Horse Ranch in Grand Teton, Wyoming

The American Conservation Ethic: How Individual Liberty and Free Markets Can Help Us Find Real Solutions to Environmental Problems

by Robert Gordon

AMERICANS ARE CONSTANTLY DELUGED with bad news on the environment.

We are told that we humans are degrading natural resources, disrupting the delicate ecological balance, the web of life—Earth as a living, breathing entity. We are told that, by and large, Earth’s natural resources are fragile, finite, and destined to degradation and decline, and even supposedly “renewable” natural resources are threatened given the rate at which they are now being depleted. We hear that this destruction is unsustainable; that we are approaching points of no return: a tipping point for the acceleration of global warming, the line where the extinction rate creates runaway ecological catastrophe or irrevocable injury to water, air, or other fragile resources.

We are told human consumption drives the degradation and destruction, and as population grows, so does the impact; that technological advances magnify our ability to degrade and deplete natural resources; and that profits from meeting the increasing consumption-driven demand enable further technological advances, establishing a vicious cycle of increasing destruction.

We hear that the array and magnitude of the threats humans present demand action even if some threats are speculative and even if the costs of the proposed actions are enormous. We are told, consequently, that science can no longer be value neutral when employed in the public policy arena and should determine environmental policies; and that government regulation and ownership—centralized and top-down—are necessary to protect Earth’s natural resources.

We are told that making society environmentally sustainable will require social transformation for undeveloped nations with explosive birthrates and especially for developed nations with disproportionate per capita consumption of resources. We hear that achieving sustainability will require altering, eroding, or jettisoning obsolescent cultural concepts, legacies, and institutions: the institution of property rights; the Judeo–Christian concept of dominion (the according of lesser values to non-human species); American notions of social and geographic mobility; and, clearly, consumption-oriented behavior. And we are told that policies must establish new norms that put us in greater harmony with the Earth; that opposition to these policies will eventually wane; and that ascending generations will have altered—meaning lowered—expectations tempered by their greater environmental awareness.

These messages sound ominous. I have asked many people: “What do all these ideas have in common?” and have gotten many different answers. The most common by far has been that these ideas are used to support command-and-control policies. That is definitely true. Ideas like these have formed the spines and ribs of much environmental thinking and, consequently, have guided the Environmental Protection Agency as well as the major pieces of environmental legislation, especially, the National Environmental Policy Act, and the Clean Air Act in 1970; the Clean Water Act in 1972; and the Endangered Species Act of 1973 (ESA). These ideas really began to take hold four decades ago in the Nixon era of wage and price controls, gas rationing, and other laws in the command-and-control mode.

The command-and-control answer is true, but there is another, more fundamental, commonality to these ideas. While there are instances, events, and examples that those who believe these ideas can point to in defense of their worldview, the reality is that, in general, these ideas are wrong. They are wrong—and wrongheaded ideas have consequences. A few examples of these ideas in action should give a flavor of the problems.

In the 1970s, environmental groups opposed capturing and breeding in captivity the last few wild California Condors. Instead, they argued that the Condors should be allowed to die out in dignity—that they should be allowed to go extinct. Clearly, these groups believed that human intervention can only be a negative on the environment. That is the philosophy behind the Endangered Species Act. Now, nearly 40 years after the ESA’s enactment, we keep adding critters to the list with little evidence that the program generally works and much evidence that it does not.

In 1994, a helicopter crew spotted a Boy Scout lost in the Pecos Wilderness, but because of the Wilderness Act, could not land to rescue him without permission from the National Forest Service. It took the Forest Service another day to grant permission for a second helicopter to rescue the 14-year-old boy, who thus had to spend another night lost in the wilderness. Environmental bureaucrats have had similar hesitations about permitting mechanical devices that would allow disabled individuals to visit wilderness areas—i.e., wheelchairs. Such bureaucrats seem to place little value on human welfare in their environmental calculus.

