Policy Institutes

Where did Hillary Clinton’s campaign get the “I’m with her” slogan that Donald Trump criticized last week? I saw this in the Washington Post:

Ida Woldemichael, a designer who came up with “I’m with Her” for the Clinton campaign,…is a graphic designer who worked for the Clinton Foundation before joining the campaign about a year ago.

Not that the Clinton Foundation is any kind of tax-exempt, dictator-supported, $2 billion advance team for the Clinton campaign.

Back in January, I blogged about TransCanada taking legal action under NAFTA-related to the rejection of its Keystone XL pipeline permit application. It is now being reported that TransCanada has taken the next step in the process. This is from Canada’s Financial Post:

TransCanada Corp. made good late Friday on its threat to challenge President Barack Obama’s rejection of the Keystone XL pipeline, filing a request for arbitration under the North American Free Trade Agreement (NAFTA) to recoup US$15 billion in damages from the U.S. government.

In the 42-page document, TransCanada claims the U.S. government “ultimately denied Keystone’s application, not because of any concerns over the merits of the pipeline, but because President Obama wanted to prove his administration’s environmental credentials to a vocal activist constituency that asserted that the pipeline would lead to increased production and consumption of crude oil and, therefore, significantly increased greenhouse gas (“GHG”) emissions.”

TransCanada further claims that the U.S. administration knew “those assertions were false” and that in fact, “the State Department had issued five environmental impact statements between 2008 and 2015, all of which concluded that the Keystone XL Pipeline would not result in a significant increase in GHG emissions.  The State Department reiterated that conclusion for a sixth time when it denied Keystone’s second application in November 2015.”

As I noted in January, these cases take a long time:

Keep in mind, also, that these investment cases are not quick. We’ll have a new president long before the NAFTA case is completed. If the new president is a Republican, he/she will likely approve Keystone (if TransCanada files a new application). That should end the NAFTA lawsuit (although TransCanada could still claim damages from the delay). If it’s President Clinton/Sanders, though, who both oppose Keystone, we could see a ruling in the case.

Let me amend one aspect of this, however, to take into account Donald Trump. Trump says he would approve Keystone, but only under some absurd conditions:

Donald Trump’s vow to resuscitate the Keystone XL oil pipeline in exchange for a share of its profits has a glaring problem: It risks running afoul of laws against government takings of private property. And even supporters of the project warn that it risks hurting relations with Canada, the nation’s No. 1 oil supplier.

The presumptive Republican nominee has repeatedly pledged to revive the Canada-to-Texas pipeline, a long-standing cause for Republicans in Congress, but Trump has brought a twist. He wants U.S. taxpayers to get a slice of the project’s revenue.

“I want it built, but I want a piece of the profits,” Trump said May 26 before delivering an energy speech to an oil-industry audience in North Dakota. “That’s how we’re going to make our country rich again.”

Trump’s suggestion of taking “a piece of the profits” would likely mean that TransCanada’s claim will go ahead, but with a slightly different factual and legal basis.

The United Kingdom will exit the European Union. The shock waves first hit Scotland. The secession-minded government plans to hold another independence vote. Next time a majority of Scots may see no reason to stay.

Both the Conservative and Labour Parties face bitter, internecine strife. Calls already have been made for the resignation of opposition leader Jeremy Corbyn. Prime Minister David Cameron announced his intention to resign and the rest of his government is likely to be swept away as well.

The UK and EU must plan a process never before undertaken. Most important will be early negotiations over London’s future economic and political association with the rest of Europe.

However, some Eurocrats, who dominate Brussels, have threatened to retaliate against the British vote by making the UK’s departure as difficult as possible. For no obvious reason President Barack Obama took a similar position, telling the British people that they would end up at “the back of the queue” for free trade negotiations with Washington. Yet turning post-Brexit negotiations into a punitive expedition would harm everyone involved.

The impact of the vote will radiate across the continent. Some Eurocrats imagine that dissatisfaction with the EU is a uniquely English phenomenon. It actually is much more.

Observed Raoul Ruparel and Stephen Booth of London-based Open Europe: “a number of other states attempted to piggy-back on the UK’s reforms, but this was resisted by others for fear of ‘reform contagion’.” Reform may be harder to resist in the future, however.

Cato’s Marian Tupy pointed out that “the EU is undemocratic not by accident but by design.” Thus, the British are not the only Europeans desiring to escape from the EU’s smothering embrace.

A majority of French and Italians and plurality of Danes and Swedes told pollsters that they want a similar vote. And strong pluralities in most states polled favor returning more powers to national governments.

Moreover, populist and nationalist parties are likely to make EU membership an issue in upcoming elections. France, Germany, and Italy will hold elections within the next two years. Recently the hard nationalist right barely missed winning the presidency in Austria. Economic hardship also has elevated Euroskeptics of varying degrees on the left.

Although there will be no mass exodus from the EU, the departure of even a couple more nations would further diminish the reality of the “European Union.” Moreover, other governments are likely to push to regain authority or at least resist any further accretions of power to Brussels. The continent is fracturing, not uniting.

Some European leaders remain oblivious. There was strong resistance in Brussels to Cameron’s reform proposals as well as other nations’ attempts to win similar concessions. Yet ever fewer Europeans appear to desire the existing union.

In contrast, Donald Tusk, who heads the European Council, admitted that “ordinary people, the citizens of Europe, do not share our Euro-enthusiasm.” France’s ambassador to America, Gerard Araud, argued: “Reform or die!”

What the EU desperately needs is a true “reform contagion.” Painful as it would be to Brussels in light of Brexit, the EU should move “in a ‘British’ direction,” argued Vernon Bogdanor of King’s College London. At least the organization could allow multiple levels of integration, with different requirements for different states.

