Policy Institutes

Will global warming of a couple of tenths of a degree Celsius bring about certain disaster? That’s what a widely circulated report by Marlow Hood of the French Associated Press suggests about the horrors to come if global warming exceeds 1.5°C.

But this is one of those cases where the prescription is worse than the disease.

According to the Climate Research Unit at the University of East Anglia, we’ve already warmed about 0.9° since 1900, although temperatures have been remarkably flat in the first 14 years of this century. A bit less than half of the total warming probably had nothing to do with the combustion of fossil fuels, as it began in 1910, when the increase in atmospheric carbon dioxide was tiny.

Global temperatures are a mere 0.6° away from the dreaded 1.5° threshold. Yet there are reasons to question the concerns voiced in the AFP report; does one seriously believe that if you tack on another 0.6°, all that prosperity, wealth, and health that was accrued since 1900 starts to melt away?

Since then, vibrant economies grew like topsy. Per capita wealth in the U.S. increased by more than a factor of ten, and life expectancy nearly doubled.

Despite the fact that cities naturally warm from the bricks, buildings and pavement retaining heat, and also warm slightly from carbon dioxide increases, heat-related deaths are in decline because people adapt to frequent and repetitive events. And global warming preferentially heats the coldest airmasses, not the hottest ones. It’s noteworthy that winter cold kills 20 times more people than summer heat. 

And in spite of rising temperatures, there has been economic development throughout Asia and South Asia in recent decades, with China’s average GDP growth exceeding eight per cent since 2000. In sub-Saharan Africa there have been rapid increases in life expectancy, between 20 to 42% since 2000. It’s unlikely that temperatures 0.6 degrees higher will dramatically reverse that.

Yet the AFP article points to research which says that, despite huge gains in global per capita GDP to date, it will fall globally by 13% if the world meets the 2° ceiling. According to the World Bank, global GDP is currently growing at an impressive 3.7% per year, despite climate change.

The research cited by the AFP is flawed at its core, because it assumes that all the warming since 1900 has been caused by human activity. If the spurt that began in 1910 (and ended in 1945) indeed was due to us, then the atmosphere would be so sensitive to changes in carbon dioxide that it would be hotter than blazes right now.

Global temperatures did spike in 2016, but that was thanks to a big El Niño event, a periodic fluctuation of the tropical Pacific Ocean that releases a lot of heat into the atmosphere. Both satellite-sensed and surface-measured temperatures have since fallen back near to what they were at the end of the 14-year “pause” in warming, prior to the El Niño. Both records show net warming to be about half of what was forecast to be occurring by this time.

The 1.5° goal turns out to be very expensive compared to the two degree limit. Recently Joeri Rogelj of the International Institute for Applied Systems Analysis in Vienna calculated in his econometric model that the cost of limiting warming to the IPCC’s 1.5°C is three times the cost for two degrees Celsius.

And that doesn’t even consider the illogic that literally a few tenths of a degree of additional warming will somehow turn the world around from its prosperous trajectory of the past 120 years.

This week’s report, by Elizabeth Thomas and colleagues from the British Antarctic Survey, that snowfall has been increasing in Antarctica is hardly surprising. What is different that it is much more comprehensive than previous studies, which were largely limited by a virtual lack of pre-1957 data. That was the “International Geophysical Year”, in which systematic observations of Antarctica’s climate began.

The new study looks at the last 200 years of snowfall trapped in 79 ice cores taken from around the continent. It supplements other recent findings that also made headlines.

Determining Antarctica’s overall ice balance has been, well, slippery. One favored method has been to look at gravitational data measured by satellite. Thicker ice means more mass, which means greater gravity. These studies usually come up with a net loss, translating to from 6/1000 of an inch of sea level rise per year to 12/1000 (both values being rather small beer). But different measurements show otherwise. Three years ago, Jay Zwally and his colleagues at NASA used satellite-based altimetry and concluded Antarctica was undergoing a net gain in ice.

Common sense dictates that it should be snowing more in Antarctica. Think of it as Buffalo on steroids when it comes to snow. In the fall, when Lake Erie isn’t frozen, cold air passing over it from the west picks up evaporated moisture and dumps it on the land in the form of snow squalls. The warmer the water and/or the colder the air is, the more is snows. Unlike a mere Great Lake, Antarctica is surrounded by a largely unfrozen ocean, and when any atmospheric disturbance sends moisture onshore, it snows too.

Around Antarctica, there’s been a slight—meaning a couple of tenths of a degree—warming of the surrounding ocean, which means that the air blowing over it picks up a bit more moisture than it used to. Unlike Lake Erie, the Southern Ocean is huge, and any atmospheric disturbance that shoves more oceanic air up onto the continent is going to be pushing a substantial stream inland with ever more moisture, even for a very slight ocean temperature rise.

The “surface mass balance” of a glacier or an ice sheet is the difference between accumulated snowfall and what either melts or evaporates. In anticipation of increased snowfall, the last (2013) scientific summary by the United Nations’ Intertgovernmental Panel on Climate Change shows that the projected 21st change in the Antarctic mass balance to be weakly positive. That’s why it’s perplexing that the new finding is so newsworthy.

But now we know that the snow has been increasing down there for the past 200 years…and that the increase started before the major emissions of atmospheric carbon dioxide.

The House of Representatives are set to debate and vote on introducing a Balanced Budget Amendment to the Constitution of the United States. Such a move is almost certain to fail, as it requires a super-majority in both chambers of Congress, and three-quarters of the states—38 out of 50—would need to ratify it. Coming hot on the heels of the recent spending-cap busting omnibus bill, it’s difficult not to see this as a form of Republican fiscal virtue-signalling.

As I wrote in my recent paper on fiscal rules, the best way to build support for fiscal conservatism is to deliver it. That means constructing an argument about the supply and demand for government, getting public and political buy-in for a new fiscally responsible budgeting framework, and taking the necessary steps to get to a stage where the budget is balanced, ideally though spending cuts. Neither party has shown an appetite for this so far – in fact, quite the opposite.

Rule design is an incredibly important part of acceptance, and then adherence to a rule, too, though: critics and economists have a point about some of the downsides of a pure year-on-year BBA (as proposed). Evidence from around the world suggests rules that are too inflexible to changing circumstances and recessions prove less durable.

The specific proposed bill would require budget balance every year unless three-fifths of Congress overall voted for an exception. This would be both too stringent and too lenient at the same time: creating difficult within-year budgeting conditions when outcomes deviated from plans, but also giving Congress carte blanche to abandon fiscal probity during “emergencies”. Rather than this rigid form of rule, Congress would be better served examining countries such as Switzerland, which insists on year-on-year “structural” balance, equating to absolute balance over time, and which compensates for deviations from plans and emergency spending by adjusting spending caps in future.

There’s another issue with the rule though, and one where libertarians will be divided. It tries not only to ensure balanced budgets, but also to cap the overall size of the federal government at 20 percent of GDP. This relates to a fear that conservatives such as Paul Ryan have had in the past about BBAs (he voted against one in 2011). Then he said:

My specific concern was that under this bill, a future Congress could raise spending levels without any limits and then raise taxes without any limits to meet the increased spending levels.  The result would still be a balanced budget, but without any caps on spending or taxes.  In the end, this proposal would allow Congress to continue to chase ever higher spending levels with ever higher tax rates.  Consequently, for these reasons, I could not support this Amendment.  I do; however, support a balanced budget amendment that would keep spending and tax rates in line with their historical averages.  If this version of the amendment is brought to the House floor, it would have my support.

Now all libertarians would agree with Ryan that keeping government small is desirable. And as Milton Friedman explained, it’s government spending that is the real tax burden on the private economy, so it’s spending that is what we want to reduce. The question really is then whether a pure BBA will help or hinder this goal?