And very recently, the EPA told an Idaho couple that they could not build a home on their dry, vacant, residential lot, because the agency considers the property to be protected wetlands. And until the Supreme Court ruled otherwise in 2012, the EPA had maintained that its instructions to the couple were not challengeable in court because they did not constitute a final ruling under the law. If the couple had chosen to wait for a final ruling, they would have run the risk of facing fines in the amount of $37,500 per day. Here, the EPA seems to consider the rule of law and property rights as anachronistic obstacles to be swept aside in order to keep pristine every half-acre near any puddle or moisture.

The environmental establishment’s most illogical missteps do indeed become the subject of sensational news accounts and critical congressional hearings; but these accounts usually gloss over the deeper problems with environmental policy. At best, the environmental community may rhetorically acknowledge that environmental priorities should be “balanced” against other concerns—but only if doing so doesn’t threaten its broader quest for power.

There is, however, another framework for understanding environmental policy issues. That framework helps us understand that the problems noted above are not merely cases of bad judgment by environmental bureaucrats, but too much power given to too few bureaucrats in the first place. What’s needed to augment the piecemeal critique of the environmental establishment’s worst depredations is a set of principles that connects the goal of conserving the environment to America’s tradition of individual liberty, free markets, and the rule of law. We need a set of principles that shows how these ideas are not merely obstacles to be managed or accommodated by a centralized bureaucracy, but, indeed, should be sources of guidance in the search for solutions to environmental problems.

Below are eight principles that provide an effective framework for understanding environmental issues, and that provide an alternative to the command-and-control approach to environmental policy. That alternative is needed not only to find a better “balance” of human values, but indeed because the command-and-control approach is fundamentally mistaken in its understanding of how human beings best solve problems in order to live better lives. Here are the eight principles of what I and others in the natural resources field have come to call the American Conservation Ethic:

Principle #1: People are the most important, unique, and precious resource. This principle is both a value statement and a recognition of the power of human creativity. The inherent value of each individual is greater than the inherent value of any other resource. Accordingly, human well-being, which incorporates such measures as health and safety, is the foremost measure of the quality of the environment. Simply put, a policy cannot be good for the environment if it is bad for people. Moreover, this principle recognizes that human intellect and accumulated knowledge are the only means by which the environment can be willfully improved or modified.

The power of human creativity was most famously demonstrated by a bet between Julian Simon and Paul Ehrlich. Simon, a great free-market thinker, believed that human creativity was the ultimate resource. Ehrlich, who constantly sells catastrophe, sees humans as a plague. He even devised an equation: I = P x A x T, in which I = negative environmental impact; P = people; A = affluence; and T = technology. Humans are reduced to nothing more than a negative variable, and the renascence—progress itself—is illusory.

Many years ago, Simon bet Ehrlich that any basket of resources Ehrlich picked would go down in price over time. Ehrlich was sure that he would win because as population increases, demand increases, reducing supply. This would be especially so for finite materials. If present trends continue, prices should go up. Ehrlich picked a group of metals: What could be more finite?

Simon won. When the wager was up, every single metal Ehrlich had picked went down in price. They went down because present trends don’t continue. They don’t continue because the ultimate resource—human creativity—changes things. The ultimate resource resulted in things like the discovery of new supplies, more efficient mining techniques, and the development of substitutes.

Principle #2: Renewable natural resources are resilient and dynamic and respond positively to wise management. These resources—trees, plants, soil, air, water, fish, and wildlife—are the resources upon which we depend for food, clothing, medicine, shelter, and innumerable other human needs. Such resources are regenerated through growth, reproduction, or other naturally occurring processes that cleanse, cycle, or otherwise create them anew. These characteristics make it possible to use renewable resources now while ensuring that they are conserved for future generations.

Principle #3: Private property protections and free markets provide the most promising new opportunities for environmental improvements. Ownership inspires stewardship. Whether for economic, recreational, or aesthetic benefit, private property owners have the incentive both to enhance their resources and to protect them. Polluting another’s property is to trespass or to cause injury. Polluters, not those who are most vulnerable in the political process, should pay for damages done to others. The guarantee that people can reap the fruits of their own labor inspires the investments of time, money, and effort necessary to expand upon centuries of accumulated wisdom.