Most important, I argue on Forbes online: “instead of attempting to circumvent the public, Eurocrats should make their case for change and abide by the voters’ decisions.” For today “the specter of a breakup is haunting Europe,” warned Tusk.

Once again the British have lived up to their reputation. Average folks rejected expert opinion and economic special pleading in order to better govern themselves. Just as America’s forefathers did against the British Empire so many years ago.

The final panel of last week’s foreign policy conference continued the discussion of the political obstacles to restraint and provided further details on what such a strategy would look like today. Cato’s Emma Ashford kicked off the discussion by explaining how U.S. involvement has undermined U.S. interests in the Middle East, recommending instead that the United States adopt an offshore balancing approach to the region.

John Mueller, also of Cato, used his time to downplay the many commonly cited threats to U.S. security, including rising powers, proliferation, and terrorism. He also cast doubt on whether our large, powerful military is well-suited to deal with these minor threats, most of which are exacerbated by the use of force.

Ben Friedman discussed why primacy enjoys so much support in Washington, despite its flaws. U.S. safety and wealth, he argued, insulate most Americans from the consequences of foreign policy, making them indifferent to it, and enabling special interests that benefit from primacy dominate policy-making. He discussed policy reforms that would heighten appreciation of primacy’s costs in order to increase support for restraint.

The conference’s final speaker, Jacqueline Hazelton of the Naval War College, challenged those who seek a more restrained U.S. foreign policy to develop a plan to bring make it a reality. Picking up on that point, panel moderator Trevor Thrall brought the conference to a close by noting: “Our work is not done.”

The conference’s hosts, Cato’s Ben Friedman and Trevor Thrall are editing a book featuring chapters by the experts who presented at “The Case for Restraint” conference. For more information on the book, please email tevans [at] cato.org.

You can watch full discussion from final panel below.

 

House Republicans have released a proposal for major tax reform. Kudos to Ways and Means chairman Kevin Brady for stepping up to the plate and planning ahead for 2017. Brady and his staff did extensive outreach to think tank experts and the GOP caucus, and they have come up with a blueprint that focuses on savings, investment, simplification, and economic growth.  

The GOP plan would cut the top personal income tax rate from 40 percent to 33 percent, while consolidating the bracket structure from 7 rates to 3. The plan would reduce the top tax rate on small businesses to 25 percent, and it would repeal the estate tax and alternative minimum tax.

The corporate tax rate would be cut from 35 percent to 20 percent. That would be the single most important thing that the next Congress could do for the U.S. economy. Corporations build factories, buy equipment, and hire workers to earn after-tax profits. Slashing the marginal tax rate by 15 points would substantially increase the after-tax profits companies could earn on new investments, and they would respond accordingly. More capital investment would mean more job opportunities and higher wages for American workers.

The GOP plan would allow businesses to immediately write off capital investment, which would further boost after-tax returns on new investment and simplify the tax code. The plan would adopt a “territorial” approach for foreign business income to make America an attractive place to headquarter multinational corporations. The lower tax rate, territorial approach, and capital expensing would generate a large inflow of real investment and paper profits to our shores, rather than repelling them as our current tax system does.

The GOP plan would expand individual saving opportunities as well. In particular, it embraces the Brat/Flake proposal (H.R. 4094/S. 2320) for creating Universal Savings Accounts (USAs). After the big success of such accounts in Canada and Britain, I’ve long argued that USAs are a no-brainer for tax reform in the USA.

House Speaker Paul Ryan has championed major tax reform for years. If Donald Trump wins the White House, the GOP could well move swiftly on tax reform early in 2017. Ryan and Brady are smart to put a detailed plan out there now and rally support for bold changes.

Last night, the British people voted to leave the European Union. When Britain joined the European Economic Community in 1973, the EEC was little more than a free trade area. Over time, the EEC evolved into a supranational entity that at least superficially resembled a federal state. The European Union has its own flag, anthem, currency, president (five of them, actually) and diplomatic service. It is governed by an overpaid and arrogant bureaucracy in Brussels that is unelected and unaccountable. It was, therefore, perfectly reasonable to give the British electorate an opportunity to reflect on the changes that have taken place in Europe over the last 43 years.

Moving forward, there is no reason why nations committed to entrepreneurship and free trade should not prosper outside of the EU. Switzerland has done so in the past and Britain can do so in the future. By showing the rest of Europe that it is possible to live in prosperity and peace outside the suffocating confines of the EU, Britain will lead the way for other nations – including Denmark, France, Holland and Sweden – that wish to regain their sovereignty and chart their own course. Yesterday was Great Britain’s Independence Day. There is now a reason to hope that one day, freedom will return to the rest of Europe. 

In a lunch address to last week’s foreign policy conference, Barry Posen of MIT and author of Restraint discussed the perils of liberal hegemony, which he defined as a strategy that combines economic and military primacy with the “noble” goals of active democracy and human rights promotion. Posen argued that the advocates of liberal hegemony rely heavily on the use of force to achieve their objectives, and view military power as a scalpel that can perform precise, strategic operations.

Restraint-minded scholars, however, see military power as a “blunt and costly instrument” that is often counterproductive. Posen explained, for example, how identity politics, especially nationalism and religion, lead many to fight against or oppose invading armies, regardless of how benevolent the latter’s intentions may be.

Posen pointed out that there is strong opposition to America’s liberal hegemony strategy, in large part due to its high costs and profligate adventures abroad. Yet, by labeling restraint as “retreat,” Posen laments, liberal hegemony proponents militate substantive discussions and muddy the waters of the foreign policy debate.

