zero: "A Call to Prayer from the World Trade Center Rubble: Islamic Dawa in the Heart of America Post-9/11."

What does "dawa" mean? McCarthy explains: "Dawa, whether done from the rubble of the World Trade Center or elsewhere, is the missionary work by which Islam is spread. ... The purpose of dawa, like the purpose of jihad, is to implement, spread, and defend Sharia. ... through means other than violence and agents other than terrorists."

As of this writing, Imam Rauf is on the State Department tour (financed by us) of Arab nations in the Middle East. He has been on four such State Department tours — two under George W. Bush. Says State Department spokesman P.J. Crowley (New York Post, Aug. 20):

"I wouldn't be surprised if he talks about the ongoing debate within the United States, as an example of our emphasis on religious tolerance and resolving questions that come up within the rule of law."

Does our State Department include Sharia as being within our rule of law?

At the end of that news story, we are told that Rauf "is not allowed to fund-raise on the trip." Yet, in the Aug. 18 New York Post, Geoff Earle and Tom Topousis report that "in an interview overseas, he (Rauf) said 'he would also tap Muslim nations for help.'"

I would not be surprised if Saudi Arabia ultimately becomes a generous contributor, but not quite in the agreement with the State Department's "emphasis on religious tolerance."

New York Mayor Michael Bloomberg charges that opponents of Imam Rauf's mosque "should be ashamed of themselves" and are bigots.

Me, too, Mr. Mayor?

If you want to join Speaker Pelosi in investigating me, your honor, I'd be glad to oblige. I'm just doing my job as a reporter. I wish more reporters had gone beneath the shouting on both sides. There's another part of the First Amendment in addition to the free exercise of religion: The press is free to investigate the reasons for Imam Rauf's fixation on the 9/11 location of his mosque.

And why does this location make Hamas glow?

featuring Juan Carlos Hidalgo

Part 1 | Part 2 | Part 3

This article is Jim Harper's opening remarks in a larger debate on The Economist's website.

The internet is not for couch potatoes. It is an interactive medium. While internet users enjoy its offerings, they should be obligated to participate in watching out for themselves. Government efforts to provide online privacy will almost certainly make a hash of things.

Internet-connected devices and computers both retrieve information and send out information. This interactivity is why the internet's usefulness and entertainment stand head and shoulders — and chest and waist — above static media like TV, movies and (many) books.

The blessings of interactivity come at a cost. There is someone (well, something — a server) on the other end of every mouse-click, and sometimes every keystroke. The cost of interactivity is privacy. But many internet users do not know the full price they are paying. Unaware of how internet connections, browsers, websites, plug-ins and various other technical tools work, lots of people do not know what information they share when they go online, how much of it, or how revealing it is. Obviously, this deprives them of the opportunity to do anything about it.

There are concerns and complaints beyond control, of course. Potential unfair uses of information posted or released online are a "privacy" concern. People worry about the security of their financial accounts and reputations against identity fraud, or even about risks of theft or violence produced by information put online. Other "privacy" concerns include intrusive protocols and practices-spam, pop-ups and the like — that interfere with peaceful enjoyment of the net.

It is understandable for people, feeling bowled over, to wish government would take these challenges from their hands. The promises of regulation are lavish, though the results are not so great. Witness the American government's Minerals Management Service, which did not prevent a recent massive oil spill in the Gulf of Mexico. The American Securities and Exchange Commission did not discover Bernie Madoff's multibillion-dollar scam despite being told of it repeatedly. Should consumers abdicate responsibility for privacy to such institutions?

For some privacy problems, law and government are already appropriately on the case. Law is rightly recognising privacy policies as enforceable contractual promises. Fraud is already a crime, irrespective of medium or subject matter. The problem with online law enforcement is not the need for new law or for government to "do more". Government should get better at carrying out its existing responsibilities.

In the meantime, controlling identity fraud requires people to watch out for themselves by monitoring their financial statements and credit reports. The financial-services and credit-reporting industries must similarly keep watch on their end. Waiting for government help will not do.

Government help will not do for protecting privacy in its stronger "control" sense either. Privacy is a value that varies from person to person and from context to context. Perfectly nice, normal people can be highly protective of information about themselves or indifferent to what happens with data about their web surfing. Any government regulation would cut through this diversity.