Principle #4: Efforts to reduce, control, and remediate pollution should achieve real environmental benefits. Science provides invaluable tools to do just that. One is risk assessment, through which we may rationally weigh risks to human health or assess and measure other environmental impacts. Another is cost-benefit analysis, through which we may measure actions designed to reduce, control, and remediate pollution or other environmental impacts so that we can have a cleaner, healthier, and safer environment. Tools such as these, not the self-contradictory “precautionary principle,” are most likely to help us achieve real environmental benefits.

Principle #5: As we accumulate scientific, technological, and artistic knowledge, we learn how to get more from less. Technology promotes efficiency, and through efficiency we substitute information for other resources, resulting in more output from less input. Technological advancement confers environmental benefits like more miles per gallon, more board-feet per acre of timber, a higher agricultural yield per cultivated acre, and more gross domestic product per unit of energy. As the economics writer Warren Brookes used to say: “The learning curve is green.”

Principle #6: Management of natural resources should be conducted on a site- and situation-specific basis. Resource management should take into account that environmental conditions will vary from location to location and from time to time. A site- and situation-specific approach takes advantage of the fact that those who are closest to a resource are also those who are best able to manage it. A site- and situation-specific approach avoids the institutional power and ideological concerns that dominate politicized central planning. Where laws and regulations to achieve environmental goals must be set, we should ensure that they are meaningful, measurable, and objective; and contain bright legal lines—rather than bureaucratic requirements—as to how such standards are to be met.

Principle #7: Science should be employed as a tool to guide public policy. Science should inform societal decisions, but, ultimately, such decisions should be based on ethics, beliefs, consensus, and other processes. A law is a determination to force compliance with a code of conduct. Laws go beyond that which can be established with scientific certainty; indeed, laws are based on normative values and beliefs and are a commitment to use the coercive power of the state.

Principle #8: The most successful environmental policies emanate from liberty. We Americans have chosen liberty as the central organizing principle of our great nation. Consequently, environmental policies must be consistent with this most cherished principle. Choosing policies that emanate from liberty is consistent with holding human well-being as the most important measure of environmental policies. Freedom unleashes the forces most needed to improve our environment. It fosters scientific inquiry, technological innovation, entrepreneurship, rapid information exchange, accuracy, and flexibility. There is a strong and statistically demonstrable positive correlation between economic freedom and environmental performance.

The Key to Effective Stewardship

Briefly, those are the principles of the American Conservation Ethic. In a nutshell, the Ethic recognizes that:

  • The key to effective environmental stewardship is to better understand renewable natural resources and the relationships among them;
  • We must use science as a guide for public policy;
  • We need to create policies that result in real and significant environmental benefits;
  • We should tap the free market and property rights to achieve environmental goals;
  • We must approach environmental issues on a site- and situation-specific basis;
  • We need to tap the inherent and relentless drive for efficiency through technological improvement; and
  • While doing all of this, we need to recognize humans as the most important resource and liberty as something we choose and refuse to sacrifice.

Applying this knowledge improves our ability to use our natural resources wisely and conserve them for the benefit of current and future generations.

All Americans aspire to improve upon our tradition of wisely using and conserving the world around us for generations to come. The American Conservation Ethic embodied in these eight principles is the way to fulfill these aspirations.

While we may not have all the expertise gathered here to answer each and every environmental question, we—not being planners for the state—should not expect to. What we recognize is that somewhere out there, among the greatest resources—humans, human intellect, human creativity—there is an answer and that having principles such as these can help us identify it.


Mr. Gordon is Senior Adviser for Strategic Outreach in the External Relations Department at The Heritage Foundation. This article is adapted from remarks he delivered on August 28, 2012, introducing The Heritage Foundation publication, Environmental Conservation: Eight Principles of the American Conservation Ethic.

slow_recovery

Why Such a Slow Recovery? New Regulations Are Killing Start Ups and New Jobs

by Salim Furth

THE ECONOMIC RECOVERY since 2009 has been exceptionally slow and does not match the pattern of previous recoveries. One reason for the recovery-less recovery is that new government regulations combined with tighter credit have made it harder than ever to start a business. Those factors have raised the barriers to entry to new firms, and since start-ups normally create all of the net new jobs in an economy, job creation and investment are slack.