Ryan’s view, shared by some of my colleagues, is that a BBA neutral between taxes and spending would make the case for tax increases easier to make. Politicians could say “we have to balance the budget, and so we must raise taxes to protect spending.”

My view is that using a BBA to try to achieve two objectives – balancing the books and determining the size of government – means there will never be a consensus for one to be introduced and endure. Democrats wouldn’t tolerate it. And that loses some key benefits of having one as a tool to encourage spending restraint.

Politicians have complete freedom to raise taxes now. They don’t. Why? One reason is surely that deficit-financed spending creates a fiscal illusion. People do not feel the effects of higher spending being linked to their pay checks or spending power. A BBA would make this link between taxes and spending explicit over time, eliminating the expectation of a free lunch. Just as in the UK when the public took deficit reduction seriously, the constant question politicians would be asked when they proposed higher spending would be “how are you going to pay for this?”

The strategy of “starving the beast” by cutting taxes first has seemingly had no discernible effect on curbing this spending, given it can be financed by borrowing. It seems highly likely that if spending and taxes tracked each other, that support for spending would be more likely to fall than rise.

Importantly, a Swiss-style debt brake would not allow Congress to raise spending without any limits and then raise taxes later. But it wouldn’t determine what the size of government should be – allowing governments to raise taxes first to facilitate higher spending. In other words, it would encourage honest and transparent budgeting.

Those who believe in smaller government should have the courage of their convictions in saying “if you want low taxes, then we need spending restraint.” Yes, there’s a risk of the opposite equilibrium developing – but right now that risk exists too as the recent spending bill showed, and there are many other downsides associated with continuing to sail into the debt abyss.

On April 11 the Washington Post cited a new study from the American Action Forum that reinforces arguments I have made here and here, that despite a dramatic reduction in the opioid prescription rate—a 41 percent reduction in high-dose opioid prescriptions since prescriptions peaked in 2010—the overdose rate continues to climb, as nonmedical users have simply migrated to more dangerous substitutes like fentanyl and heroin while the supply of diverted prescription opioids suitable for abuse continues to come down.

I have a minor quibble with the study’s finding that “the annual growth rate of prescription opioid-involved overdose fatalities significantly slowed from 13.4 percent before 2010 to just 4.8 percent after.” In fact, the Center for Disease Control and Prevention end-of-2017 Data Brief No. 294 reported:

The rate of drug overdose deaths involving natural and semisynthetic opioids, which include drugs such as oxycodone and hydrocodone, increased from 1.0 [per 100,000] in 1999 to 4.4 in 2016. The rated increased on average by 13% per year from 1999-2009 and by 3% per year from 2009-2016. (Emphasis added)

As an aside, it is worth mentioning that four researchers working in the CDC’s Division of Unintentional Injury Prevention reported in the April 2018 American Journal of Public Health that the CDC’s method for tracking opioid overdose deaths have over-estimated the number due to prescription opioids, calling the rate “significantly inflated.” Many overdose deaths actually due to fentanyl are folded into the “prescription opioid” numbers since, technically, fentanyl is a prescription drug even though it is rarely prescribed outside of the hospital in a form suitable for abuse. 

The AAF report understates the significant role that the abuse-deterrent reformulation of OxyContin and other opioids have played in driving nonmedical users to heroin and fentanyl. The researchers “suggest” abuse-deterrent formulations “could be a major factor driving the rise in heroin fatalities.” But evidence of the connection is much more powerful and convincing, as I presented in the Cato Policy Analysis “Abuse-Deterrent Opioids and the Law of Unintended Consequences” in February of this year.

The Washington Post says Ben Gitis, the lead investigator, stated that “many people became dependent on prescription opioids, and when the narcotics became difficult to obtain, people turned to whatever alternative they could find. The cartels saw that market and filled it rapidly.” He suggests in his study that overprescribing by doctors in the late 1990s and early part of this century was the driving force behind opioid abuse and addiction. This is another area where I have to disagree.

While there were undoubtedly unscrupulous doctors operating “pill mills,” some doctors who prescribed opioids too liberally with the best of intentions, and dishonest and overzealous pharmaceutical sales reps falsely representing the safety of their product, these factors were exceptions to the rule, and peripheral rather than central to the opioid overdose problem. 

It must be remembered that numerous studies throughout the 1970s, 1980s, and 1990s documented that patients were being undertreated for pain because of an irrational fear of opioids. In 1989, Charles Schuster, the Director of the National Institute on Drug Abuse, stated. “We have endowed these drugs with the mysterious power to enslave that has been overrated.” The “opiophobia” of the time gradually—and correctly—gave way to a more rational and humane approach to patients in pain. Furthermore, numerous studies, including Cochrane systematic analyses in 2010 and 2012, as well as a report this past January in BMJ by researchers at Harvard and Johns Hopkins show that opioids have an addiction rate of roughly 1 percent or less in the medical setting. And Dr. Nora Volkow, the current Director of NIDA, in a 2016 New England Journal of Medicine article, stated, “addiction occurs in only a small percentage of persons who are exposed to opioids — even among those with preexisting vulnerabilities.”

The National Survey on Drug Use and Health repeatedly finds that less than 25 percent of nonmedical users of prescription opioids obtain them from a doctor. Three-quarters obtain them from a friend, family member, or dealer. The NSDUH also found that nonmedical use of prescription opioids peaked in 2012, and total (medical and nonmedical) opioid use in 2014 was less than in 2012.

Studies repeatedly show upwards of 90 percent of opioid overdose victims have multiple drugs on board. In New York City in 2016, 75 percent of opioid overdoses were from heroin or fentanyl, and 97 percent also were found to have multiple drugs in their system at the time—46 percent of the time it was cocaine. And a November 2017 study from Washington University found 33.3 percent of heroin users entering rehab in 2015 stated that their gateway drug was heroin—as opposed to 8.7 percent in 2005. These numbers do not describe the profiles of patients victimized by doctors who were too liberal in their prescription of opioids. These are nonmedical users seeking drugs in the illicit and dangerous market that results from drug prohibition. 

And the problem is not confined to the US. In the European Union, where doctors historically have been “stingy” in prescribing opioids, expecting stoicism from their patients (and where it is much harder to “doctor shop”) there is an opioid crisis as well.  EU overdose rates have increased for the last three consecutive years for which data have been collected. It seems to be worse in the UK, Spain, and Sweden. And the distribution of drugs follows the same pattern as in the US: predominantly heroin and fentanyl. The same is happening in Australia.

Overdose deaths from methamphetamine and other stimulants have also been surging in recent years and now are at record levels. And recent reports from New England point to a surge in deaths from fentanyl-laced cocaine, the latest version of the “speedball.”

The reasons behind the rise in the illicit use and abuse of mind-altering drugs in the developed world is a subject worthy of serious investigation. The causes are most likely multifactorial. But policymakers need to disabuse themselves of the notion that the prescription of opioids to patients by doctors is at the heart of the problem. That notion has made too many patients suffer needlessly as the old “opiophobia” of the 1970s and 1980s has returned. 

The American Action Forum study provides yet another reason for our policymakers to end their focus on the supply-side. If they lack the political will to re-examine drug prohibition, they should at least put the focus on harm reduction programs, such as needle exchange and supervised injection facilities, medication-assisted treatment for addiction, and making naloxone available over-the-counter.

A US attack on Syria is imminent, but don’t expect a congressional debate on whether it’s wise or lawful, the Wall Street Journal reported this morning. “I think for a surgical strike, they easily have the authority to do it,” says Senate Foreign Relations Committee chairman Bob Corker. 