Government "experts" should not dictate social rules. Rather, interactions among members of the internet community should determine the internet's social and business norms.

There is a response to this argument: industry defaults, set against privacy, are as uniform as government rules would be. But they are not. Apple's Safari browser blocks third-party cookies, denying ad networks their most common source of consumer demographic information. If stronger cookie controls are warranted, coders can write plug-ins — as they have for Mozilla's Firefox.

The limiting factor on the success of such efforts so far has been consumer awareness and interest. All major browsers allow users to control online tracking, for example. (In Internet Explorer and Firefox, go to the "Tools" pull-down menu, select "Options", click on the "Privacy" tab and then customise cookie settings.) Yet few web surfers take these rudimentary steps.

The social engineer takes consumer indifference as a signal that people should be forced to prioritise privacy, but this would undercut consumer welfare as indicated by the best evidence available: consumer behaviour. People appear generally to prefer the interactivity and convenience of today's web, and the free content made more abundant by ad network tracking.

Appeals like this — to revealed consumer interest — typically fall on deaf ears because people involved in privacy debates care more about privacy than the average person. Each of us believes ourselves to be typical, and we take our own opinions as the best evidence of consumer interest. Indeed, if you have read this far, you care more about privacy than most, and you probably favour government regulation to serve your slightly peculiar interests. Rare will be the reader willing to suspend personal opinion on privacy in favour of evidence.

The privacy challenges of the online environment are real and difficult. But asking the government to fix them is the couch potato's solution. And it is an unsatisfactory one. Government regulation will make consumers worse off than they could be. The better alternative is to get people educated and involved in their own privacy protection.

Having previously congratulated Governor David Paterson for signing into law the removal from NYPD computerized databases the names and personal information of many thousands of entirely innocent New Yorkers stopped and frisked wholly without reasonable suspicion, I confess that I missed a vital part of that story.

I found it in the black weekly New York Beacon (July 22 — 28). I regularly read the black, Jewish, Catholic, and labor union press for perspective, and I am often rewarded. As reported by J. Zamgba Browne, what Paterson said about signing the law was a clear refutation not only of the policies of Mayor Mike Bloomberg and NYPD Commissioner Ray Kelly, but also of the Bush-Cheney-Obama insistence that national security and public safety can triumph over individual constitutional liberties.

If any civics classes still remain in Joel Klein's public school system, Paterson's warnings are especially worth hearing and discussing in the context of a 22-page July 29 ACLU report card: "Obama Administration in Danger of Establishing 'New Normal' With Worst Bush-Era Policies." In my return to the Voice, I cited some of those Obama policies not only continuing, but also expanding, the disabling of the Bill of Rights ("George W. Obama," January 12).

"In a democracy," Governor Paterson said, "there are times when safety and liberty find themselves in conflict. From the Alien and Sedition Acts [opposition to which gave Thomas Jefferson the presidency] to the Patriot Act, we have experienced moments where liberty took a back seat."

As president, Barack Obama has not done anything to make the Patriot Act more American. Indeed, when Democrats on the Judiciary Committee tried, once Obama was in the Oval Office, to enact a few reforms, the president helped the Republicans block most of them.

In Paterson's signing message, the Beacon reported, he "underscored that the new law does not prevent the use of the stop-and-frisk technique, which is legal and constitutional, [provided] the officer reasonably suspects that the person stopped has committed or is about to commit a felony or a misdemeanor as defined in the penal law."

As for the 88 percent of New Yorkers who are blocked by cops on our streets (the huge majority of them black or Latino), Paterson emphasized that every American, in or out of school, should know — even members of Congress, those who still read what they pass: "There is a principle — which is compatible with the presumption of innocence, and is deeply ingrained in our system of justice — that individuals wrongly accused of a crime should suffer neither stigma nor adverse consequences by virtue of arrest or a criminal accusation, not resulting in conviction," he said.

But until this law, masses of New Yorkers accused of nothing at all remained in Ray Kelly's computer in case — who knows? — they are somehow connected in some way to some kind of alleged crime. Warned Paterson: "It is not unreasonable that these individuals could be targeted in future investigations even though no evidence of wrongdoing was found during the initial stop that warranted further legal action."

