Policy Institutes

The big news from Donald Trump counterterrorism speech Monday is his proposal for an “ideological litmus test” to screen Muslim immigrants, which comes in lieu of his prior call to ban them outright. The focus here is the rest of Trump’s speech, which consists largely of shaky facts meant to exaggerate the terrorist threat to the United States, dubious arguments meant to blame President Obama and Hillary Clinton for that threat, self-congratulation for having taken smarter positions, which requires some invention, plus a touch of his special innuendo.

What’s lacking, unsurprisingly, are new policy proposals. After all his criticism of current U.S. counterterrorism policy, Trump offers a vague rehash of it, plus a desire to be tougher on Muslim immigrants.

The speech begins with a recitation of recent terrorism meant to convey a sense of rising menace, with the Islamic State (ISIS) leading the way. That doesn’t require dishonesty. One can exaggerate danger by selecting scary facts and failing to put them in context. For example, Trump doesn’t say that ISIS has been losing territory, which costs it cachet and recruits. Unsurprisingly, he mentions neither the miniscule odds that an American will be killed by terrorists nor the absence of a major attack organized by ISIS in the United States. The San Bernardino and Orlando shooters cited ISIS as an inspiration but, in its absence, might have acted in the name Qaeda or some other group.

Still, Trump can’t help molding the facts to his story. First, he claims that “this summer, there has been an ISIS attack launched outside the war zones of the Middle East every 84 hours.” That figure comes from a July 31 CNN article, which itself repeats a contractor’s non-public data covering a period—June 8 until late July—when attacks were unusually frequent. The count seems to include attacks, like the Orlando massacre, where the attacker had solely ideological links to ISIS. Using that broad definition and public lists of ISIS attacks for the period from June 8 until Trump spoke, attacks have come every 136 hours. Counting Orlando, the United States has gone 1560 hours without an ISIS attack.

Second, Trump contends that ISIS is “fully operational in 18 countries with aspiring branches in 6 more.” Trump doesn’t mention that he is directly quoting an NBC news report on a leaked White House briefing from the National Counterterrorism Center. The story doesn’t define “fully operational,” but it can’t mean much. To get 18 nations, one has to count just about every terrorist entity that has endorsed ISIS, though the main outfit in Syria only slightly controls a few of them. Mostly they’re splinter jihadist groups that embraced ISIS’s brand once it eclipsed al Qaeda’s.

Third, Trump argues that a new Congressional report shows that “the administration has downplayed the growth of ISIS, with 40 percent of analysts saying they had experienced efforts to manipulate their findings.” As Politico notes, the report was about analysts at Central Command, not all U.S. intelligence analysts, as Trump implies. Nor do we know that the pressure came from higher administration officials, rather than Centcom leaders, or that their take was entirely misguided, given ISIS’s recent decline.

Trump also cites one seven-year old murder to suggest honor killings are a growing problem in the United States. He exaggerates the number of U.S. immigrants annually arriving from the Middle-East (it’s 70,000, not 100,000). He misquotes President Obama to make him seem un-American.  

The speech next fixes the blame for ISIS’s rise on the Obama administration, especially Hillary Clinton. To show his superior judgement, Trump repeats his widely discredited claim that he opposed Iraq War “from the beginning.” As evidence, he quotes himself questioning the invasion’s timing in early 2003 and an August 2003 interview where he mocked the goal of democratizing Iraq and suggested that the war accomplished nothing.

Trump’s pretension that these quotes show that he initially opposed the war is strangely desperate. What’s more relevant is his basis for turning on the war—the impossibility of making Iraq into a nice, stable place. That stance and Trump’s opposition to “nation-building and regime change” contradict the speech’s criticism of Obama’s Iraq policy. Trump essentially blames the administration for giving up on nation-building there:

The failure to establish a new Status of Forces Agreement in Iraq, and the election-driven timetable for withdrawal, surrendered our gains in that country and led directly to the rise of ISIS.

That echoes the surge mythology, which sees the decline of violence as evidence that U.S. forces created a durable settlement between warring Iraqi factions—successful nation-building— rather than a temporary respite from a fight that was always likely to reignite once U.S. policing and bribes to sheiks ceased.

There’s a lot to say against that myth, but the point here is that it’s an odd stance for Trump. A true critic of nation-building in Iraq would argue that once U.S. forces overthrew the government, it became nearly impossible, at least at reasonable cost, to rebuild a stable government, not that the effort failed because U.S. forces left too hastily.

Trump also brags that he would have prevented ISIS’s rise by forcefully seizing Iraq’s oil facilities. Left unexplained is how he can be against the invasion and for plundering Iraq’s oil or how you permanently occupy oil-producing areas without some nation-building around them.