You can watch Posen’s full remarks below. 

After six-plus years, congressional Republicans have finally offered an ObamaCare-replacement plan. They should have taken longer. Perhaps we should not be surprised that House Republican leaders* who have thrown their support behind a presidential candidate who praises single-payer and ObamaCare’s individual mandate would not even realize that the plan cobbled together is just ObamaCare-lite. Don’t get me wrong. The plan is not all bad. Where it matters most, however, House Republicans would repeal ObamaCare only to replace it with slightly modified versions of that law’s worst provisions.

Here are some of ObamaCare’s core private-health insurance provisions that the House Republicans’ plan would retain or mimic.

  1. ObamaCare offers refundable health-insurance tax credits to low- and middle-income taxpayers who don’t have access to qualified coverage from an employer, don’t qualify for Medicare or Medicaid, and who purchase health insurance through an Exchange. House Republicans would retain these tax credits. They would still only be available to people ineligible for qualified employer coverage, Medicare, or Medicaid. But Republicans would offer them to everyone, regardless of income or where they purchase coverage.
  2. These expanded tax credits would therefore preserve much of ObamaCare’s new spending. The refundable part of “refundable tax credits” means that if you’re eligible for a tax credit that exceeds your income-tax liability, the government cuts you a check. That’s spending, not tax reduction. ObamaCare’s so-called “tax credits” spend $4 for every $1 of tax cuts. House Republicans know they are creating (preserving?) entitlement spending because they say things like, “this new payment would not be allowed to pay for abortion coverage or services,” and “Robust verification methods would be put in place to protect taxpayer dollars and quickly resolve any inconsistencies that occur,” and that their subsidies don’t grow as rapidly as the Democrats’ subsidies do. Maybe not, but they do something that Democrats’ subsidies don’t: give a bipartisan imprimatur to ObamaCare’s redistribution of income.
  3. As I have tried to warn Republicans before, these and all health-insurance tax credits are indistinguishable from an individual mandate.  Under either a tax credit or a mandate, the government requires you to buy health insurance or to pay more money to the IRS. John Goodman, the dean of conservative health policy wonks, supports health-insurance tax credits and calls them “a financial mandate.” Supporters protest that a mandate is a tax increase while credits—or at least, the non-refundable portion—are a tax cut. But that’s illusory. True, the credit may reduce the recipient’s tax liability. But it does nothing to reduce the overall tax burden imposed by the federal government, which is determined by how much the government spends. And wouldn’t you know, the refundable portion of the credit increases the overall tax burden because it increases government spending, which Congress ultimately must finance with additional taxes. So refundable tax credits do increase taxes, just like a mandate.
  4. Health-insurance tax credits also give the federal government as much control over the content of your health plan as ObamaCare’s individual and employer mandates do. The government has to define both (a) how much coverage you must buy to qualify for the credit, and (b) whether your employer offers sufficient coverage to make you ineligible for the credit. What House Ways & Means Committee chairman Kevin Brady (R-TX) said yesterday of the tax preference for employer-sponsored insurance–“You only get it if you do exactly what Washington says”–is also true of his proposed tax credit. Republicans may try to allow for flexibility in insurance design, but they would still be creating (preserving?) tools that future Congresses and unelected bureaucrats would use (a) to restrict choice and innovation in both the individual and employer markets, (b) to push consumers back and forth between these markets, and (c) to increase government spending.
  5. Since House Republicans would offer tax credits for non-employer coverage without imposing an employer mandate to discourage employers from dropping coverage, their plan would do even more than ObamaCare to encourage employers to drop coverage. I don’t necessarily think that employers dropping coverage a bad thing–but wait until you see what happens next.
  6. House Republicans appear to want to retain ObamaCare’s guaranteed-issue regulations: “No American should ever be denied coverage or face a coverage exclusion on the basis of a pre-existing condition,” they write. “Our plan ensures every American, healthy or sick, will have the comfort of knowing they can never be denied a plan from a health insurer.” (Emphases added.)
  7. They also would modify, rather than repeal, ObamaCare’s community-rating price controls. A bit of explanation. Rather than allow reality-based (i.e., actuarially fair) premiums, ObamaCare requires insurers to charge everyone of a given age the same premium, and forbids insurers to charge their oldest enrollees more than three times what they charge their youngest enrollees. The centerpiece of ObamaCare, these government price controls literally punish insurers (like United Healthcare) who offer coverage the sick actually want, while rewarding insurers who offer coverage that’s unattractive to the sick. House Republicans propose not to repeal these price controls, but merely to increase the age-rating ratio to 5:1 (better, but still binding) and, more importantly, to preserve pure community rating in cases where consumers switch plans. That last part is a big problem. Imposing community rating for plan-switchers would create the same perverse penalties and rewards, and cause the same race to the bottom among health plans, that we observe in ObamaCare’s Exchanges. The race to the bottom might be even worse under the House Republicans’ plan than under ObamaCare. The GOP plan contains none of the mechanisms ObamaCare uses to slow down the degradation of coverage. And if the House Republicans’ tax credits and lack of employer mandate cause employers to drop coverage, which is a real concern, then House Republicans could trap tens of millions more Americans in an even quicker race to the bottom than ObamaCare does.
  8. House Republicans would also keep ObamaCare’s millennial mandate.
  9. Like ObamaCare, they would cap the tax exclusion for employer-sponsored coverage in a way that increases taxes on workers with expensive health benefits.

Expect howls from conservatives who protest that the House plan is not ObamaCare-lite. I mean, gosh, Chairman Brady promised it would create “health care freedom in a way Americans have never experienced”!