Is this America? It defined New York City justice until Paterson frisked Bloomberg and Kelly about their knowledge of the Constitution or privacy. He found nothing. Paterson said: "Simply justice as well as common sense suggests that those questioned by police and not accused of a crime should not be subjected to perpetual suspicion." Ever hear of a prosecutor named Stalin, Mr. Mayor?

If Rudy Giuliani had somehow been elected governor, can you imagine his ever signing into law what David Paterson did on the basis of simple justice?

What Bloomberg and Kelly would have gotten away with, had it not been for Paterson, illustrated this always contemporary truth by Thomas Jefferson: "Every government degenerates when trusted to the rulers of the people. The people themselves, therefore, are its only safe depositories. And to render even them safe, their minds must be improved to a certain degree."

The much underestimated Justice David Souter understood that. When he resigned from the Supreme Court, he was apprehensive about how few Americans know what it means to be an American, or should mean, saying that the majorities can't even name the three branches of government. (Ask your friends to name the five freedoms of the First Amendment.)

How many of them know that under the "Guidelines for Domestic FBI Operations," rushed through Congress in the last month of the Bush administration — and not in the least objected to by President Obama — the FBI, like under J. Edgar Hoover, can start a "threat assessment" (an investigation) of anybody without having to go to a judge and, as has been the case in this city's stop-and-frisk operation, without any reasonable suspicion?

"We need," Souter says, "the restoration of the self-identity of the American people." Otherwise, what safeguards individual freedoms from government "can be lost, it is being lost, if it is not understood."

The ACLU's "Establishing A New Normal" report ends with the grim conclusion that "if the Obama administration does not affect a fundamental break with Bush administration policies," it will "create a lasting legal architecture in support of those policies, and then it will have ratified rather than rejected the dangerous notion that America is in a permanent state of emergency and that core liberties must be surrendered forever."

As Paterson put it on the day of the signing: "Today, we have an opportunity to set the scales of safety and liberty in balance before we lose something we cannot get back."

At stake is not only an Obama break with the Bush-Cheney "dark side" here and abroad, but enough understanding among Americans that this current president has consistently and insistently maintained that he has the power to indefinitely imprison a terrorism suspect who cannot be brought before a military commission or into one of our federal courts because the purported evidence against him or her can't be admitted.

Why? Because that suspect has been tortured to extract the alleged evidence.

Years ago, I was writing a profile of Justice William Brennan, which became part of my book, Living the Bill of Rights (University of California Press). I was in his chambers at the Supreme Court, and was unusually somber.

"How," he suddenly asked me, "can we get the Bill of Rights off the pages and into the lives of students?"

I haven't heard that question in all the raging dissonance of how to "reform" education — and end its sentencing of so many of the young to largely dead-end lives. Some real-life changes, however, are being made in a number of schools around the country that focus on the critical-thinking skills of one student at a time instead of the collective test scores of a class, or a whole school, or a state.

I don't yet know how many of these still few schools are also bringing the Constitution into students' lives so that, as they become active citizens, they'll insist on their loyalty to the Constitution rather than to whichever government is in power.

Well, David Paterson took a small step in that direction. But how much time do we have to act on Justice Hugo Black's ringing of the liberty bell: "Do not be afraid to be free!"

Meanwhile, there are more and more NYPD stop-and-frisks on paper. During the first six months of 2010: 319,156. Same period last year: 311,646. Commissioner Ray, with 8.3 million of us in this city, you're catching up fast!

Sometime in the next week or so, the U.S. national debt will exceed $13.4 trillion.

To put that in perspective: If you earned $1 every second, it would take you 425,000 years to earn enough money to pay off that debt. And it's not likely to get much better any time soon. According to the Congressional Budget Office, the United States will run up more than $1 trillion in debt next year as well, and for years to come. And with entitlement programs like Social Security and Medicare facing more than $100 trillion in future unfunded liabilities, we may look back on this level of debt as representing the "good old days."

Yet, as frightening as those numbers are, focusing on the deficit and debt is to confuse the symptom with the disease. As Milton Friedman often explained, the real issue is not how you pay for government spending — debt or taxes — but the spending itself. In other words: Don't just look at the deficit, look at why we have a deficit. And the reason we have a deficit is pretty simple: Government spends too much.