Trump is on more solid ground in criticizing the administration’s push for regime change in Libya and Syria. Gaddafi’s overthrow predictably produced political chaos, which allowed an ISIS affiliate to operate. Still, it’s possible that the rebels would have survived without U.S. intervention and that ISIS might have arrived without U.S. help.

Likewise, regime change efforts in Syria threaten to help ISIS. Assad’s forces are its main opponent. On the other hand, Syria’s civil war and ISIS’s participation in it preceded U.S. intervention. And rhetoric notwithstanding, U.S. efforts have done little to unseat Assad, though Clinton says she’ll change that. In other words, it’s sensible to criticize Obama’s Syria policy, but not to blame his administration for Syria’s collapse, as Trump does.

Trump speech reveals little about how he’d change U.S. counterterrorism policy, beyond immigration. He’d continue the drone wars, keep the Guantanamo Bay prison open, use financial and cyber tools to disrupt terrorists, convene an international conference to coordinate efforts, ask a blue-ribbon commission to study radical Islam, work with NATO and Russia against ISIS, and avoid nation-building. Nothing is new there, except maybe the effort made to engage Russia and the hope that another commission or summit will bring counterterrorism breakthroughs.

Trump claims to have something more up his sleeve. But great generals like MacArthur and Patton taught him not to “telegraph his plans,” so it’s secret, we’re told. Let’s pretend that’s true. Maybe Trump is just keeping ISIS on its heels by being for and against nation-building in Iraq in the same speech. But Trump isn’t campaigning for a fourth star. Presidents have to suffer democracy, which entails debate about policy. In any case, Trump is in no danger of offering plans specific enough to help his enemies, let alone analysts.

Recently, Donald Trump announced a team of economic advisers. One of them is Dan DiMicco of Nucor Steel. When DiMicco offered up a tweet about trade, I thought this might be an opportunity to engage him and try to learn more about Trump’s trade views, which are protectionist in tone but lack much detail. Here’s how the exchange went, minus a couple tweets that I left out to keep this post shorter.  (Spoiler: He didn’t seem to know much about the substance of trade law!) 

In response to his initial tweet, I asked for some specifics on how Trump’s trade deals would be different from existing trade deals: 

He referred me to the “7 point plan” Trump had previously announced:

So, I picked one of the points – Trump’s suggestion to renegotiate NAFTA – and followed up with a request for details:

DiMicco then said this:

I suspected he was confusing a couple different trade issues, and that he was actually referring to something outside of the NAFTA context, because “border adjustable taxes” is an issue broader than NAFTA. It is usually raised in the WTO context, in relation to the use of a territorial tax system in many countries (but not in the U.S.), although the impact of “border adjustable taxes” on trade is questionable. So I tried to help him along:

But he insisted I was wrong, and that he really had in mind something Mexico was doing:

Since he wanted to keep insisting on his point, I asked for some more specifics on Mexico’s actions:

In response, he tweeted this:

I couldn’t figure out what he was going for here, so I followed up:

He finally gave me some links:

But neither link offers any specifics on this issue in relation to NAFTA, and instead indicate that what he really had in mind was most likely the territorial tax issue I mentioned.

So I kept pressing a bit more. I asked several times for more details:

 

 

 

Finally, he ended the conversation with this:

A conversation like this leaves you very puzzled. Trump says he wants to renegotiate NAFTA. Yet neither he nor his advisers can explain what they want to change. It’s not a hard question. I can think of quite a few things I’d change about NAFTA! No trade agreement is perfect. My main take away is this: When Trump’s trade advisers are unable to explain the basic details of Trump’s trade policy, it’s no wonder that Trump sounds so uninformed and incoherent when he talks about trade.

The Thai people voted on the latest constitution pushed by the reigning military junta. By banning any opposition, General/Prime Minister Prayuth Chan-ocha won approval to continue his dictatorship from behind the scenes.

For decades military coups were frequent and the court, along with the military, bureaucracy, and business, long dominated democratic politics. Well-connected elites prospered while the rural poor languished, seemingly forgotten by their own government.

That came to a dramatic end in 2001 when flamboyant business mogul Shinawatra Thaksin (the latter his given name, by which he is known), ran a populist campaign and won the support of the long-suffering rural poor. The usual governing elites refused to accept their loss of control and an extended, often violent political struggle ensued, culminating in coups in 2006 and 2010.

In the latter Gen. Prayuth seized power. The junta banned public protests, prohibited political meetings, seized radio and televisions stations, censored print media, blocked websites, threatened dissidents, detained critics, and tried opponents in military courts.