Please. The above similarities to ObamaCare include at least remnants of all three legs of ObamaCare’s three-legged stool. Conservatives, libertarians, and independents have spent seven years fighting ObamaCare…for this?

Moreover, this plan is downright dishonest. House Republicans say they want to “Repeal ObamaCare” and make “a clean start,” because they want to signal to their conservative base that they remain committed to full repeal. But then they too start down the same path ObamaCare has blazed. That is arguably worse than framing this plan as partial repeal and promising to finish the job later. Pretending to repeal all of ObamaCare but then reinstating some of its provisions with a Republican imprimatur would make those provisions completely repeal-proof.

To be fair, the plan includes some proposals that move in the right direction. It would modestly expand tax-free health savings accounts (HSAs) and health reimbursement arrangements (HRAs). It would allow people to purchase health insurance licensed by states other than their own. It would limit federal spending on Medicaid by giving states the option of a fixed amount of federal dollars per enrollee or a block grant (except for the elderly and disabled). A pure lump-sum, block-grant approach would be better, but at least this would be a step in the right direction. The Medicare reforms would move that program ever so slightly in the direction of Social Security, where the government subsidizes enrollees’ health care simply by giving them cash. But there would have to be a lot–a lot–of Medicare and Medicaid cuts to make up for Republicans keeping an ObamaCare entitlement they are pretending to repeal.

And still other parts of this plan betray Republicans’ lack of seriousness about health care reform and/or their own principles. Its authors claim, “ObamaCare set America on a path that leads to a larger government having a greater role in how health care decisions are made,” even though just a few paragraphs before they were lauding and promising to protect Medicare–a disaster of a program–and even boasting that it was Republicans who expanded it with a new, unfunded entitlement to prescription-drug coverage. They apparently see HSAs as a product to be promoted–or a nice way to shave a little off your tax bill–rather than as a mechanism for fundamental reform that gets the IRS out of your health care decisions entirely. Sen. Jeff Flake (R-AZ) and Rep. Dave Brat (R-VA) have introduced legislation that includes the basic elements of that approach. At press time, the House Republicans’ plan didn’t even include that bill among its list of health care proposals Republicans have offered this Congress. And then there are House Republicans’ wrong-headedunconstitutionalanti-federalism, special-interest-pandering medical malpractice liability reforms. At a time when the estimated number of annual deaths due to medical errors in the United States (251,454) is seven and a half times the number of firearms deaths (33,636), these geniuses are proposing to reduce incentives for providers to invest patient safety–oh, and to abandon their principles along the way.

Health care reform should make health care better, more affordable, and more secure, particularly for the most vulnerable. ObamaCare does the opposite, and Republicans are right to oppose it. If they really care for patients, Republicans need to go back to the drawing board until they find a better way.

 

*One of the architects of this plan, House Committee on Energy and Commerce chairman Fred Upton (R-MI), has refused to endorse presumptive GOP presidential nominee Donald Trump.

In my continuing quest to shine the light on successful cases of defense conversion (i.e. transitioning former military facilities to non-military uses), I traveled to the Big Apple on Wednesday to visit Governors Island, a former U.S. Army and later Coast Guard facility that the federal government sold back to the City of New York in 2003.

The occasion of my visit was a rendezvous with Samer Bagaeen and Celia Clark, co-editors of a new book, Sustainable Regeneration of Former Military Sites. I contributed a chapter on two sites in Philadelphia, and co-authored a second chapter (with Clark) on the Brooklyn Navy Yard. Celia had previously visited Governors Island, and included it as one of many cases where former defense facilities had been converted to venues for art exhibitions.

Governors Island is accessible via ferry from Battery Park, at Slip No. 7, just adjacent to the Staten Island Ferry terminal. The ferries to the island run once every hour during the summer, with a second ferry route coming from Brooklyn on weekends. The trip takes only a few minutes, but along the way you are treated to some terrific view of Lower Manhattan and the Brooklyn Bridge.

There were perhaps one hundred on the boat that I boarded at 2 pm, but one of the friendly deck hands Krishendat (“Call me Kris,” he said) explained that the boats, which can accommodate 1,250 passengers, were packed on weekends.

I was skeptical. There were few others there as I strolled the peaceful grounds on a pleasant weekday. The National Park Service supervises the 22 acres of the Governors Island National Monument, and park rangers and volunteers showed people around and answered questions. A few folks tooled around on two-person bikes, and the lucky ones had golf carts for shuttling between the historic properties, including Fort Jay and Castle Williams (a former prison). For the most part, the walkways were sparsely populated or empty. The view of Lower Manhattan through the talls trees was striking.

The Commanding Officer’s House, constructed in the 1840s, is a nice venue for meetings. A plaque in the entry way boasted of one such meeting: Ronald Reagan’s luncheon with Mikhail Gorbachev and then-Vice President/President-elect George H.W. Bush on December 7, 1988. Other structures were not as well maintained, and the worst of the lot were closed off with gates and warning signs.

Leslie Koch, the long-time president and chief executive of the Trust for Governors Island, confirmed that 10,000 or more come to the island each day on summer weekends. Many will come for the grand opening of a new park, The Hills, constructed from the remnants of the old seawall. Leslie, who is stepping down next month, gave us a sneak peak.

The 10-acre area, once completely flat, now features several undulating hills of grass, small trees, and rock walkways (scrambleways) for climbing. The Statue of Liberty rose up from behind the hills as the golf cart wound its way up the freshly paved road. The new park is sure to be a big hit for all ages, but the young ones will like the slides.