Traditionally, federal spending has run around 21 percent of GDP. But George W. Bush and (even more dramatically) Barack Obama have now driven federal spending to more than 25 percent of GDP. And as the old joke goes, that's the good news. As the full force of entitlement programs kicks in, the federal government will consume more than 40 percent of GDP by the middle of the century. That doesn't even begin to count state and local-government spending.

As any doctor knows, getting the diagnosis wrong leads to the wrong treatment. Thus Democrats pose as deficit hawks by calling for more taxes. But think about how high taxes would have to be raised to pay for all the government spending to come. Federal taxes have traditionally run at around 18 percent of GDP. Currently, they are down somewhat, around 15 percent of GDP, mostly as a result of the recession. Would we really be better off if, in 2050, federal spending reached 40 percent of GDP but we doubled taxes to pay for it? There would at least theoretically be no deficit, but we would be both poorer and less free.

Of course it is almost as silly for Republicans to argue that the answer is simply to cut taxes in order to grow our way out of the problem. There are many good reasons to cut taxes — not the least of which is that the money really is ours — but too many Republicans argue that tax cuts would generate so much additional revenue that spending cuts aren't necessary. They harken back to Jude Wanniski's "Two Santa Claus Theory," which holds that "if the Democrats are going to play Santa Claus by promoting more spending, the Republicans can never beat them by promoting less spending. They have to promise tax cuts in order to grow the economy — not to 'starve the government of revenue.'"

Yes, tax cuts — at least some types of tax cuts — will stimulate economic growth. But no amount of economic growth is going to enable us to afford the levels of spending to come. And even if it did, would that be a good thing? Do we want that big a government, even if we could pay for it?

The fact is, there is no Santa Claus — not a Democratic spending one, and not a Republican tax-cutting one. Spending is going to have to be cut — really cut: The old "fraud, waste, and abuse" line is not going to do it.

Cutting spending is never easy politically. In an election season like this one, being honest about spending is liable to get you labeled as an "extremist." But it is time for someone to step up and show the courage to tell the American people that Santa Claus isn't coming to town.

The White House on Tuesday unveiled another "analysis" that purportedly demonstrates the stimulus's success in "transforming" the economy. Vice President Joe Biden, who presented the report, stated that the "government plants the seed and the private sector makes it grow." Argues Cato scholar Tad DeHaven, "Because the government possesses no 'seeds' that it didn't first confiscate from the private sector, what the vice president is advocating is the redistribution of capital according to the dictates of the Beltway. This mindset exemplifies the arrogance of the political class, which at its core believes that free individuals are incapable of making the 'right' decision without the guiding hand of the state."

• "Biden's Fatal Conceit, by Tad DeHaven
• "The Stimulus: The Government Job Creation Myth, by Tad DeHaven

featuring Adam B. Schaeffer

Love it or hate it, Israel is unique. A young nation created amidst conflict and sustained under siege, it retains an ethic forged in the famed "exodus" from Europe after World War II. While Israel exhibits a superficial commonality with Europe — Tel Aviv has the relaxed feel of other Mediterranean cities — there remains a hard inner core. One might question the wisdom of particular Israeli policies, but no one should doubt the Jewish people's willingness to do whatever is necessary not to repeat the past.

The best way to understand that commitment is to visit Yad Vashem. Established in 1953 as the Holocaust Martyrs' and Heroes' Remembrance Authority, Yad Vashem (the name comes from Isaiah 56:5) is a 45-acre complex on Har Hazikaron, or the Mount of Remembrance, overlooking Jerusalem. The site commemorates the Holocaust, or Shoah (meaning totally unimaginable catastrophe). To visit the history museum is to journey back into a human nightmare highlighting the utter depravity of mankind.

When the horror did end, Israel was one of the unintended results. The museum lives up to its goal of serving "as a bridge between the world that was destroyed and the life that resumed."

A new complex opened five years ago. The museum is built into the mountain using a unique triangular design, with numerous side exhibition halls.