That’s the same Senator Corker who, not long ago publicly agonized that President Trump’s “volatility” and recklessness could put America “on the path to World War III.” One wonders what he could have had in mind if not something like this

Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!

— Donald J. Trump (@realDonaldTrump) April 11, 2018

Might I suggest that taunting and threatening a nuclear-armed rival is far more disquieting than insulting Mika Brzezinski, tweeting out CNN/Wrestlemania mashup videos, or whatever else usually provokes cries of “not normal” from official Washington? This particular tweetstorm will likely be followed by a barrage of Tomahawk missiles and the risk of a wider war. Maybe Corker and his colleagues should show some concern about it and do something—like their jobs.

Corker’s claim that the president “easily [has] the authority” to launch airstrikes is nonsense. In the absence of an imminent threat, the Constitution denies the president the power to initiate war. That this is supposed to be a “surgical” attack is a distinction that doesn’t make a constitutional difference. No prominent figure in the Founding Generation thought the president had the right, absent authorization from Congress, to engage in “limited” war. Washington even doubted his authority to take unilateral action against hostile Indian tribes, writing that “The Constitution vests the power of declaring war with Congress; therefore no offensive expedition of importance can be undertaken until after they shall have deliberated upon the subject, and authorized such a measure.”

In this case, Congress hasn’t authorized an attack against the Assad regime. The 2001 AUMF—already stretched beyond credulity to underwrite the war against ISIS—can’t be made to fit what Trump plans. 

Trump has no legal authority to order the strike; what’s more, his administration insists that we have no legal right to hear the reasons he thinks he can. Last year, DOJ’s Office of Legal Counsel drafted a legal memorandum justifying Trump’s drive-by Tomahawk attack on a Syrian airfield in April 2017. The administration is currently fighting in federal court to prohibit the release of that memo, in a Freedom of Information Act lawsuit filed by the the Protect Democracy Project. As Protect Democracy noted in a filing Monday, “the withheld documents are serving as the working law that embodies [the administration’s view of] the governing legal authority for the use of military force.” As the administration contemplates ordering military action in Syria—and elsewhere—aren’t the American people entitled to know what limits, if any, it acknowledges on its authority to wage war? Apparently, not: that’s on a need-to-know basis, and we don’t need to know.

In 1793, James Madison wrote that “In no part of the constitution is more wisdom to be found than in the clause which confides the question of war or peace to the legislature, and not to the executive department.” Were it otherwise, he explained, “the trust and the temptation would be too great for any one man.” Human nature’s “most dangerous weaknesses… ambition, avarice, vanity, the honorable or venial love of fame” all conspire against “the desire and duty of peace.” When he issued that warning, Washington was president—a man with a storied record of resisting such temptations. Today… well, it seems clear that advances in destructive power and the concurrent degeneration of presidential character have made Madison’s warning even more vital.

And yet, “this town” doesn’t seem especially concerned about Trump’s deranged and lawless threat. A few hours after the tweet, Twitter trends for Washington D.C. showed it registering behind Paul Ryan’s retirement, #NationalPetDay, and Mariah Carey’s “battle with bipolar disorder.” 

 

The gulf between our first president and our 45th is pretty vast; but our downward spiral seems to have picked up speed in recent decades. I’m old enough to remember when people considered Barack Obama reckless for blurting out his Syrian “red line” at a press conference, wrung their hands over George W. Bush’s “cowboy” rhetoric, and feared that Dan Quayle was too dumb to trust “a heartbeat away” from the presidency. 

In the space of a week, President Trump has whipsawed from demanding an immediate withdrawal from Syria to warning about the “Big price” Assad and Putin are about to pay. The rest of us are left wondering what prompted the reversal: could Trump’s legal difficulties have played a part, or was it just something he saw on TV? Either way, according to Senator Corker—and most of official Washington—waging war is Trump’s call. At this point, what could possibly convince them that’s too big a risk to take?

A chemical weapons attack allegedly carried out by Syrian government forces against the rebel-controlled city of Douma has prompted the Trump administration to consider military strikes against the Assad regime. The United States will likely follow through with military retaliation given last year’s U.S. missile strike against a Syrian air base following a similarly large chemical weapons attack. Since the last U.S. attack clearly failed to deter Syria from using chemical weapons, the Trump administration faces pressure to inflict greater pain on the Assad regime this time around. However, a stronger U.S. military response—or any military action for that matter—carries more risks than rewards.

The argument supporting U.S. military action is more or less the same as the argument made in 2017: the United States must punish the Assad regime in order to deter any future use of chemical weapons by the regime. However, Washington seriously overestimates its ability to influence or change Damascus’s behavior.

In theory, deterring the future use of chemical weapons requires the United States to make the costs of using these weapons unacceptably high. Over the course of the civil war, the Syrian government has repeatedly demonstrated the ability to absorb a great deal of military and economic costs. A military strike against Syrian air bases or chemical weapon sites may cause some temporary slowdown in the regime’s operations but it will neither end the civil war nor prevent the regime from using chemical weapons in the future. Moreover, Russian and, to a lesser extent, Iranian support for the Syrian government will help insulate Syria from the costs of U.S. military action.

Using military force to prevent future chemical weapons attacks would require much more than a limited attack. Short of deposing Assad, which Russia and Iran would try hard to prevent, the United States would have to carry out sustained attacks against air bases, command and control assets, and chemical weapons sites to degrade the regime’s ability to conduct future chemical weapons attacks. This would be a major escalation of the U.S. military role in Syria, which is at odds with President Trump’s desire to reduce America’s involvement in the country. There is also no guarantee that Assad and his allies would be cowed by a U.S. escalation. If Syria responds with more chemical weapons attacks or some other form of counter-escalation the United States would have to decide to up the ante or back down.

Another risk of a larger U.S. military response is the increased likelihood of inadvertent escalation with Russia. A sustained U.S. military pressure campaign that lasts long enough to significantly degrades the Assad regime’s chemical weapon capabilities would necessarily increase the probability of American and Russian forces making contact with one another.

Figuring out what limited military attack can deter Assad from using chemical weapons without risking a broader escalation of the U.S. role in Syria—what my colleague John Glaser called the “Goldilocks military option”—is a practically impossible needle for the Trump administration to thread. A strike that minimizes escalation risks will be too small to change Assad’s calculus about chemical weapons and a larger attack risks escalating a conflict that the United States has no great interest in fighting. The Trump administration must come to terms with the limitations of U.S. military power. 

In a surprising move, former House speaker John Boehner has joined the board of directors of Acreage Holdings, a multi-state company focused on growing and selling marijuana. Boehner was a long-time opponent to marijuana legalization but is quoted in the Washington Post as saying:

I have concluded descheduling [marijuana] is needed so that we can do research and allow [the Department of Veterans Affairs] to offer it as a treatment option in the fight against the opioid epidemic that is ravaging our communities.

The Post article goes on to note that:

Descheduling cannabis would not legalize it nationally, but it would end federal marijuana enforcement and allow states to set their own marijuana policies without federal interference.

It remains to be seen whether Boehner’s reversal on marijuana legalization is indicative of a larger trend, but at a minimum it is a step in the right direction.

The Parkland shooting, even almost two months later, remains a very painful topic, and there seem to have been many very important factors at play. One that hasn’t been discussed very much, but probably needs to be examined, is whether the kind of schools students attend makes a difference. At least one author, Stella Morabito at The Federalist, has discussed this, and has identified many problems that she thinks are associated with public schools ranging from their large sizes to their seeming hostility to Christianity.

All of the problems she discusses may be factors—school size has been suspect for a long time—but as a starting point we ought to look at the numbers.

Hyewon Kim—a Cato Center for Educational Freedom Intern—compiled information on school shootings in the United States from 2000 to 2018 using the Tribune-Review database. The database is limited to legitimate school shootings; that is, shootings that occurred on or near a K-12 school campus while classes were in session or when students were present. The list also excluded suicide-only incidents.