The Slow Recovery

Here’s what we know about the recovery from the 2008–2009 recession:

1. It has been a very slow recovery. Usually, gross domestic product grows fastest right after a recession as it bounces back to trend. Since 2009, GDP has been growing parallel to—but far below—the long-term trend. Employment has remained flat since 2009. Employment dropped drastically in 2008 and has not recovered.

2. Non-residential investment fell by almost 25 percent in two years but has grown steadily since the end of 2009. It has not yet returned to its 2007 level.

3. Corporate profits are booming. Corporations have strong revenues but are not purchasing much capital or labor.

Start-Ups

How can we account for these three facts? An extra piece of the puzzle suggests an explanation: Employment at start-up companies has fallen for five years in a row, reaching unprecedented lows in 2010 and 2011.

Start-ups have been a constant source of new employment in the U.S. economy, hiring about 15 of every thousand working-age American adults every year for decades. Previous recessions featured big job losses from existing firms, but even in recessions, start-up job creation has been a constant—until now.

As economists John Haltiwanger, Ron S. Jarmin, and Javier Miranda show in a 2011 paper published by the National Bureau of Economic Research, most net new jobs come from start-up companies. In 2005, 3.5 million net new jobs were created by startups, while the rest of the economy shed a million jobs. In fact, existing firms rarely create net new jobs. The economy expands by the creation of new firms, not from the expansion of existing firms. Research by economist Tim Kane of the Hudson Institute documents that even in 2008, at the depth of the great recession, new firms created 2.8 million new jobs. But instead of recovering after the recession, job creation by new firms fell in 2009, 2010, and 2011.

Kane shows that hiring by start-ups has slowed to 10 jobs per thousand adults per year, one-third lower than the usual rate. In 2010 and 2011 alone, “missing” start-up hiring amounted to 2 million net jobs. With normal start-up hiring, growth in the employment rate would have been three times as high as it was.

Fixed Costs

Why would business start-ups fade in a period of booming corporate profits? After all, the last two peaks of corporate profitability were both followed by peaks in start-up job creation in 1998 and 2006. And why are corporate profits so strong when the economy is weak?

A simple explanation is that fixed costs, which constitute a barrier to entry to new firms, have gone up in recent years.

With new regulations and business requirements in health insurance, small-business finance, environment, energy, and tax compliance, not to mention the ever-expanding reach of state licensure boards, it is expensive to open a business. In a report published by the Weidenbaum Center at Washington University in St. Louis and the George Washington University Regulatory Studies Center, Melinda Warren and Susan Dudley have calculated how much money the federal government spends to develop and enforce regulations. They calculate that the federal budget for economic regulation increased to $9.2 billion in 2012 from $6.3 billion in 2007. In President Barack Obama’s first three years in office, 106 new major regulations were created (four times more than in President George W. Bush’s first three years), report The Heritage Foundation’s James Gattuso and Diane Katz. Those regulations cost earners $46 billion annually. The biggest new fixed costs come from the Dodd–Frank bill, ObamaCare, and the activist Environmental Protection Agency. In all three cases, enormous discretion is left to regulators to write and implement rules as they see fit. Under arbitrary enforcement, large firms with lobbyists and lawyers have a competitive advantage over unconnected newcomers.

High fixed costs and onerous regulation are textbook “barriers to entry.” Incumbent firms favor many of these barriers, because they keep competitors out of the market, which keeps profits high. In banking, the stringent regulations of the Dodd–Frank Act not only make it hard for small or start-up banks to survive, they discourage banks from lending to borrowers who do not have a strong track record. Less credit for unknown borrowers means fewer start-up jobs created.

Other factors that might discourage competition and firm creation include: elevated uncertainty over the implementation of new regulations, expectations of higher tax rates in the future to pay for rising debt, implicit promises of bailouts for large incumbent firms, and slow demand growth since the recession.

As long as start-ups are held down by bad policy and feckless deficits, incumbent firms can earn profits without expanding supply.