We had sped past a number of brick buildings on the way there. Most of the structures are unoccupied. Per the terms of the sale from the federal government to the City of New York, residential housing is forbidden on Governors Island. This could be a lucrative source of revenue to offset more than $16 million per year in operating expenses; by way of comparison, the Presidio Trust in San Francisco collects more than 50 percent of its revenue from residential rents. Residences can also draw businesses to former base properties, one of the reasons why the former Philadelphia Navy Yard decided to develop a few thousand apartment units. The restaurants and shops that cater to these residents also make the place more attractive to businesses, whose employees otherwise would have to travel off site for lunch or to run errands.

But while there are untapped opportunities on the island, it is a terrific space just a few minutes away from the heart of New York’s financial district. If you haven’t been, you should. And, when you go, remember: this former defense site was once closed off to nearly everyone. Now it is open for all to use and enjoy. We can and should do the same with other defense facilities around the country.

At the Washington Post, Tom Jackman highlights a new report documenting arrests of police officers across the country. The report, entitled “Police Integrity Lost: A Study of Law Enforcement Officers Arrested” and written by scholars at Bowling Green State University, estimates that three American police officers are arrested per day every year. The years covered in the study cover 2005-2011.

From the WaPo story:

The most common crimes were simple assault, drunken driving and aggravated assault, and significant numbers of sex crimes were also found. About 72 percent of officers charged in cases with known outcomes are convicted, more than 40 percent of the crimes are committed on duty, and nearly 95 percent of the officers charged are men.

[…]

“This is probably the tip of the iceberg,” said Cara Rabe-Hemp, a professor at Illinois State University who has studied police deviance. She said the effort is the “first-ever study to quantify police crime” and shows it is “much much more common than what police scholars and police administrators previously thought.”

A representative of the National Fraternal Order of Police union stated that the numbers are small when put in the context of 900,000 police officers nationwide. But there is nothing contradictory between his statement and that of Professor Rabe-Hemp. The raw numbers the BGSU researchers found are interesting, but we can be sure that they do not tell the whole story.

At the National Police Misconduct Reporting Project, we collect similar data that is consistent with the BGSU findings. Every day we find cases of misconduct, both on and off-duty. Some incidents result in arrests, other incidents are handled administratively, and some others are revealed by civil suits brought by victims and surviving families of police misconduct. We track the stories over time to see how they are handled by the police and prosecutors as the cases move through the labyrinth of administrative, civil, or criminal procedures.

We find cases where officers are arrested and convicted of crimes. But we also find officers who are given “professional courtesy” and not arrested for drunk driving. We see cases in which officers plea down their violent and disturbing felony cases to misdemeanor disorderly conduct, which allows them to maintain their peace officers’ license. We find longstanding criminal conspiracies that sometimes take years to uncover. And, just today in Baltimore, we see prosecutors unable to convict the officer believed to be most culpable for the conduct that resulted in the death of Freddie Gray. It is impossible to gauge the extent of misconduct because we don’t know how much of it the police and the media are catching.

Part of the reason NPMRP tracks these stories is to get a better sense of how different police agencies handle their misconduct cases, as well as the judicial systems that are sometimes involved. For a number of reasons—the Blue Wall of Silence, qualified immunity, use-of-force protocols, political pressures, the Law Enforcement Officers Bills of Rights, and sympathetic juries, among others—it is very difficult to bring criminal charges against a police officer, let alone secure a conviction, absent incontrovertible proof of wrongdoing.

As I testified last year before the U.S. Commission on Civil Rights, policymakers, watchdog agencies, and police leadership can benefit from more collection and analysis of police misconduct data. The new BGSU report is a welcomed one. It is 209 pages plus another 440 pages of notes and appendices, and we’re looking forward to digging further into those findings. You can read it for yourself here.

We are doing our part to make these issues clearer at NPMRP, which you can check out here. Keep an eye on NPMRP for more information about police misconduct in the coming weeks.

The welfare state is so vast and complex that it often works against itself. Regulations and taxes kill jobs and work incentives, but EITC subsidies are supposed to boost incentives. The government tells women to breastfeed, but the federal WIC program subsidizes baby formula.

The food stamp program provides billions of dollars for people to buy junk food, but liberals are pressing governments to penalize junk food with special taxes. Philadelphia just passed the first special tax on soda.

May I suggest that health do-gooders wanting people to eat less junk food focus on cutting subsidies rather than imposing taxes?

At the same time as Philly is imposing this new tax, Maine Governor Paul LePage is fighting the federal government to cut junk food out of the food stamp program. He is not getting much help from the Obama administration.

The federal government won’t reveal what share of $78 billion a year in food stamps are spent on junk food, but one estimate put soda alone at $4 billion of the total.

The Feds: Drink soda! Philly: Don’t drink soda! Me: Drink whatever you want, but not on my dime!

Food subsidies should be ended altogether, and we should have a simple and neutral tax code. Imposing special taxes on things that liberal elites dislike is a dangerous trend. Much better if those elites rallied around LePage, and focused on cutting junk food subsidies.

The deadlocked Supreme Court couldn’t issue an opinion, but still left in place the block on President Obama’s immigration actions. The lower courts had correctly found that the executive actions implementing DAPA violated both administrative law and immigration statutes so, for practical purposes, it wouldn’t have mattered if Justice Scalia had still been on the bench to make this a 5-4 decision against the government. In any case, DAPA is now dead and so is any chance for immigration reform until the next president. That’s why those of us favoring reform in this area counseled against the president’s attempt to rewrite the law via executive action. This country’s immigration system is a mess - not serving anyone’s interests, let alone national security - but changing the law requires a new law. 