Hyewon found 134 school shootings from 2000 to 2018. Only eight of these occurred in private schools while 122 occurred in public schools. The type of school could not be definitively classified for 4 of the shootings. As shown in the figure below, about 94 percent of the shootings that could be classified occurred in public schools while only about 6 percent occurred in private schools.

 

Since there are many more public schools than private schools, we must consider that difference. The most recent data from the National Center for Education Statistics show that around 25 percent of U.S. K-12 schools are private, while about 10 percent of schooled children attend private schools. In other words, the data suggest that children that go to private schools are disproportionately less likely to experience a school shooting than children in public schools.

Of course, considering the difference in the number of students across the two sectors does not account for differences in the types of students. After all, at least some of the divergence in school shootings found are likely due to other factors such as household income and parent education levels.

However, a recent study by Danish Shakeel and me, presented at the International School Choice and Reform Conference, finds that private schools experience better school culture than public schools even after controlling for several characteristics such as school size, location, racial composition of students and teachers, and the percent of students from low-income families. We find that private schools are significantly less likely than public schools to experience problems such as student fighting, bullying, and, perhaps most importantly, weapon possession.

Anytime you write about a tragedy and point to your favorite policy reform as the solution, it can seem opportunistic and, frankly, a little callous. But it is not groundless to think that school type could matter, and nothing should be off-limits for discussion to end these sorts of tragedies.

Vanessa Brown Calder and I examined the Low-Income Housing Tax Credit (LIHTC) in a November study. The LIHTC is a $9 billion federal program that is supposed to increase the supply of apartment units for people with moderate incomes.

We found that the LIHTC imposes high administrative burdens, generates local government corruption, inflates construction costs, and crowds out market-based housing supply.

The Heritage Foundation recently published its analysis of the LIHTC, and scholars Adam Michel, Norbert Michel, and John Ligon come to similar conclusions.

They find:

  • “The LIHTC is a complex program that has spawned a cottage industry of lawyers and accountants.”
  • “The value of the LIHTC is largely captured by investors and intermediaries, not renters.”
  • “The LIHTC is a costly and inefficient corporate welfare program that has failed to boost the U.S. housing stock.”
  • “Since its inception as part of the 1986 tax reform, the LIHTC has proven ineffective and inefficient.”

The authors conclude that “it is time to repeal the LIHTC and focus on reducing artificial barriers to new housing supply.”

Vanessa examined those artificial barriers in a 2017 Cato study. She argued that state and local governments can tackle housing affordability by cutting the thicket of land-use and zoning regulations that restrict housing supply.

The Heritage scholars concur:

The LIHTC and other housing subsidies are largely treating the symptom of high housing costs, rather than the cause of overly restrictive land-use regulations. Reforms to make it easier to privately build and finance new and expanded housing developments of any type would go a long way toward relieving the current upward pressure on rent in America’s cities.

The LIHTC is a failed federal response to a problem caused—or at least exacerbated—by state and local policies. As Congress considers legislation to adjust some of the provisions in its recent tax reform law, it should put the housing tax credit on the chopping block.

President Trump delivered a disturbing tweet this morning regarding a U.S. military strike in Syria, which is reportedly impending:

Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!

— Donald J. Trump (@realDonaldTrump) April 11, 2018

This amounts to an embrace of Russia’s challenge and it risks a significant escalation of the U.S. role in Syria. It is a profoundly dangerous example of brinkmanship. Americans are now supposed to ready themselves for a military clash with a nuclear power over a U.S. military strike against the Assad regime that has no legitimate justification.

First, any U.S. strike against Syria will be illegal unless it first receives explicit authorization from Congress. As was the case with Trump’s previous missile strike against the Assad regime last April, he will be acting unlawfully if he takes this action.

Second, what does the administration expect to accomplish here? No U.S. military action short of all-out regime change is going to deter the Assad government from committing future atrocities. The strike in April 2017 had zero strategic or tactical utility. It did nothing to resolve the Syrian civil war. It did not serve U.S. national interests in any tangible way. Nor did it serve any humanitarian objective. The Assad regime has continued to use violence against its own people. 

Third, it strains common sense that we would take an illegal military action with virtually no chance of success and with high risks of escalation because roughly 40 people were killed by chlorine in a civil war that has killed 500,000 people by bullets and bombs. Chemical weapons occupy a special place in our minds as a particularly cruel form of violence, but there is nothing special about them, except perhaps that they are less lethal than the conventional military means by which most Syrians have been killed or maimed in this war.

Reports indicate that the Trump administration is trying to find a Goldilocks military option that would be more damaging than the pin-prick punitive strike last April, but not big enough to entangle the United States in another Middle East quagmire by toppling the Assad government or clashing directly with Russian or Iranian forces in a way that triggers escalatory measures. This is a farcical exercise that ignores the utter lack of strategic, tactical, legal, or humanitarian rationale for military action.

Just days prior to news of this recent chemical weapons attack in Syria, President Trump articulated his desire to withdraw U.S. forces from the country. His instincts were correct

Today, the Cato Institute is launching a new online initiative: Checkpoint: America–Monitoring the Constitution-Free Zone.

For over 60 years, the executive branch has, through regulatory fiat, imposed a “border zone” that extends as much as 100 miles into the United States. Within this area–which, according to the ACLU, encompasses two-thirds of the U.S. population–are a series of Soviet-style internal checkpoints run by the Department of Homeland Security’s Customs and Border Protecton (CBP) service. The majority of these stretch across the southwestern United States from southern Calfornia to the Texas Gulf Coast. As outlined below, CBP agents operating these checkpoints routinely violate the constitutional rights of citizens and other who are forced to pass through them to get to work, go to the store, or make it to a vacation destination in the American Southwest.

Because these checkpoints can be either fixed or mobile, research for this project involved the use of multiple data sources to help provide precise geolocational data and detailed physical descriptions of a given fixed checkpoint, or, where captured on overhead imagery, a temporary checkpoint. In particular, prior reports by the Government Accountability Office (2009 and 2017), as well as Google Earth and the Streetview functionality in Google Maps, were critical in helping pinpoint existing checkpoints and making possible relatively precise physical descriptions of the facilities and equipment present at each. The ACLU, including it’s Arizona chapter, also provided valuable data.

The need for this project, and for greater scrutiny of these checkpoints, is more pressing than ever.

A 1976 Supreme Court decision, U.S. v. Martinez-Fuerte, provides the primary legal justification for CBP’s operation of these checkpoints. Because of the sweeping nature of the decision and its ongoing impact, it’s worth looking at some of the key particulars of the Court’s ruling.

The case, which centered on three separate incidents involving the illicit transportation of Mexican nationals into the United States, examined the question of whether the use of such checkpoints for warrantless seizures and visual inspection (i.e., searches) violated the Fourth Amendment.

Writing for the Court’s majority, Justice Powell asserted that given the huge problem of illegal immigration and CBP’s responsibility to prevent it, under “the circumstances of these checkpoint stops, which do not involve searches, the Government or public interest in making such stops outweighs the constitutionally protected interest of the private citizen…In summary, we hold that stops for brief questioning routinely conducted at permanent checkpoints are consistent with the Fourth Amendment and need not be authorized by warrant.”

The majority’s reasoning seemed to be that adhering to the Constitution’s traditional probable cause standard was too onerous on CBP in its efforts to stem illegal immigration.

