SECTIONS

arts & leisure

finance

politics

reactions

reality check

BACKGROUND

home page

about us

contact us

press clippings

predictions

	Federal Follies By Declan McCullagh January 1, 1999 Quick: What do you think of when someone mentions the Year 2000 computer glitch? If you're like most of us, you might picture hackers hunched over monochrome terminals. Breath-taking computer crashes. Whopping mainframe problems at the IRS. Maybe even blackouts. But U.S. Marines patrolling city streets? That's what Sen. Robert Bennett has been talking about recently. And since Bennett is head of the Senate's Year 2000 committee and banking subcommittee, folks are starting to listen. In a June hearing, the Utah Republican asked what plans the Pentagon has "in the event of a Y2K-induced breakdown of community services that might call for martial law." Deputy Secretary of Defense John Hamre replied carefully, but none too reassuringly, "We've got fundamental issues to deal with that go beyond just the Year 2000 contingency planning. And I think you're right to bring that up." Other proposals are nearly as alarming. It seems that the closer we get to January 1, 2000, the more likely politicians are to take boneheaded ideas seriously. They're already describing Y2K as a national crisis -- and, hey, "crises" have a nasty habit of ending with abridged freedoms when the dust settles. It's high time to start worrying not just about computer snafus, but dangerous new laws and regulations. Consider the Securities and Exchange Commission's demand that companies reveal their Y2K plans and timetables. Sound reasonable? At first blush, perhaps. But additional reporting rules are as likely to delay useful work as encourage it. When programmer-hours become increasingly precious, why waste time filling out a blizzard of paperwork demanded by a host of different government agencies? Vague assurances (there is no standard way to calculate Y2K-readiness) might even lull the public into a false sense of security. Besides, market forces may do the job, without government intervention. Insurance companies are warning their customers. Moody's has cautioned firms that unless they can show they're Y2K-OK, their credit ratings will suffer. So will your pocketbook, if David Eddy has anything to say about it. Eddy, president of a software marketing firm, asked the Senate Small Business Committee to start a "Y2K service corps." Apparently envisioning Newer Deal camps where would-be programmers struggle for two weeks to learn arcane languages that in truth take years to master, Eddy invited the Feds to provide "start-up funds to create a training program for Y2K workers." (A similarly benighted U.K. government proposal would train prison inmates.) Harris Miller, president of the Information Technology Association of America, asked the same Senate panel for a national "public service" advertising campaign, tax breaks for companies done with repairs by July 1, 1999, low-interest government loans to pay for Y2K fixes, and a Year 2000 "small business corps" that could roam the country in search of companies in distress. (Not-so-coincidentally, the Y2K-repair firms that are members of ITAA stand to make a bundle from these roundabout subsidies.) "Other countries, including Hong Kong and Taiwan, have created national productivity centers," argued Miller, so why not the U.S.? And why not man these "national productivity centers" with conscripted programmers? Joel Willemssen, director of the General Accounting Office's civil agencies information systems, has been quoted as saying that the government may need to draft programmers to "find or hold people in critical government jobs, at least for two years." Willemssen didn't say how productive the draftees would be -- particularly after abandoning plush corporate jobs for government salaries. Don't Sue Me: Liability Limitations Nobody knows for sure what will happen when computer clocks touch 1-1-00, but one thing seems certain: Anyone with a problem will try to blame it on someone else. At least that's what doomsayers have been saying, with one estimate predicting Y2K-related litigation topping $1 trillion in the U.S. alone. It should be no surprise, then, that liability limits are becoming more popular. High tech firms this spring lobbied for such limits in the California legislature, but were defeated before the bill left committee. Clinton on July 14 proposed a "Good Samaritan" law to limit liability if firms disclose their readiness. One reasonable argument for limits goes like this: Our civil liability system is spinning so far out of whack that a bigger-than-asbestos, trillion-dollar hit might well send it into orbit. "In a rational world it's hard to justify liability caps. It's somewhat less hard to justify them in this world because liability does not always track harm," says David Post, a law professor at Temple University. But restrictions on liability would infringe on property rights and might conflict with the Fifth Amendment's prohibition on uncompensated takings. "If someone sells a product for some particular purpose, why should they after the fact have their liability limited -- especially on this one particular issue -- after someone may have bought the product or hired the firm?" asks Randall Holcombe, an economics professor at Florida State University. And it's unlikely that a liability curb would affect all industries neutrally. What's more realistic is legislation that would redistribute Y2K harm in a way that helps special interests, not economic efficiency. Recently health care lobbyists asked a House committee for such curbs. The