What Policymakers Can Do

Policymakers need to ease entry by new firms. This task can be done at all three levels of government. At the state level, licensure boards should be composed of industry customers, not industry insiders; and licensing requirements should be repealed wherever safe.

At the federal level, Dodd–Frank’s over-regulation of the financial services industry should be repealed, along with its implicit promise of bailouts; and Obama-Care, which was written with input from the largest insurance companies, should be replaced with a sensible health care system based on competition and individual choice.

And at every level of government, regulations of energy use and the environment should be rationalized by taking account of the broad economic impact; small-business regulations that can’t be followed without a lawyer’s help should not be written; and lobbying for special favors and protections should be rebuffed. Generally, big employers in congressmen’s districts do not create net new jobs; their upstart competitors do.

A Bad Environment for Jobs

Entrepreneurs have proven their willingness and ability to start new firms and hire new workers in every economic environment. Only since 2007, in a policy environment that puts government first and people second, has their creativity been slowed. Washington should reverse this trend immediately.


Mr. Furth is Senior Policy Analyst in Macroeconomics in the Center for Data Analysis at The Heritage Foundation. This article is adapted from his Heritage Foundation paper of the same title, published in October 2012.

lehman-j-hires

Right-to-Work Comes to Michigan: An Interview with Joe Lehman of the Mackinac Center for Public Policy

IN DECEMBER, Michigan—the land of the United Auto Workers—became the 24th right-to-work state, which means workers can’t be forced to join a union in order to obtain a job. A key reason that reform happened is the work of the Mackinac Center for Public Policy, a free market think tank founded by Lawrence Reed in 1988. Mackinac introduced the idea of right-to-work to the public shortly after opening its doors and did not stop talking about it until the reform was enacted. Joe Lehman, President of the Mackinac Center, talked with us about right-to-work, unions, Michigan’s economic situation, and the work of changing people’s minds in the long run.

The Insider: How did Michigan become the 24th right-to-work state?

Joe Lehman: It certainly didn’t all come about in the last few weeks or months. In fact, it’s the high point on an arc drawn over the last 20 years by the Mackinac Center and its allies.

TI: When did the Mackinac Center start pushing for a right-to-work law?

JL: Lawrence Reed opened the doors to the Mackinac Center in 1988, and he recalls talking about right-to-work the very next year and being ridiculed for it. In 1994, Larry and Joe Overton—our senior vice president—wrote a report calling for Michigan to pass a right-to-work law. That was our first report on the topic. It took another year to convince the Detroit Free Press, the biggest newspaper in the state, to even allow us to ask the question on its pages: Should workers be forced to support a union in order to hold a job.

At that point right-to-work was still an idea in Michigan that seemed utterly impossible, but we knew it would always be impossible unless we put the idea on the map, developed it, described it, explained how it could work, and made it politically possible.

TI: So how does right-to-work work?

JL: Right-to-work is a very simple concept that is often confused by unions. All right-to-work does is say a worker can’t be fired for refusing to support the union.

TI: How do you think right-to-work will make the Michigan economy better?

JL: It’s important to understand that right-to-work is not a magic bullet. Merely allowing workers the freedom to decide on their own if they’ll support a union is great for workers, but it is not a magic elixir for the economy. The effects of right-to-work come into play over time.

Right-to-work requires unions to be more responsive to their members. They can’t freeload on their members’ paychecks anymore. They have to earn their members’ trust. They have to earn those dues. To do that, they have to constrain their bargaining in ways that won’t bankrupt the companies they’re negotiating with.

One reason the auto companies are in such dire straits is that there is very little holding the union back from demanding more and more. Government, through the Wagner Act, gave unions the power to compel bargaining, and management gave in too often. We saw what happened to those companies. Michigan’s economy was greatly affected by that.

So those are the economic effects, but I would say there is an even larger effect of passing right-to-work—a psychological effect that is the same as hanging a huge billboard in space over Michigan that says: “Michigan is open for business.”

Over the past half century, when companies all around the country and the world looked at Michigan, they said: Well there’s a place that has a lot of talent, a lot of resources, and a lot of advantages, but the unions are running the place.