Justices Brennan and Marshall dissented forcefully, with Brennan arguing: 

The Court assumes, and I certainly agree, that persons stopped at fixed checkpoints, whether or not referred to a secondary detention area, are “seized” within the meaning of the Fourth Amendment. Moreover, since the vehicle and its occupants are subjected to a “visual inspection,” the intrusion clearly exceeds mere physical restraint, for officers are able to see more in a stopped vehicle than in vehicles traveling at normal speeds down the highway. As the Court concedes…the checkpoint stop involves essentially the same intrusions as a roving-patrol stop, yet the Court provides no principled basis for distinguishing checkpoint stops.

And there was something even more fundamentally troubling about the majority’s opinion: it was arguably racist in character, and would likely lead to racial/ethnic profiling going forward. Quoting Brennan again:

Every American citizen of Mexican ancestry and every Mexican alien lawfully in this country must know after today’s decision that he travels the fixed checkpoint highways at the risk of being subjected not only to a stop, but also to detention and interrogation, both prolonged and to an extent far more than for non-Mexican appearing motorists. To be singled out for referral and to be detained and interrogated must be upsetting to any motorist. One wonders what actual experience supports my Brethren’s conclusion that referrals “should not be frightening or offensive because of their public and relatively routine nature.”…In point of fact, referrals, viewed in context, are not relatively routine; thousands are otherwise permitted to pass. But for the arbitrarily selected motorists who must suffer the delay and humiliation of detention and interrogation, the experience can obviously be upsetting. And that experience is particularly vexing for the motorist of Mexican ancestry who is selectively referred, knowing that the officers’ target is the Mexican alien. That deep resentment will be stirred by a sense of unfair discrimination is not difficult to foresee.

Indeed, one need not actually be a Mexican or have Mexican ancestry to be victimized at one of these checkpoints. Just being dark-skinned and having an accent was enough for Armenian-American immigrant Greg Rosenberg to be stopped, roughed up, and detained without charge for 19 days after an encounter with CBP agents at the Laredo, Texas checkpoint in 2014. Through 2015, at least 35 people have been shot and killed by CBP agents, according to data compiled by the ACLU and CBP’ own internal data. To date, no agents involved in these use-of-force incidents has been fired.

For too many American immigrants or legal permanent residents living in or just passing through the southwestern United States, Justice Brennan’s fears of these checkpoints becoming racial profiling and civil liberties violation stations long ago became a reality.

The checkpoints are also largely ineffective in performing their stated task: catching illegal border crossers.

As the 2017 GAO report referenced above notes (p. 38):

CBP reported in the budget justification that apprehensions at checkpoints ranged from 1.34 to 2.52 percent of nationwide apprehensions across fiscal years 2013 through 2016.

The 2009 GAO report, also referenced above, noted (p. 5) that approximately 4% of deployed CBP agents were deployed at these internal checkpoints. Thus, a significant portion of CBP agents are tied to checkpoints that account for a miniscule portion of apprehensions of persons not legally authorized to be in the United States.

Additionally, as GAO found in their latest work (2017, p.50), many of the residents living in the southwest border region believe CBP’s available manpower should be deployed along the border itself:

For example, members of one community group we interviewed said that there are hundreds of illegal crossers and smugglers who attempt to circumvent the local checkpoint by walking through the surrounding ranches. Echoing views from ranchers we interviewed for a December 2012 report, 56 members of one community group we spoke with as part of this review said that they would like to see Border Patrol direct more enforcement efforts at the immediate border to prevent illegal crossers from entering their communities or properties. Officials we interviewed from two sheriffs’ departments in nearby counties said they have heard similar views from residents.

Instead, CBP insists on keeping checkpoints well away from the border, operating them primarily as generalized crime control stations that disproportionately target American citizens. Indeed, as the 2017 GAO report notes (p. 45):

In addition to analyzing where apprehensions and seizures occurred, we analyzed marijuana seizure data to determine how seizures that occurred at checkpoints compared to those that occurred at other locations…out of the 30,449 seizures that occurred at checkpoints, at least 12,214 (40 percent) were 1 ounce or less of marijuana seized from U.S. citizens. In contrast, seizures occurring at non-checkpoint locations were more often higher-quantities seized from aliens. For example, more than three-quarters of marijuana seizures at non-checkpoint locations were of over 50 pounds (25,792 out of 33,477 seizures).

Thus, in addition to failing at their primary mission of curtailing illegal border crossings, CBP personnel manning these stations are running largely useless “weed dime-bag checkpoints” that only help to perpetuate the failed War on Drugs.

Beginning in 2014, CBP officials in Arizona reacted with threats and intimidation as a group of citizens in the town of Arivaca attempted to monitor the local CBP checkpoint for potential rights violations. In response, the citizens sued the CBP for the right to record or otherwise monitor CBP activities at the checkpoint. A lower court tossed the case in 2016, but the Arivaca residents appealed and in February 2018, the Ninth Circuit Court of Appeals reinstated the case, which has been remanded to the U.S. District Court in Tuscon.

The fact that CBP agents are attempting to prevent American citizens from monitoring checkpoint activities only underscores why the efforts of the people of Arivaca, as well as this new Cato project, are so important in the ongoing effort to prevent and expose misconduct and constitutional rights violations by CBP personnel. It is also hoped that this project will help spur a long overdue discussion about the very rationale behind these checkpoints.

Ironically, in his search for additional manpower to police the southern border, President Trump has turned to America’s military–a move my Cato colleague Alex Nowrasteh has correctly characterized as unnecessary and dangerous.

It is also a less effective measure–fiscally and legally–than disestablishing useless CBP fixed checkpoints and redeploying the hundreds of CBP agents currently manning them down to the southern border. Unlike American troops, CBP agents are law enforcement officers, capable of making arrests and processing illegal border crossers through America’s established deportation process. Redistributing exising CBP personnel in this way would also remove a constitutional blight that has plagued American border communities like Arivaca for decades. Whether President Trump will show the wisdom required to adopt such an approach is another matter.

Fear of immigrant criminality is driving many changes to domestic immigration enforcement programs during the Trump administration.  One of the earliest such changes was the reactivation of the 287(g) program that allows state or local law enforcement agencies to enforce federal immigration law after entering into a partnership with Immigration and Customs Enforcement (ICE).  The Obama administration substantially scaled back 287(g) after numerous government reports found serious flaws in the program.  Gaston County, North Carolina sheriff Alan Cloninger said his sheriff’s office enrolled in 287(g), “for the protection of the citizens of Gaston County.”  Sheriff Cloninger’s desire to increase public safety is the primary reason, if not the only reason, why 76 local and state level law enforcement agencies across the country have enrolled in 287(g).

Surprisingly, there is little research on whether 287(g) had any effect on crime.  To test whether 287(g) had its intended effect, Cato research associate Andrew Forrester and I investigated whether 287(g) adoption actually lowered crime rates in North Carolina counties where it was established.  From 2003 through 2013, we find no statistically significant relationship between crime rates in counties that adopted 287(g) agreements relative to those that did not in North Carolina.  Importantly, we look at the number of deportations due to 287(g) enforcement by county, which allows us to examine 287(g)’s specific effects.  This means that 287(g) failed to reduce crime in counties where it was activated prior to 2013 when the Obama administration canceled many 287(g) agreements across the country.

In North Carolina, the crime-prevention justification for 287(g) does not hold but neither does the primary critique that it would raise crime rates by reducing citizen cooperation with the police.  It is possible that immigrants in 287(g) counties reported fewer crimes due to fear of immigration enforcement and, thus, an increase in crime would not be recorded in official statistics.  However, some crimes, like murder, are difficult to hide and tend to be reported regardless of local immigration enforcement policies.  To account for this, we further break down the crime rates by the offense and find no relationship between 287(g) and murder or any other individual crime.  Since crime rates did not increase after 287(g) adoption in North Carolina counties, it did not impact trust between local police and the population enough to affect crime rates.   