The Supreme Court’s 4-3 ruling upholding UT-Austin’s use of racial preferences in admissions was surprising and disappointing. Justice Alito does well to call out the majority’s imperial opinion as having no clothes. “Something strange has happened since our prior decision in this case,” he begins in his magisterial dissent - referring to the Court’s 2013 ruling directing the lower court to scrutinize university officials’ self-serving justifications for their policy.

“Even though UT has never provided any coherent explanation for its asserted need to discriminate on the basis of race,” Alito concludes in a way I can’t improve upon, “and even though UT’s position relies on a series of unsupported and noxious racial assumptions, the majority concludes that UT has met its heavy burden.” (He cites Cato’s two amicus briefs for the proposition that UT’s misleading legal arguments can’t be trusted.)

The best that can be said about this decision is that it’s limited to the weird affirmative action program that UT-Austin uses, which is unique in the country. Future lawsuits are still possible, and will depend on the type of racial preferences challenged and, of course, the composition of the Supreme Court. 

Federal Reserve Chair Janet Yellen recently appeared before the Senate Banking Committee to deliver the Semiannual Monetary Policy Report to the Congress. A handful of Senators queried Yellen as to the lack of diversity among both the Fed staff and the members of the Federal Open Market Committee (FOMC).

Here, for example, is the exchange between Senator Warren and Yellen (paraphrased, as I heard it):

Warren: Diversity is very important. Studies show gender diversity in leadership makes for stronger institutions. I’m not surprised there’s a stunning lack of diversity at our biggest financial institutions. The Fed’s leadership diversity is somewhat better, but not a whole lot better. … Does lack of diversity among regional Fed presidents concern you?

Yellen: Yes, I believe it’s important to have diverse groups of policy makers who can bring different perspectives to bear. It is the responsibility of regional banks’ Class B and C directors to to conduct a search and identify candidates for regional Fed presidents. The Board reviews those candidates and we insist the search be national and every attempt is made to identify a diverse pool of candidates.

Warren: But what about the outcome? When a new regional Fed president is selected by the regional Fed board that person must be approved by you and others on the Board of Governors before taking office. The Fed Board recently reappointed each and everyone of these presidents without any public debate or any public discussion about it. If you’re concerned about diversity, why didn’t you use these opportunities to say enough is enough? Let’s go back and see if we can find qualified regional presidents who also contribute to the overall diversity of the Fed’s leadership?

Yellen: Well we did undertake a thorough review of the reappointments … [etc., etc.]

Warren: [Interrupting] But you’re telling me diversity’s important and yet you just signed off on all these folks without any public discussion about it. …The selection process is broken. Congress should take a hard look at reforming the regional Fed selection process so that we can all benefit from a Fed leadership that reflects a broader array of backgrounds and interests.

While it is tempting to dismiss such questions as mere identity politics (I’m waiting for Trump to complain about bringing in the Fed Vice Chair from Israel), the Fed has increasingly over time come to look less and less like the rest of America.

Should this matter, at least in terms of monetary policy? I believe it should.

We are a big country and, despite a focus on national aggregates, different parts of the country experience different economic conditions. California isn’t Texas; nor is it Ohio or New York. To some extent these regional differences are why we have the convoluted regional structure of the FOMC. Different voices can bring their experiences and local knowledge to bear in a manner that should result in a monetary policy that weighs the conditions of both New York and Ohio (as well as the rest of the country). Researchers have found that local economic conditions do indeed influence voting behavior on the FOMC. The finding holds not just for the regional bank Presidents, but also for Fed governors.

Of course geography is only one element. Having Fed leadership from different segments of our society, as well as different disciplines, encourages multiple approaches to problem-solving. While I am an economist and see a lot of value in economics, I’d be the first to say economics doesn’t have all the answers. Similarly, bankers can have important insights into the functioning of the economy, but so can manufacturers, retailers and farmers.

A greater variety of backgrounds could also improve Fed communications. Spending a lot of time around economists, I think it is fair to say we often speak a different language, sometimes foreign and strange to outsiders. A Fed board where deliberations occur across disciplines could improve the explanations of those deliberations to the broader public. I know I’ve often learned a considerable amount of economics in the process of trying to explain something to non-economists.

It is perhaps for this reason that Section 10 of the Federal Reserve Act requires that

In selecting the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country.

Despite the clear language of Section 10, since 1996 80 percent of Fed governors have come from the East Coast (which has only about 30 percent of the population). The chart below shows successful nominees and the Federal Reserve district they were connected with, as viewed by the President who nominated them, the Senate who approved them, and the district of the nominees birth. The fact is we are not getting a monetary policy reflecting the perspectives and needs of the entire nation, but rather one concentrating on those of New York and Washington (which falls in the Richmond district).

To some extent the heavy concentration of appointments to the Board from NY, Boston and DC reflects the revolving door between the Fed, the financial industry and the executive branch (particularly the Treasury and the Council of Economic Advisors). So the lack of diverse perspectives is likely even worse than it seems. Not only do Fed appointments reflect biases favoring New York, but predominately biases favoring New York’s financial industry. Similarly, for Washington, appointments reflect biases favoring the Treasury department or the status quo thinking in monetary economics.

As both The Wall Street Journal and the Harvard Business Review have noted, the FOMC has come to be dominated by academic economists. Josh Zumbrun observed in 2015:

Of the 17 Fed officials in office next year—five members of the Board of Governors and 12 regional bank presidents—all but three will have professional backgrounds as academics or with Goldman Sachs. The exceptions will be Atlanta Fed President Dennis Lockhart and Fed governor Jerome Powell, who worked at other banking institutions, and Kansas City Fed President Esther George, who was primarily a bank supervisor.