Shortly after entering the hall carpeting gives way to simple concrete: a rough road is about to begin. The first exhibit illustrates Jewish life before the Holocaust. Jews typically constituted less than one percent of the populations of Western Europe and were largely assimilated. In Eastern Europe the Jewish share of the population rose, hitting 10.3 percent in Poland. At 3.3 million, Poland's Jewish population was Europe's largest and largely unassimilated. The Soviet Union followed with three million, but that constituted only 1.8 percent of the total population.

Included are some amazing film footage and photographs. One sees a lost world that was vibrant and diverse. Although anti-Semitism existed in West, the most vicious antagonism was further east. Industrialized and sophisticated Germany was one of the last societies in which one would have expected Nazism to take hold.

Next comes an exhibit of Nazi Germany at peace, when anti-Semitism was turned into official law and practice. It is a familiar story in some ways, but the museum turns abstract history into brutal reality. There is anti-Semitic literature, including the infamous Protocols of the Elders of Zion. Beer drinkers could use an anti-Semitic beer stein decorated with detailed reliefs. There even is an anti-Semitic board game for children, with the objective of capturing the Jewish figures: never lose an opportunity to teach children to hate.

Through photos, posters, relics, and text, the story of the Nuremberg Laws, Kristallnacht, and much more is told. Nazi policies came as a shock to German Jews who, the museum explains, "considered themselves loyal patriots, linked to the German way of life by language and culture." But nothing would protect them from the Nazis' warped ideology.

Controls over the economic, professional, and cultural life of Jews were steadily expanded. Photos of the period remind us how Adolf Hitler built support, imprisoned opponents, and persecuted Jews. "The Fateful Year," according to German documents, was 1938. An anti-Jewish campaign began which, according to the museum, "included the demolition of synagogues, mass arrests, destruction and looting of shops, and registration of Jewish property for expropriation purposes." Deportations of Jews with Polish citizenship also started.

Moreover, the bloodless conquests of Austria and Czechoslovakia placed more unfortunate Jews under Hitler's control. Still, Western nations were loath to offer sanctuary; the exhibit covers the tragic voyage of the St. Louis, turned back to Europe where many of its Jewish passengers ended up perishing. Jews had no sanctuary. Observed Chaim Weizman, President of the World Zionist Organization, in 1939: "the world is divided into places where they cannot live and places were they cannot enter."

Still, despite all this, no one could imagine mass murder. The onset of the war on September 1, 1939, again expanded, dramatically, the number of Jews under German control, and made possible — indeed, necessary, in the warped Nazi mind — the physical elimination of the Jews. The broad war story is standard for any World War II buff. But the museum emphasizes how the conflict impacted Jews, who faced expropriation of their property, arrest, and abuse. The abundant photos have lost none of their power over the years. No practice was too degrading or humiliating not to use on hapless Jews. Even the common troops joined in, usually with no prodding from above.

At this point the hallway steadily narrows to illustrate the diminishing options for Europe's Jews. Germany had to come up with a policy towards the millions of Jews now under its rule. In Western Europe, home of kindred racial peoples in Hitler's view, "the Nazis did not ghettoize the Jews but enforced racial legislation and introduced Aryanization and discrimination," explains the museum. In the east the policy was far harsher: Jews were forced into ghettos, isolating them from employment, culture, and the rest of the world.

The next side gallery — they are growing in size even as the hallway shrinks — tells the horrifying story of the ghettos in Kovno, Lodz, Theresienstadt, and Warsaw. Included are a bench, cobble stones, and even section of train tracks from the Warsaw ghetto. Again, photos and art show us a life that is unimaginable, filled with forced labor, starvation, and disease. Nevertheless, residents fought to preserve a community and cultural life, especially for children. Tragically, Jews so effectively imprisoned "were doomed to humiliation, poverty, decline, and death."

The death of millions was made inevitable by the German invasion of the Soviet Union, covered in the next gallery. Millions more Jews fell into Nazi hands. In January 1942 at the Wannsee Conference — the villa where the meeting was held is a museum in Potsdam, Germany — the decision was made for the "final solution." At first the killings were slow and inefficient: the four Einsatzgruppen could only shoot so many people.