The only statistically significant relationship that we did find was an increase in the average number of assaults against police officers in 287(g) counties.  We do not know why 287(g) is causally related to the increase in assaults against police officers and we do not know the identities or characteristics of those who committed them.  Besides otherwise law-abiding illegal immigrants who are deported as a result of 287(g) and their American friends, families, consumers, employers, and landlords, police officers in North Carolina also appear to be victims of this program that fails to reduce crime.

Almost 62 percent of the 287(g) agreements currently in effect, 47 out of 76, were signed after President Trump took office.  In the coming months and years, many more state and local law enforcement agencies could also enroll in 287(g) out of the desire to reduce crime.  Charlotte-Mecklenburg Police Chief Kerr Putney recently said:  

The intent [of 287(g)] was to make sure we’re taking felons and gang members, who are violent, out of play … If you apply [the program] specific to those reasons, I think you’d have a totally different outcome.  If you’re asking everybody about their national origin, I think it’s a different application.  And so if it were as it were designed, I think it’s a good tool. I don’t know that it’s being applied that way.

Our research addresses Chief Putney’s concern that 287(g) is not an effective anti-crime tool.  The experience of North Carolina’s counties where 287(g) failed to reduce crime while it increased the number of assaults against police officers should at least be a warning to other counties and police agencies that are considering joining this program: It will not reduce crime.

The country saw other kinds of identity and values-based battles in March, but the month was dominated by one thing: guns, especially how you protest against them, for them, or try your best to stay neutral.

Of the 24 conflicts recorded on the Battle Map in March, 15 involved guns in some way. The large majority were directly about the March 14 National School Walkout, primarily whether schools should allow walkouts without ramifications in support of free speech; whether concerns about order and safety required that those who walked out be punished; if allowing a walkout to protest gun violence but not other causes amounted to viewpoint discrimination; and what to say, if anything, in events held in lieu of walkouts. Gun-related conflicts were recorded in Pennsylvania, North Carolina, New Jersey, Illinois, New York, California, Arkansas, Michigan, Ohio, and South Carolina, and there were likely many we did not find.

Among the incidents that got the most press attention was the case of Rocklin, CA teacher Julianne Benzel, who was apparently suspended by the district for holding an in-class discussion in which she mused that if an anti-gun walkout were allowed, so should a protest opposing abortion, lest the district treat some views unequally. So intrigued by the idea was student Brandon Gillespie that he planned a national pro-life walkout on April 11, which may well be a prominent battle in the April Dispatch. In a reversal of the expected walkout fear—kids getting in trouble for walking out in protest—a student in Hilliard City, Ohio, was punished for staying in his classroom during outdoor activities sanctioned by the school on Walkout Day. District officials said the student was punished for failing to go to the right place for students choosing not to participate, but the boy’s father said, “He was uncomfortable…as he thought that going outside would most likely be politicizing a horrific event which he wanted no part of.” Finally, a girl in New Jersey was punished for walking out, but what grabbed headlines was that the school would not accept roughly $1000 worth of flowers sent to her by people who admired her standing up for what she believed in. Said the student, “They’re always like, ‘You can always speak your mind and stuff, you have the freedom of speech here,’ and then when we do it, we’re always getting in trouble.”

Public schools absolutely upholding freedom of expression is impossible unless schools have no rules about what you can wear or say, when, about what, and to whom. But having no rules would render effective teaching very difficult, if not impossible. Not surprisingly, this tends to come to a head with highly charged issues like the war in Vietnam, or gun violence, especially when schools and students are so immediately affected by them. It is no coincidence that of all the polls we’ve put on the Battle Map Facebook page the one that has gotten by far the most attention—as the Dispatch reported last month—was about guns in schools. And it is not surprising to see quotes like this from coverage of a battle in Lacey Township, New Jersey, where two students were suspended for a Facebook post showing pictures of a family trip to a gun range: “’People like us are under attack,” said resident John Pinto.

No one should feel besieged by the schools for which they must pay. But we know that they often do, because when opposing views collide in public schools, one must lose. School choice would go a long way to ending that.

The transit industry loses $50 billion a year. It’s customer base is dwindling. Business in many regions has declined by 20 to 40 percent. Yet Bloomberg, one of the nation’s leading business publications, says, “The outlook for public transit isn’t all that bad.”

Sheesh. Just how bad does it have to be to be “that bad”?

According to Bloomberg columnist Noah Smith, light-rail and commuter-rail ridership “are at all-time highs.” Although his chart appears to show ridership increasing through 2017, according to the source of data in his chart, ridership reports from the American Public Transportation Association (APTA), both light rail and commuter rail declined in 2017 and light rail (which APTA equates with streetcars) was much higher before 1955 than it is today.

It is true that both light- and commuter-rail ridership in 2017 were higher than 2014, a time period during which, Smith claims, heavy rail (subways and elevateds) was “down only slightly.” The different scales on Smith’s charts disguise the fact that heavy rail lost almost nine times as many riders during that period as were gained by light and commuter rail together.

Moreover, the only reason light rail grew at all was the opening of new lines, and all of that growth was offset by declining bus ridership in the cities that opened the new lines. Between 2014 and 2017, buses nationwide lost 35 riders for every one gained by light and commuter rail.

Based on the charts, Smith concludes that “the decline in U.S. transit comes almost entirely from buses” and that “trains will still be a good bet.” It’s true that about 80 percent of the decline is from buses. But buses are the backbone of the industry, providing 100 percent of transit ridership in most regions and, until the recent decline, more than 50 percent nationwide, so a loss in bus ridership can’t be dismissed as irrelevant.

Smith’s presumption is that bus and rail ridership aren’t connected. In fact, one reason bus ridership is plummeting is that too many cities bet on trains and the resulting construction cost overruns, the high costs of rail maintenance, and debt service on rail bonds forced them to cut bus service.

Here are some hard facts. According to data just released by the Federal Transit Administration, nationwide transit ridership in the first two months of 2018 was 2.2 percent less than the same two months of 2017. In turn, 2017 ridership was 4.9 percent less than 2016 and 11.5 percent less than 2014. Nearly all forms of transit are declining.

If an 11.5 percent nationwide loss since 2014 doesn’t sound “that bad,” how about a 31 percent loss in Cleveland? Or 20 to 26 percent losses in Charlotte, Columbus, Miami-Ft. Lauderdale, St. Louis, Tampa-St. Petersburg, Virginia Beach-Norfolk, and Washington DC? Or 15 to 20 percent losses in Atlanta, Boston, Dallas-Fort Worth, Los Angeles, and Philadelphia, among many other regions? Since 2010, Memphis is down 40 percent!

These regions are all very different – some large, some small; some growing rapidly, some slowly; some with trains, some with only buses – but the trend is downward everywhere except Seattle. And Seattle’s upward trend may have more to do with the confluence of Millennials, university students, and Pacific Northwest weirdness than the kind of transit Seattle is offering, so should not be construed as an example for other cities to follow.

Trains are an especially bad bet because they represent an expensive 30- to 50-year investment, so if the bet proves wrong, cities will be stuck paying the mortgage on empty railcars and tracks for decades. Outside of Manhattan, buses can move more people than trains at a far lower cost, and in Manhattan, new rail construction is ridiculously expensive.