About 70 percent of Fed Board members and regional Presidents were once either Fed economists or academics:

Educational background of FOMC’s members has also become more concentrated around PhDs in economics:

Additionally, Fed economists themselves are heavily concentrated among the graduates of a handful of graduate programs:

Don’t get me wrong. A couple of smart economists with degrees from MIT, who have lived most of their lives in either Boston, New York or DC, are certainly able to contribute to monetary policy. But when the entire system starts to consist of individuals from the same small number of cities, who graduated from the same schools and studied the same disciplines, then “yes” we have a problem. You are guaranteed to have an institution that suffers deeply from groupthink, as well as being insulated from the everyday experiences of most Americans.

Senator Warren suggests that “the selection process is broken.” I couldn’t agree more. To repair it, we must first recognize that the choice of Fed Board members begins with the President. At a minimum the President should faithfully follow the considerations spelled out in Section 10 of the Federal Reserve Act. If he fails to do so, as was the case with the nomination of Peter Diamond, the Senate is obligated to reject that nomination. While Diamond’s case was clear, previous nominations have been less so. To provide some clarity, I would suggest that Congress amend Section 10 to list specific conditions determining residency. I believe a minimum of ten years actual residency should be the requirement for a nominee to be “from” a particular Fed district.

Congress could put additional limitations on Board appointments to increase diversity. For example, amending Section 10 to state that no more than two board members may come from any one of “finance, manufacturing, agriculture, government or academia” would reduce groupthink and likely increase the quality of decision-making at the Fed. Slowing the revolving door between the Fed, Treasury and finance could also increase diversity. I would suggest we ban from consideration for Fed nomination anyone who has served in the executive branch in the previous six years and impose a similar ban for those working for institutions regulated by the Fed.

Having worked on Fed nominations as a staffer for the Senate Banking Committee, I’d be the first to say that the Senate has too often rubber-stamped a President’s Fed nominees. Recent years have witnessed an improvement in Senate due diligence, but far more needs to be done. Changes in the norms behind Senate consideration may not be durable. Accordingly changes to the selection process for the FOMC are badly needed. I agree with Sen. Warren, the Fed needs leadership with a “broader array of backgrounds and interests.” Which means the definition of diversity must also include geographic diversity, educational diversity, and diversity of professional experience. The quality of monetary policy-making depends on it.

[Cross-posted from Alt-M.org]

In the debate over CO2-induced global warming, projected impacts on various weather and climate-related phenomena can only be adjudicated with observed data. Even before the specter of dreaded global warming arose, scientists studied historical databases looking for secular changes or stability. With the advent of general circulation climate models, using historical data, scientists can determine whether any observed changes are consistent with the predictions of these models as atmospheric carbon dioxide increases. An example of the pitfalls in such work was recently presented by Rahmat et al. (2015), who set out to analyze precipitation trends over the past century at five locations in Victoria, Australia. More specifically, the authors subjected each data set to a series of statistical tests to “analyze the temporal changes in historic rainfall variability at a given location and to gain insight into the importance of the length of data record” on the outcome of those tests. And what did their analyses reveal?

When examining the rainfall data over the period 1949-2011 it was found that all series had a decreasing trend (toward less rainfall), though the trends were significant for only two of the five stations. Such negative trends, however, were reversed to positive in three of the five stations when the trend analyses were expanded over a longer time domain that encompassed the whole of the 20th century (1900-2011 for four stations and 1909-2011 for the fifth one). In addition, the two stations with statistically significant negative trends during the shorter time period were also affected by the longer analysis. Though their trends remained negative, they were no longer statistically significant when calculated over the expanded 112 years of analysis. In summation, in the expanded analysis the “annual rainfall time series showed no significant trends for any of the five stations.”

In light of the above findings, Rahmat et al. write that “conclusions drawn from this paper point to the importance of selecting the time series data length in identifying trends and abrupt changes,” adding that due to climate variability, “trend testing results might be biased and strongly dependent on the data period selected.” Indeed they can be; and this analysis shows the absolute importance of evaluating climate model projections using data sets that have been in existence for sufficiently long periods of time (century-long or more) that are capable of capturing the variability of climate that occurs naturally. And when such data sets are used, as in the case of the study examined here, it appears that the modern rise in CO2 has had no measurable impact on rainfall trends in Victoria, Australia.

 

Reference

Rahmat, S.N., Jayasuriya, N. and Bhuiyan, M.A. 2015. Precipitation trends in Victoria, Australia. Journal of Water and Climate Change 6: 278-287.

The third in a series of panels at last week’s conference on restraint explored the evolution of foreign policy in America—from the Founders’ embrace of restraint to Theodore Roosevelt’s interventionism to our current strategy of primacy. Speaking first, William Ruger of the Charles Koch Institute affirmed the roots of restraint in American history by presenting the Founders’ pillars of strategic independence and neutrality. Ruger explained how those principles guided U.S. foreign policy from the nation’s founding through the outbreak of the Spanish-American War in 1898.

Edward Rhodes of George Mason University followed with an analysis of Theodore Roosevelt’s ideas about politics, society, and foreign policy. According to Rhodes, Roosevelt feared that if left unchecked, the liberalism of the previous era would lead the moral decay of America. Roosevelt believed waging war, crusading, and searching abroad for challenges would strengthen American virtues and thus provide the needed balance to American liberalism.

Lastly, Cato’s Trevor Thrall discussed the current state of politics as it relates to foreign policy. Thrall presented polling data to demonstrate that while the foreign policy establishment continues to defend vociferously the merits and wisdom of primacy, a large contingent of Americans would prefer a restrained, less interventionist foreign policy. This “restraint constituency,” in fact, outnumbers supporters of primacy by nearly a two-to-one margin.