Now when they look at Michigan, they’ll say: Wow! You mean the legislature actually passed a right-to-work law? They must be really serious about getting their act together. They must be really serious about fixing their economy. And if they passed a right-to-work law, they must be doing a lot of other smart things, too.

So I think some companies that wouldn’t have considered locating in Michigan before will now rethink that decision.

TI: Is it true that right-to-work will mean the end of unions and lower incomes for workers?

JL: It’s not true. If anybody is contemplating right-to-work as a way of getting rid of unions, they need to find a different strategy. It doesn’t work. There is robust union membership in right-to-work states. In fact, Nevada has one of the higher rates of unionization, and it’s a right-to-work state.

Right-to-work doesn’t change collective bargaining, and right-to-work doesn’t change the right to organize. All it does is say: The unions are not automatically entitled to a slice of the paychecks of all the workers they unionize. They have to earn those dues.

TI: Michigan is the only state in the country that lost population between 2000 and 2010. And even with all the people leaving, Michigan’s unemployment rate is still a percentage point higher than the national average. So do these reforms represent the rare case of government learning from failure?

JL: Economic hard times certainly opened many people’s eyes to different policy possibilities. It’s hard sometimes for people to change when things are going reasonably well, but things were not going reasonably well in Michigan for really more than a decade. Things are just starting to turn around maybe in the last year or so. Michigan lost about a million jobs in a decade. So the Mackinac Center was there with the idea, keeping the idea alive until policy makers needed our idea as an alternative.

TI: Even before right-to-work passed, the unions had a setback in the November elections, right?

JL: That’s right. The unions advanced several ballot measures in November. The most important of those was Proposal 2. That was a very radical constitutional amendment that would have given government union contracts the ability to overrule acts of the legislature.

That amendment did more than enshrine collective bargaining rights in the constitution. It actually said anything that a union manages to get into a contract can trump state law. For instance, if the law says teachers have to pay a portion of their health insurance, but the contract says they don’t, the contract trumps the law. It would have turned the governance of the state on its head. We worked very hard to educate voters on that point, and they very soundly defeated Proposal 2 by about 15 percentage points.

TI: What other labor policy reforms would you count as successes?

JL: One of the most underappreciated achievements of Governor John Engler was moving all state employees from a defined-benefit to a defined-contribution pension system in 1997. That reform saved the state billions of dollars. He did not manage to move the teachers into that system. That work remains to be done. But you’ve got to hand it to John Engler because he took all the political heat for a reform that future politicians and future taxpayers and constituents would benefit from. You don’t see that very often.

TI: How much money has that reform saved Michigan taxpayers?

JL: The Mackinac Center estimates that those reforms save $167 million in current spending and between $2.3 billion and $4.3 billion in future liabilities.

TI: Any other victories on labor policy?

JL: There are. Since 2000, the Mackinac Center has handed the unions several defeats in the courts and in the legislature.

In 2001, the Michigan Education Association sued us demanding our donor list. In that suit, the MEA was trying to prevent us from quoting their president. The MEA president had called a news conference and told reporters he admired what the Mackinac Center had done in terms of getting its research to legislators. We quoted him when almost nobody else did, and then he sued us because he didn’t want us using his quote. The union lost that case. The union leaders did not get our donor list, but they got national embarrassment every time their lawsuit made the news and the quote, “Frankly, I admire what the Mackinac Center has done,” was reported.

Since then, Mackinac Center Legal Foundation has put a stop to three separate illegal government unions that were extracting a total of about $10 million per year from people who were not even government employees.

TI: Who were those workers?

JL: One group was home health care workers. Another was university graduate students. That litigation is actually still pending, but we have got them stopped for now. The other one was home day care workers.

TI: How does one illegally unionize workers?

JL: Most of those workers were not even aware they had been unionized. The unions claim they had conducted an election by mail for the day care and home care workers, but for some reason most of the 100,000 people who were swept into those schemes—at least the ones we’ve talked to—don’t remember ever being asked if they wanted to be part of a union. They just noticed that the union started taking money from them.