The Brennan Center for Justice recently released a new proposal paper, Criminal Justice: An Election Agenda for Candidates, Activists, and Legislatures. The agenda covers a wide range of issues within the federal and state justice systems. Several of the paper’s suggestions overlap with what we’re doing here at Cato’s Project on Criminal Justice. Specifically, the agenda calls for the federal government to allow the states decide their own marijuana laws and policies, which aligns with our longstanding commitment to federalism and ties directly to our commitment to rolling back unconstitutional overcriminalization. The paper also supports enabling police officers to divert individuals experiencing mental health crisis or drug-related problems to social services rather than take them to jail. This is a smart solution to what we call “self-defeating policing”: the policies and practices that may inflict harmful unintended consequences on communities without making them safer or providing for more personal security. In the same vein, we applaud Brennan’s call to courts to adjust civil fines on a person’s ability to pay. Civil remedies are generally superior to jail for minor offenses, but to the poor, fines and fees can become onerous new burdens that effectively criminalize poverty.

Of course, there are some proposals in the Brennan agenda where we would take a more limited government approach, such as not replacing federal subsidies that encourage mass incarceration with new federal subsidies to go in another direction, but these should not detract from the opportunities papers like this one present to the broader criminal justice community. Criminal justice reform remains among the most promising bipartisan efforts to improve society and increase individual liberty throughout the country.

You can read the whole Brennan Center report here. For more Cato work on criminal justice and civil liberties, go here.

Tennessee’s Billboard Regulation and Control Act of 1972 regulates roadside signs by imposing onerous restrictions as well as location and permit requirements. The statute also provides exemptions, particularly with regard to so-called “on-premises” signs. On-premises signs are those that either advertise activities that are conducted on the property or the sale of the property on which the sign is located. If a sign fails to qualify as “on-premises,” it’s subject to the full weight of the law and is often outright prohibited.

Based on the 2015 Supreme Court case of Reed v. Town of Gilberti, the federal district court ruled this on-premises/off-premises distinction to be a content-based regulation subject to strict scrutiny, ultimately finding it to violate the First Amendment. Cato certainly agrees with this outcome, and we have now filed a brief supporting it after Tennessee appealed to the U.S. Court of Appeals for the Sixth Circuit. Our basic point is this: Regardless of whether the court applies “strict scrutiny” or some lesser form of review, the statute is unconstitutional because of an insufficient fit between the ends the state claims to pursue and the means it uses.

While strict scrutiny requires the government’s interest to be “compelling” and the means employed to be the least restrictive possible, lesser scrutiny employs a somewhat more forgiving standard; a narrowly tailored regulation must directly advance the government’s “substantial” or “significant” interests.

Unlike similar statutes in other states, Tennessee’s Billboard Act applies even to noncommercial speech. In fact, the unauthorized sign at the center of this case was overtly noncommercial, featuring an American flag combined with Olympic rings in one instance and a reference to the holiday season in another. But because the tests for content-neutral regulations and commercial-speech restrictions are virtually identical, we used examples from both of these types of cases to drive home the idea that this law fails constitutional muster.

While Tennessee identified traffic safety and the aesthetic beauty of its highways as reasons for its law, neither interest is well-connected to the Billboard Act’s on-premises/off-premises distinction. Not only did the evidence that the state offered range from unsupported assertions to irrelevant witness testimony, but the statute and accompanying regulations were also completely irrational. For example, while the law would allow large, unsightly, highly distracting on-premises signs, it would ban small, unobtrusive off-premises signs. The associated regulations are even more ridiculous, actually attempting to make a legal distinction between service stations’ advertising “accessory” products like tires and “incidental” products like cigarettes.

Further, although lesser scrutiny doesn’t require the government to use the absolute “least-restrictive means” possible, the existence of numerous viable alternatives that impose less of a burden on free speech provides good evidence that the means-ends fit is lacking. For example, rather than imposing the nonsensical on-premises/off-premises distinction, the state could regulate the size, height, color scheme, font, and spacing between all roadside signs to prevent distracted driving and scenic degradation.

Finally, the statutory text and overtly commercial context of the regulatory scheme makes it nearly impossible for any noncommercial speech to qualify as “on-premises.” And since on-premises signs constitute the major exception to the statute’s restrictions, this means that the Billboard Act actually restricts noncommercial speech to a far greater extent than its commercial counterparts. Worse still, the on-premises/off-premises distinction imposes an especially disproportionate burden on one of the most highly protected forms of speech: the free expression of ideas.

Because the Billboard Act neither directly advances Tennessee’s interests in traffic safety and beautiful roads, nor qualifies as a “narrowly tailored” regulation, the Sixth Circuit should uphold the district court’s ruling and toss the statute. Regardless of whether the court applies “strict,” “intermediate,” or some other kind of scrutiny, the Billboard Act is a clear First Amendment violation. The Sixth Circuit, based in Cincinnati, will hear Thomas v. Schroer, later this spring. 

What role should the Consumer Financial Protection Bureau play in regulating its industry? Although there is debate as to whether the Bureau should exist at all, policy analyst Diego Zuluaga argues in an op-ed recently published at The Hill.

Established in the wake of the financial crisis, the CFPB courted controversy from the start. As an independent agency headed by a single director who could only be dismissed for negligence or malfeasance, the bureau enjoyed an autonomy unprecedented in U.S. regulatory history.

Judge Brett Kavanaugh from the D.C. Circuit Court of Appeals wrote that ’[the CFPB’s] Director enjoys more unilateral authority than any other officer […] of the U.S. Government, other than the President.’

The first director, Richard Cordray, set about remaking American consumer finance by slapping punitive fines on providers and broadening the CFPB’s remit to include, among others, auto dealerships.

Under his direction, the bureau introduced a rule to restrict arbitration clauses in financial contracts, an intervention that would likely have raised the cost of credit.

Cordray also championed measures to severely constrain payday lending, an expensive form of short-term borrowing that can nonetheless be a lifeline for borrowers who have run out of options.

Indeed, throughout the CFPB’s first five years of existence, Cordray made little effort to dispel the fear among financial providers that the bureau was out to get them.

This may have been Cordray’s understanding of what the CFPB ought legitimately to do. Yet, in combination with the absence of effective checks and balances, his proclivity for regulatory intervention invariably created uncertainty.

By and large, the CFBP has been a destabilizing force for the financial industry. Zuluaga shows some of the ways the bureau has harmed the sector it purports to protect.

Consumer finance is an area particularly in need of legislative certainty, because it involves critical sources of short-term funding for households and is currently undergoing substantial disruption from online lenders and greater use of data in credit allocation.

Furthermore, the most prolific users of products regulated by the CFPB, such as short-term lenders, debt collectors and mortgage servicers, are people on low and middle incomes.

Politicization is not the CFPB’s only weak point. The bureau has devoted precious little effort to ensuring that regulation does not stand in the way of innovation and choice. Yet, as a rule, firms should be allowed to offer a range of products, and consumers should have the freedom to choose.

Zuluaga advocates turning the bureau from a single-director agency into a multi-member board, akin to the SEC or the Fed, and moving the bureau away from the auspices of the Fed and over to the FTC. 

The Fed’s regulatory remit involves prudential regulation and financial stability; that is, making sure bank balance sheets can withstand losses and, if they don’t, that contagion is minimized.

The FTC’s mission, on the other hand, is to protect consumers and promote competition. The CFPB’s role better matches the FTC’s because it involves not risk minimization but protecting the financial well-being of consumers.

A greater focus on competition and consumer welfare, moreover, might help the bureau to resist the temptation to overregulate.

And although Zuluaga acknowledges that there is a case for eliminating the bureau altogether, he cautions that so long as it still exists “it must be turned from foe into enabler of consumer finance.” 

The full piece is available here.

In a July 1932 radio address, Franklin Roosevelt said, “Let us have the courage to stop borrowing to meet continuing deficits. Stop the deficits … Any government, like any family, can for a year spend a little more than it earns. But you and I know that a continuation of that habit means the poorhouse.”

That was a surprisingly sound bit of advice from that particular president. However, after Roosevelt was elected, he helped entrench a new culture of spending and deficits in Washington that triumphed over a traditional approach of prudence and restraint in public budgeting. FDR’s fiscal legacy continues to haunt us today.