National Association for Manufacturers wants one too. Yet granting liability caps would provide a particularly perverse incentive: With reduced worries, companies might stop working as diligently on Y2K repairs. It doesn't help that one of the best-known Y2K experts is Ed Yardeni, chief economist for Deutsche Bank Securities, who spends much of his time demanding aggressive government intervention. "Let's at least get from corporations what the government is providing," he said in June when pressing for more disclosure requirements. Yardeni also wants the government to order businesses to send home "nonessential employees" in January 2000. Another Yardeni scheme: Declaring war on miscreant computers. "The Y2K Alliance," he writes, "could use the expertise of military personnel who should be involved because they have the necessary training and experience for marshaling and mobilizing resources." Have The Feds Made Y2k Worse? One thing Yardeni and others miss is the government's Y2K problem. Government computers won't make it. Bureaucrats don't have the same fix-or-go-out-of-business market incentives to update their systems. They also don't have the same legal incentives: state governments have already begun to immunize themselves from Y2K lawsuits. Much more than the private sector, the Feds have proven themselves singularly inept at Y2K repairs. Since last fall, the IRS repeatedly has upped estimates of its Y2K costs, from $250 million to $850 million to more than $1 billion. It fell behind its own deadline of having 66 of its 127 most vital systems fixed by January 1998, and still hasn't finished deciding which minicomputers, file servers and PCs need debugging. Social Security, Medicare, Medicaid and veterans' benefits checks come from the Treasury Department's Financial Management Service, a little-known agency through which almost all the government's payments and collections flow. It's in poor shape. As of March, FMS hadn't finished even the preliminary step of deciding which systems needed to be repaired. Cypherpunk Jim Burnes compares Y2K to a virus that preys on the consolidation that happens when the government takes over vital functions like charity and health care. "Seeing that Y2K feeds on centralization, perhaps Y2K is a type of disease that all oversized central bureaucracies fall prey to," he says. "Is it a centralization virus? The ultimate example of software rot? Sure, Y2K can occur in relatively decentralized entities, but the effects are not widespread." What is spreading quickly are attempts by Republicans to wield Y2K against Al Gore -- a campaign that means Y2K decisions are being made in an increasingly partisan atmosphere. The House GOP leadership is now publishing a Y2K newsletter; the inaugural issue blames the White House for not sounding the alarm. "Mr. Vice President, you're the administration's technology point man," asked Republican hopeful Steve Forbes at a conference in June. "What have you been doing for the past five years?" Not reinventing government -- at least the Y2K-important portions. Antitrust laws thwart companies' plans to collaborate with competitors on Y2K fixes. Not until July did the Clinton administration reassure skittish corporate attorneys (who still want a guarantee in writing) that they won't be prosecuted. "We will be asking the Justice Department and the FTC for that kind of waiver," Jerry Jasinowski, president of the National Association of Manufacturers, said in late June. Immigration quotas aren't helping. High-tech firms complain that current restrictions on immigrants create a labor shortage that leaves 350,000 jobs open each year -- some of which are Y2K-repair positions. Then there's an arcane portion of the tax code, Rule 1706, that makes it risky for firms to hire independent contractors -- who are responsible for a huge portion of Y2K fixes. If you hire a consultant and the IRS later decides he should have been as an employee, you'll get slammed with hefty fines. Retired Intel engineer Tim May, who writes frequently about Y2K, argues that increased recordkeeping requirements such as pollution controls, Superfund tracking, and emissions standards exacerbate Y2K problems. Regulations require programmers to include "report-writing and compliance-checking code into the control software," he says. "Next thing one knows, a fairly straightforward engineering control problem is larded up with dates, fiscal years, reporting periods, and other such Y2K-interacting stuff." It's tempting to hope that the Y2K phenomenon brings with it new respect for private sector solutions (and hey, bringing down a couple federal agencies isn't a bad start). So far, though, the trend is in the other direction. Sen. Chrisopher Dodd (D-Conn) says: "You can't ask the government to solve this problem." No, but you can certainly rely on the Feds to make it worse. This article first appeared in the September 1998 (Vol.12, No.1) issue of Liberty Magazine.		FEATURES Book Reviews Y2K already has spawned its own genre. We tell you what books are worth buying. Chip 'n Little Cartoons Chip 'n Little goes on TV Chip 'n Little visits John Koskinen Chip 'n Little saves the world Warning: This cartoon has been called "foolish and tasteless." Y2K from A to Z Y2K Haiku Traditionalists may be shocked. Mad Cow Culture What does Y2K have in common with today's Mad Cow Culture? Answer: Everything. Declan McCullagh's Y2K articles Psychology of Y2K LATEST NEWS As of December 31, 1999 Get Your T-Shirt Quick Bill Gates Does Y2K Reader Feedback A Sarcastic Calendar Cooking After the Apocalypse A Real Y2K Disaster Hitchhiker's Guide Meets Y2K