You can watch the full panel here.

A new Congressional Research Service report provides a handy overview of the current state of knowledge surrounding Unaccompanied Alien Children (UAC) apprehended on the Southwest border.  Many Central American children and other family members have crossed the border and sought asylum in the United States.

UAC apprehensions so far in 2016 exceed those apprehended in 2015 but they are still below the peak year of 2014 (See Figure 1). 

Figure 1

Unaccompanied Alien Children Apprehensions

 

Source: Customs and Border Protection.

The number of apprehensions is up this year on a monthly basis.  The UAC are a small fraction of the total apprehensions (Figure 2)

Figure 2

All Apprehensions and UAC

 

Source: Customs and Border Protection.

UAC apprehensions are concentrated in just a few border sectors, most are entering through Texas (Figure 3).  A map of the border patrol sectors puts the flow in perspective (Figure 4).    

Figure 3

UAC Apprehensions by Border Sector

 

Source: Customs and Border Protection.

Figure 4

Border Patrol Sectors

 

Source: Customs and Border Protection. 

If the UAC could instead receive a worker visa or green card then they would not have to brave the difficult trip through Mexico from Central America and endure uncertainty and detention once they reach the United States.  Border Patrol wouldn’t have to waste their time apprehending these folks but could instead focus on stopping actual violent and property crime.  The lack of a legal immigration alternative for the UACs and their family already in the United States has created this situation.  An expanded legal immigration system can fix it.

The Center for American Progress has a new paper out calling for the demise of the Accrediting Council for Independent Colleges and Schools (ACICS), one of the primary accrediting bodies of for-profit colleges. The paper accuses ACICS of being negligent in its accrediting practices, and as a result enabling loads of students and federal aid dollars to flow to bad schools. And ACICS may well be lax, though there is a big debate about exactly what the role of an accreditor is: college watchdog, or friendly advisor? But ACICS itself is not what I mainly want to discuss here. No, it is the evidence that for-profit schools are perhaps being unfairly targeted rather than being particularly bad actors.

The first bit of evidence is something I’ve hinted at before: lots of suits have been brought against for-profit schools, typically by state attorneys general, but few have ended in findings of guilt. As CAP’s paper helpfully itemizes, most accusations, at least for ACICS accredited schools, have been settled with “no finding or admission of fault by the college.” And in the most notable case of a court finding a for-profit guilty—the now-defunct Corinthian Colleges—the judgement was issued without a trial because Corinthian no longer existed and could not defend itself.

Many of the state AGs who have brought suits—including in California, Kentucky, and Massachusetts—have pursued higher political office. California’s Kamala Harris is running for the U.S. Senate. Kentucky’s Jack Conway unsuccessfully ran for governor in 2015. Former Massachusetts AG Martha Coakley ran for governor in 2014.

Were the suits motivated by a desire to raise the AGs’ profiles? No one but the AGs themselves knows their motivations, and they may well have concluded that the schools had intentionally done illegal things. But it is hard not to also see for-profit schools as relatively easy, unsympathetic targets. Moreover, it is possible that many schools settled not because they thought they were guilty, especially of systematic illegality, but because they did not want their names dragged through the mud anymore. In addition, unlike the AGs, they had to use their own money to defend themselves.

The CAP report also largely brushes off a contention that is crucial—but oft neglected—to understanding the seemingly poor outcomes of the proprietary sector: they work with students facing big obstacles in hugely disproportionate amounts. Writes author Ben Miller, “That argument is not necessarily accurate according to detailed reviews of literature around student default, which found that race and ethnicity do matter for default but that degree completion status is typically the strongest predictor of default.”

Of course, the abilities and personal situations of students have a ton to do with degree completion. And this is not primarily about race. Students at for-profit schools are much more likely to be African-American, but also older, low-income, and dealing with children and full-time jobs than students in other sectors, including community colleges. Indeed, a report on accreditors released by the U.S. Department of Education just yesterday reveals that among major accreditors ACICS member institutions have the highest percentage of undergraduates receiving Pell Grants, a rough proxy for income. 74 percent of students at ACICS accredited schools receive Pell, versus, for instance, 38 percent among schools accredited by the Middle States Commission on Higher Education, and 32 percent at the New England Association of Schools and Colleges.

Now, maybe the schools should choose not work with a lot of students who face too many obstacles. But it is the federal government that gives the students much of the funding with which they pay for these schools, on the general principle that everyone should have access to college. And the feds do this without trying to meaningfully evaluate if the students are ready. So, essentially, the for-profit schools, but also the community colleges and nonselective public and nonprofit private schools, which are all seeing poor outcomes, are just doing what the feds want them to do.

Again, the evidence—all of it—needs to be considered before singling out for-profit schools for censure. Too often, it doesn’t seem to be.

On Monday afternoon, the Central Bank of Nigeria (CBN) ended the Nigerian naira’s sixteen-month peg to the U.S. dollar, sending the naira into a freefall. The currency had been pegged at 197 naira per dollar, but as the chart below shows, it had been trading at over 320 naira per dollar for months on the black market (read: free market) and currently sits at 345 naira per dollar. At the time of writing, the naira was officially trading at 282.50 naira per dollar.

The official inflation rate for Nigeria in May was 15.6 percent. However, by using changes in the black market exchange rate data and applying the Purchasing Power Parity Theory, I calculate that the annual inflation rate implied by the free market is actually much higher – currently sitting at over 56 percent (see the accompanying chart).

A managed, floating exchange-rate regime is ill-suited for a country with weak institutions and little discipline, like Nigeria. More troubles lie ahead.

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