New projections show a grim fiscal future and crushing debt burdens on young Americans. The chart shows CBO’s “alternative” projection for federal debt as a share of the economy, per CRFB. The projection may be more realistic than CBO’s baseline because it assumes current tax cuts are extended and discretionary spending caps will continue to be breached in coming years.

Without reforms, federal debt held by the public will rise from 78 percent of GDP this year to 105 percent by 2028. That will be triple the level in the early 2000s. Interest on the debt will more than double as a share of GDP from 1.6 percent today to 3.3 percent by 2028.

Unless we change course, the rise in debt will send us to the poorhouse. Some economists, such as Paul Krugman, have told us not to worry because “we owe it to ourselves.” That view is completely wrong, as I discuss here. For one thing, we owe about 40 percent of federal debt to foreigners.

But more importantly, trillions of dollars for principal and interest payments will have to be forcibly extracted from taxpayers down the road, which will damage the economy and deprive people of a growing share of their earnings. If rising debt precipitates a financial crisis—as did in Greece, Puerto Rico, and elsewhere—it will impose widespread economic harm in a rapid manner.

Today’s politicians are to blame, but the structural and cultural forces that got us here began more than eight decades ago. The 1930s was the turning point. Federal policymakers embraced “entitlement” programs that put spending increases on auto-pilot, and they began major spending on previously state, local, and private activities. At the same time, Keynesian economic thinking convinced politicians to discard the old view that deficits were bad in favor of the new and false view that deficits stimulate growth.

Deficit spending was not something that started under Ronald Reagan or George W. Bush. Presidents and congresses since the New Deal have only balanced the budget in about 1 of every 7 years. The chart shows that during the nation’s first 139 years, policymakers balanced the budget 68 percent of the time, but since 1930 they have balanced the budget just 15 percent of the time.

The irresponsible practice of deficit spending is now deeply entrenched. It appears that only a revolution in voting behavior, budgeting rules, or Washington culture can save us from a fiscal calamity down the road.

For more on the rise of debt and problems it creates, see here.

Publication of the CBO’s “The Budget and Economic Outlook: 2018 to 2028” has once again brought attention to the dire outlook for the federal public finances.

The challenge is best thought of in the following way:

1) there is a structural challenge associated with projections for debt-to-GDP ballooning in the coming decades due to unchanged entitlement programs interacting with an aging population

2) politicians have sailed us into these fiscal headwinds with a large, structural budget deficit, and debt held by the public is already at its highest level since just after World War II

The policy implications are clear: substantial entitlement reforms are, and always were, necessary if the US were to have any hope at preventing ever-rising federal debt (as Brian Riedl indicates in this excellent post).

But running something much closer to an overall balanced budget sooner rather than later is needed if the aim is to get the debt-to-GDP ratio heading back down towards historic norms over the coming decades.

It’s in this context the CBO numbers are so gloomy.

Over the next 10 years, based on current laws, the CBO estimates that the deficit will instead increase from 3.5 percent of GDP in 2017 to 5.4 percent in 2022, before fluctuating between 4.6 percent and 5.2 percent from 2023 to 2028. This compares with an average annual deficit of 2.9 percent over the next 50 years. Debt held by the public as a result is projected to rise to 96.2 percent of GDP by 2028.

But note this is based on “current law,” and assumes substantial income tax increases in 2025 as individual tax cuts expire, and that there will be spending cuts too.

As the CBO notes:

If those changes did not occur and current policies were continued instead, much larger deficits and much greater debt would result: The deficit would grow to 7.1 percent of GDP by 2028 and would average 6.3 percent of GDP from 2022 to 2028…debt held by the public under that alternative fiscal scenario would reach 105 percent of GDP by the end of 2028, an amount that has been exceeded only one time in the nation’s history.

The CBO data clearly shows that revenue as a proportion of GDP was expected to have risen back to its 2017 level by 2023 even before the expiration of many tax cuts, showing that from then on its rising spending that is driving the worsening outlook in debt over this period.

If the Republicans really wanted to lock in their tax cuts, they needed spending restraint. Instead, now, the fiscal outlook is set to deteriorate, tax cuts are being blamed (even though projections show tax revenues will still increase as a proportion of GDP), and on current policies debt is heading north pretty rapidly.

Here we go again. The 2017 round of the Nation’s Report Card was released today. The results shouldn’t surprise anyone – they are almost entirely flat at the national level. However, that doesn’t stop educators and education reformers from spinning the results to fit whatever agendas they might have. Those who defend previous reforms claim that computer-based testing must be to blame for stagnant performance – and that students today are “relatively poorer” than they were in the past. On the other hand, groups calling for additional reform claim that the NAEP results should startle Americans.

We should all settle down. Here are 3 reasons why:

  1. Test scores tell us very little about success.

Education scholars such as University of Arkansas’s Jay P. Greene have been talking about the weaknesses of standardized test scores for a long time. Specifically, Greene frequently points out that at least 10 rigorous school choice studies indicate disconnects between effects on test scores and effects on long-term outcomes such as attainment and earnings. In fact, Diane Ravitch recently praised Greene for shining a light on this issue. And it’s not every day that Ravitch and Greene agree on something.

Research reviews indicate that Greene is on to something. For example, a recent review of the academic evidence on the subject finds that “there is a weak relationship between impacts on test scores and later attainment outcomes.”

Similarly, I have started to review the causal private school choice literature that indicates divergences between effects on test scores and other long-run outcomes such as student criminality, effort, and happiness. As shown in the table below, I’ve found 11 disconnects in the literature since 2001. For example, the sample of students from the state-mandated evaluation of the Milwaukee voucher program saw no statistically significant improvements in reading test scores after the fourth year. However, those same students were more likely to enroll in a four-year college and less likely to engage in criminal activity later on in life. In other words, putting too much weight on standardized tests – like NAEP – could compromise the character development necessary for real lifelong success.

Studies with Disconnects Between Effects on Test Scores and Long-Run Outcomes

 

2. Even if test scores were strong measures of long-run success, changes in NAEP score averages alone do not tell us much about changes in nationwide performance.

Let’s assume test scores mattered. Even then, an uptick in NAEP scores wouldn’t necessarily tell us that overall performance improved. People like former U.S. education secretary Arne Duncan claim that the student population “is relatively poorer and considerably more diverse” than in the past. He may have a point. For example, single-parent households have nearly tripled since 1960. However, many scholars also point out that inflation-adjusted per capita income has nearly doubled since the 70’s, while the share of citizens with college degrees surged over the same period.

Since the magnitude – and the direction – of the student population’s relative advantage changes over time, we cannot confidently determine whether NAEP performance has actually gotten better or worse.

3. Even if test scores were strong measures of success, and we could somehow know that changes in NAEP scores reflected changes in nationwide performance, we would have no idea what policies affected those changes.

Now let’s also assume that – somehow – student advantage was held perfectly constant over time. Even then, we would have no idea what specific policies affected the changes in student performance. States that have different education policies have different populations and laws that could also affect their average standardized test scores.

Significant gains were made in Florida, for example. In fact, Florida was ranked the best-performing state for 4th grade math and reading scores after the Urban Institute controlled for several student background characteristics. But why? As a supporter of private school choice, I could spin these results in my favor by pointing to the fact that Florida has over 100,000 students participating in their privately funded private school choice program. But the truth is that the experts currently have no idea if the school choice programs in Florida have anything to do with the gains.

None of us should get this hyped up over standardized test scores. After all, these crude NAEP score averages unfortunately cannot tell us much of anything absent rigorous empirical analysis. Anyone claiming otherwise needs to slow down and reassess the situation.

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