TI: Now that right-to-work has been passed, what other labor law reforms do you think Michigan needs?

JL: The state’s prevailing wage law still costs taxpayers as much as $400 million a year by shielding union construction firms from competition. That needs to go. The unions claim to be democratic institutions, yet the vast majority of unionized government workers have never even voted on forming a union. These unions were formed by their parents and grandparents. All government unions should have to stand for approval by the workers every two years at least.

TI: Anything else that you would advise Governor Snyder to support in order to help Michigan’s economy?

JL: Even a Republican governor like Rick Snyder could learn from President Franklin Roosevelt, who was very clear about his skepticism of the whole idea of government unions. President Roosevelt said the idea of collective bargaining as usually understood cannot be transplanted to the public service. Roosevelt may have been the best friend unions ever had in the White House, but he understood that unions should not want to be in the position of bargaining against the taxpayers. That is, of course, what happens when unions organize government workers.

I would also advise Governor Snyder to finish the job on pension reform. We still have a teacher pension system that continues to pile up unfunded commitments that there is no way to pay until we convert the system to a 401(k) type arrangement. So that is work that remains to be done.

TI: Does the federal government bailing out some of the state’s biggest employers (i.e., Chrysler and General Motors) make it harder for you to make the case for smaller government?

JL: It is harder. Federal bailouts are a true moral hazard. You see some political officials in other states calling for federal bailouts, but it’s the worst thing that could happen to fiscal discipline. Sometimes a federal subsidy looks attractive to a governor. But we’ve explained to our governor that the taxpayers really don’t care which government is overtaxing them, the state or the federal. The people are paying for it one way or another. Nobody should be fooled by this federal shell game of taxing the people in one state to subsidize those in another. It’s like people standing in a circle trying to get rich by putting their hands in each others’ pockets. It just doesn’t work.

TI: The teachers union does seem to have the upper hand on one issue: Your state constitution says taxpayer money can’t be spent on any kind of education voucher program. Is that limitation going to prevent Michigan from participating in the wave of school choice sweeping the country? Or will charter schools be sufficient to provide the competition needed?

JL: We support charter schools, but they are not enough. At the end of the day, even though they are typically not hidebound by the unions, they are still government schools that lack the flexibility and incentive structure of private options.

We are very heartened to see Governor Snyder doing a lot to expand public school choice. The cap on charter schools has effectively been eliminated. That was legislation he signed. Currently, the legislature is considering legislation that would essentially knock down the school district “Berlin Walls” that separate children from the schools that might be better for them. That would create more choice and competition within the public school system. That’s all good as far as it goes, but we won’t see the change we need until we amend our constitution to let the money follow the child to whatever school the child’s parents choose.

TI: Would you care to look into your crystal ball and make a guess about where Michigan will be 10 years from now?

JL: My prediction is that in 10 years, there will be newspaper stories written about all the people who in their 20s and 30s felt like they had to leave Michigan when times were getting bad but now they are returning home, and the grandkids can be with the grandparents again. There will be more stories written about the state that came close to the brink of losing its economic productive capacity. They’ll tell a turnaround story that really began to take hold when a governor embraced some ideas nobody expected him to—but he did it, because a lot of the other alternatives had been tried and they had failed.

CT4YE9 Password security

Don’t Invite Strangers Into Your Home: How to Protect Your Think Tank’s Information Technology

by Mark Harris

THESE DAYS THINK TANKS are especially attractive targets for hacking, phishing, and other assorted cyber vandalism. Even foreign governments, according to the House Intelligence Committee, are busy trying to pry secrets out of think tanks through cyber espionage.

I was talking the other day to a friend about the types of security we use to help protect The Heritage Foundation’s Information Technology (IT) network and ensure that its digital infrastructure remains secure. IT has become the underlying cornerstone for many of our daily workplace activities, such as messaging, idea formulation, internal and external communication, and information sharing. It is critical to keep that infrastructure secure, reliable, and available.

No matter how much time, effort, and money you invest in a system to keep the bad guys out, it won’t work if you open the front door and let the bad guys come right in.