The regime also targeted opponents with Thailand’s oppressive lese-majeste laws. Last month the government charged a 40-year-old mother in an apparent attempt to silence her son, a student activist who opposes military rule.

The brutality of generalissimo Prayuth’s rule cannot be disguised by his cartoonish nature. One of his first acts was to send service personnel out to play music and dance while proclaiming the return of happiness to Thailand. He penned a song on the subject and hosts a weekly television show in which he lectures the nation.

In its latest human rights report the State Department noted that the junta had imposed an interim constitution and decrees “severely limiting civil liberties, including restrictions on freedoms of speech, assembly, and the press.” People could not choose their government and security forces often abused human rights, while largely enjoying “official impunity.”

Moreover, added State, other “human rights problems included arbitrary arrests and detention; poor, overcrowded, and unsanitary prison and detention facilities; restrictions on freedom of expression, assembly, and association; corruption;” and limits on worker rights.

Yet last year the dictator-wannabe complained about that people were “harsh” towards him.

Under the new constitution, the military will continue to dominate the state, despite the promise of elections. While allowing a nominally free vote on its “roadmap to democracy,” the military did everything else possible to force the population to ratify its continued rule from the shadows.

Most important, anyone opposing the constitution faced up to ten years in prison. In his finest dictatorial form, generalissimo Prayuth declared that the Thai people “have no rights to say that they disagree” with him: “No one will be exempted, not even the media.”

At least 120 people, including former cabinet ministers and parliamentarians, were arrested for criticizing the document. The youngest defendant was an eight-year-old girl charged with obstruction for tearing down a poster because she liked its (pink) color. The generalissimo’s minions were not amused.

The main selling point was that enacting the constitution appeared to be the quickest, and perhaps only, way back to nominal civilian rule. General/Prime Minister Prayuth, with his Gilbert and Sullivan routine, will remain in power in the background. Unfortunately, refusing to allow people to freely choose their path, warned former cabinet minister Chaturon Chaisang, means “there will be conflict in the future.”

As I pointed out in Forbes: “Thailand’s contending factions need to accept the legitimacy of each other and work together. Thailand also needs a new constitution, but one which decentralizes government authority, allowing Thais to more easily live in relative political peace.”

The future of Thailand should be up to the Thai people, and not only those carrying guns. Only by pushing generalissimo Prayuth aside will they regain their liberty.

The Cato Institute and Heritage Foundation recently co-hosted a debate in which interns from both organizations debated whether conservatism or libertarianism is the better philosophy. At the conclusion of the debate, the Cato Institute conducted a post-debate survey of attendees finding important similarities between millennial conservative and libertarian attendees on skepticism toward government economic intervention and business regulation, but also striking differences in attitudes toward immigration, LGBT issues, national security, privacy, foreign policy, and perceptions of bias in the justice system.

Full LvCDebate Attendee Survey results found here.

What Are Their Priority Issues? 

The survey asked conservative and libertarian attendees to rate on a scale of 1 to 5 how concerned they were about nineteen different issues.  

Note: This chart displays the mean level of concern (on a scale of 1-5) across 19 different issues for both conservative and libertarian millennials who attended the Libertarianism v. Conservatism intern debate at the Cato Institute. Moving from the inner to the outer circles indicates an increasing level of concern for each respective issue. Results from statistical tests are shown which indicate if conservatives and libertarians significantly differed in their concern for the issue *** p<.001 ** p < .01 * p < .05.

Despite a multitude of differences, millennial libertarian and conservative attendees share almost the same top five political priorities: 

  • Size of government
  • Government spending and debt
  • Taxes
  • Economy/jobs  

Conservatives’ other top five priority is national security/terrorism and libertarians’ is government regulation of business. The groups diverge widely on non-economic issues. Libertarian attendees are statistically more concerned about (1) government domestic surveillance, (2) the criminal justice system, (3) drug prohibition, (4) racial inequality, and the (5) environment. On the other hand, conservatives are significantly more concerned about (1) national security/terrorism, (2) abortion, (3) morality in society, and (4) immigration. Both were similarly less concerned about income inequality and drug use, and similarly concerned about education and healthcare.

Nostalgic or Optimistic? 

Similar to national surveys of conservatives, 64% of millennial conservatives say American culture and way of life has mostly “changed for the worse” since the 1950s. But millennial libertarians disagree: 74% of libertarians say America is “getting better.” Of both groups, only one in ten (11% and 12%, respectively) thought that American culture has stayed the same.

No Man is an Island?