Yet the photos of these operations are among the most striking in the entire museum. We see those about to be murdered and those who have been murdered. We also have a few horrifying images of the moment of death, of German personnel shooting, smoke escaping from their guns, and the victims' bodies poised at the top of a ditch, about to topple onto the corpses below. This was murder at the retail level, up close and personal. How can someone willingly commit such a crime? It is a question that carries forward through the ages.

The Einsatzgruppen did their best to kill promiscuously. But it was not enough for a regime bent on mass murder. Thus the ever-efficient Germans organized deportations to assembly-line death camps. The largest gallery in the history museum covers this period. The Nazis emphasized quantity. Heinrich Himmler explained in July 1942: "The existing extermination places in the East are unsuited to a large scale, long-term action. I have designated Auschwitz for this purpose."

The museum presents the entire horrid saga — the forced deportations, the ruses to defuse suspicion, the suffocating rail trips, the humiliating arrivals, and the extermination of millions. Again, the story is not new, but the photos, relics, and testimonies remind us that real people lived and died. The numbers constantly threaten to overwhelm, but we see individual victims. Of course, not all Jews went willingly. The Warsaw Ghetto uprising was followed by resistance in other Jewish ghettos. Still the Nazis continued with the killings.

Perhaps the most poignant exhibit, which comes next, details "The World's Silence." We will never know how many Jews could have been saved had the allies targeted the extermination camps and accepted Jewish refugees early and often. But it is a moral stain that will never be washed away. At least there were "Righteous Among the Nations," as the museum terms them, who acted, often at great personal risk, to save individuals and families. Their stories continue to inspire decades later. Raoul Wallenberg is well known. There were many others who are less famous but who were equally brave.

The next hall explores life in the camps, forced labor as well as extermination. Photos, artifacts, models, art, and testimony all detail a regimen of cruelty and death. Even the imminent end of war did not end the horror. For some liberation remained just out of reach, with death marches and execution. The purposes of the brutal evacuations were many: preserve needed labor, eliminate potential witnesses, and continue killing Jews. But others did survive, and soon the world knew everything.

The last exhibit covers the plight of the survivors. They managed to stay alive. But at what cost? They had been ravaged physically, emotionally, and spiritually. Their families had been killed, their communities had been destroyed, their nations had been wrecked. Survivor Herta Goldmann observed: "Slowly they told me they're all gone, you've got no one left. I had survived alone. All the hope that I had a family, someone to return to, all of life, all those years, I prayed that I wouldn't remain alone in the world. That's that, the hope disappeared and then came the despair."

How to move forward? Even liberation was only partial for many former inmates, who ended up in displaced persons camps, or victims of renewed pogroms in the east. How to rebuild an old life or build a new one? The desire to do the latter was, of course, a driving impulse in the creation of Israel.

But it was not just other Jews who lost so much from the Shoah. It was the rest of us. The Hall of Names brilliantly illustrates this point. The circular room is ringed with notebooks containing names and biographies of and testimonies about millions of victims. Explained my guide, one of Yad Vashem's "primary objectives was to give victims back their names. We are not talking about six million numbers, but six million people." After she found a page of testimony about her grandmother's half-brother, who died at Auschwitz, "I was so excited. It meant he existed. All of a sudden the number had a name."

The ceiling, essentially a cone rising skyward, contains more than 600 photos of the Nazis' victims — men and women, young and old. A cross section of humanity that happened to be Jewish. My guide — a wonderfully expressive lady who hailed from Brooklyn — pointed at the pictures and said, there was the cure for cancer. And maybe it was, along with a new symphony, an improved source of energy, and a better computer — not to mention a richer and more diverse human community.

The hallway ends with a balcony overlooking Jerusalem. It is a stunning end to a powerful trip through one of the worst, if not the worst, period of human history. There's more to the complex, including the Avenue of the Righteous Among the Nations, which acknowledges gentiles who saved Jews, as well as the Children's Memorial, to the 1.5 million children who died in the Holocaust. And Yad Vashem's mission is not just to display but to research and educate.

Human history is filled with much tragedy, war, and mass murder. But there's nothing quite like the attempt by the Nazis to wipe out Europe's Jews. It is an experience that should never be forgotten. And Yad Vashem will help ensure that it never is forgotten. Especially by Israelis.