I rattled off a host of techniques that we use, many of them with abbreviations like SSL, Secure VPN, IPSEC, VDI Infrastructure, PKI, IDS, and IPS. When I received a blank stare of incomprehension I came up with an analogy that helped my friend understand that IT security isn’t just for the IT staff to worry about. He is part of the equation, too. I told him:

There was a rich man who lived in a bad neighborhood. The man had valuables that other people wanted to get their hands on. He took steps to secure his home. He put bars on the windows, installed multiple locks on the doors, and had a company come out to install an expensive security system with sensors and cameras that would alert him if anyone tried to get into his house. Everything was automated and he didn’t really have to worry about the system protecting him. It just worked and he felt very secure. One day the man had to go away on a business trip and decided he did not want to leave his house unguarded so he invited a friend to come and stay there while he was away. He explained that the house was secure with the best technology money could buy and the bars on the windows and doors were made from the strongest steel. The house sitter felt very secure. Later that evening the doorbell rang. The friend answered the door and found a well-dressed man carrying a suitcase on the doorstep. The man explained that he was friend of the homeowner who had some business papers to drop off. The house sitter let the man in. They chatted for a while and the man handed him some papers for the home owner. He then asked if he could use the bathroom, and he walked through the house to use it. The next day the owner returned home and discovered some of his most valuable possessions were missing. The owner asked the house sitter how the loss might have happened. The house sitter said it must have been the visitor who dropped off some business papers. The owner was not pleased. He had spent a lot of money on a security system only to have it rendered pointless by his friend’s gullibility.

No matter how much time, effort, and money you invest in a system to keep the bad guys out, it won’t work if you open the front door and let the bad guys come right in.

Your IT security system is like the door locks, the bars on the windows, and the house alarm system. Firewalls, the IDS, the IPS, the antivirus infrastructure, and all the other technical backend are put in place by IT staff to keep a network secure. Your employees are like the house sitter—dedicated workers researching, downloading, and e-mailing to get theirs jobs done. And rogue states, mafia rings, kids writing scripts to damage networks for fun, spammers, intellectual property thieves, and data thieves are like the well dressed visitor who gains entry via a ruse.

Criminals don’t usually walk around wearing a mask and carrying a bag that says “Loot” on the side of it. The same is true of cyber criminals. There are a number of simple steps that you and your staff can take to protect your network and data. Unfortunately, it takes only a little bit of carelessness to make yourself a victim of “social engineering” techniques that trick people into giving out sensitive data to people who seem trustworthy but really are not. “Social engineering” is very hard to thwart, which is why it is the number one way that networks are compromised.

Clicking the link in an e-mail from an unknown recipient, visiting a website that looks legitimate, and browsing the web with no real goal are prime ways to be hacked. Ninety percent of the time these vulnerabilities can be combated through taking the following precautions:

● Be suspicious of unsolicited phone calls, visits, or e-mail messages from people asking about employees or other internal information. If someone you do not know claims to be from a legitimate organization, verify his or her identity directly with the company first before giving out any information.

● Do not provide personal information or information about your organization, including structure or networks, unless you are certain the person is authorized to have the information.

● Do not send personal or financial information via e-mail and do not respond to e-mail solicitations for this information. And do not follow links that may be in such e-mail solicitations.

● Do not enter sensitive information onto a website without checking the website’s security.

● Pay close attention to website addresses (URLs). Malicious websites may look identical to a legitimate site, but the URL may use a variation in spelling or a different domain (e.g., .com vs. .net).

● Be extra vigilant during events such as natural disasters (e.g., Hurricane Sandy, Indonesian tsunami); during epidemics and health scares (e.g., an influenza epidemic); during peak shopping seasons (e.g., Cyber Monday, Christmas, Valentines Day); and during major elections. Attackers often take advantage of those occasions to steal information.

My friend didn’t need to be educated in the technical aspects of network security to help keep his information safe. He just needed to know to be careful and aware of what the risks were and of social engineering tactics used to gain access to important information. Education and awareness are the keys to keeping us all safe and secure.


Mr. Harris is Director of Information Systems at The Heritage Foundation.

 
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