Fully 60% of conservative attendees “strongly agree” that “no man is an island” compared to just 14% of libertarian attendees. Once those who “strongly” and “somewhat” agree are combined together, 88% of conservatives and 68% of libertarians agree with the statement. Another 26% of libertarians flat out disagree that “no man is an island,” nearly 3x as likely as conservatives (9%). This underlying difference in perspective likely drives disagreement between the two groups on social policy.

Despite this, both libertarians (92%) and conservatives (94%) are equally likely to agree that “community service is an honorable thing to do.”  

Should we do more to make LGBT individuals feel welcome? 

A majority—66%—of libertarian attendees agrees that “each of us should do more to ensure that lesbians, gays, bisexual, and transgender people feel fully accepted in society, while 30% disagree. In reverse, 64% of conservatives disagree that we need to do more to ensure LGBT people feel fully accepted in society, while 32% agree.

Part of the reason why is that libertarians and conservatives have different views about what is morally acceptable. Fully 64% of conservative millennial attendees say that “identifying with a gender different from the gender assigned at birth” or being transgender is “morally wrong.” Libertarians disagree and instead 62% say that being transgender is “not a moral issue.”

Is pornography a public health crisis?

A slim majority (53%) of conservative millennial attendees agree that “pornography is a public health crisis,” comporting with the amendment to the 2016 Republican Party Platform that made the same claim, while 44% disagree. In contrast, 84% of libertarians say pornography is not a public health crisis, while 10% say it is.

Conservatives (48%) are twice as likely as libertarians (25%) to agree that the “government needs to do more to combat the prescription painkiller addiction epidemic” in this country. Instead, a majority (70%) of millennial libertarians say this isn’t government’s job, as do 49% of conservatives.

Despite these differences, majorities of both millennial conservative (56%) and libertarian (94%) attendees still agree “we should be more tolerant of people who choose to live according to their own moral standards even if they are different from our own.” Nevertheless libertarians are far more likely to fervently agree with 67% who “strongly agree” compared to 21% of conservatives.

Nevertheless, a strong majority (68%) of conservatives say that government “should promote traditional values in society” in contrast to 84% of libertarians who disagree and instead say “government should not favor any particular set of values.”

Freedom of Conscience 

Conservatives care more about religion that libertarians do; however, both strongly support religious liberty.

Fully 88% of conservative attendees agree that it “is important for children to be brought up in a religion so they can learn good values” while in contrast 61% of libertarians instead disagree that religion is important for learning good values. While nearly all (96%) of conservatives identify a religious preference, 40% of libertarians identify as “non-religious.” A slim majority (53%) of conservative attendees said they attend religious services once a week or more compared to 15% of libertarians. Twenty-eight (28%) of libertarians said they never attend compared to 4% of conservatives.

Despite differences in religiosity, 88% of conservatives and 69% of libertarians say they support a law in their state that would allow businesses to refuse service to customers for religious reasons.  

Furthermore, strong majorities of both conservative attendees (79%) and libertarian attendees (92%) agree that “if a Muslim clergyman wanted to make a speech in your community preaching hatred of the United States” that he “should be allowed” to speak.  Both are far more likely than Americans nationally (42%) to support allowing such speech. 

Criminal Justice, the Police, and #BlackLivesMatter 

Both conservative and libertarian millennial attendees tend to support criminal justice reforms. However, libertarian millennial attendees tend to be more sympathetic of charges of racial bias in the criminal justice system.

A resounding majority of libertarian millennial attendees (84%) and a slim majority of conservative attendees (52%) believe that blacks and other minorities do not receive equal treatment as whites in the criminal justice system.

However, they diverge considerably in whether or not they support “the goals of the #BlackLivesMatter movement.” A strong majority—64%—of libertarian attendees say they support the goals of BLM; in contrast, 76% of conservative attendees say they oppose. Different perceptions about what the BlackLivesMatter movement’s goals are likely drives these disparate views. 

Majorities of both conservative attendees (55%) but far more libertarians (89%) say that “local police departments using drones, military weapons, and armored vehicles” are not “necessary for law enforcement purposes” but rather are “going too far.” Another 43% of conservatives say that military weapons are necessary for law enforcement, compared to 8% of libertarians. Similarly, majorities of both support eliminating mandatory minimum prison sentences for people convicted of selling or possessing drugs (59% and 76% respectively). 

Build the Wall?  

Majorities of both conservatives (57%) but far more libertarians (94%) say we should make it “easier” for people to immigrate to the United States. Forty-percent (40%) of conservatives oppose easing immigration restrictions and 40% also say it bothers them when they come into contact with people who speak little or no English, compared to 5% and 19% of libertarians respectively.   

However, conservative and libertarian attendees diverge in how to handle illegal immigration. A majority—56%—of conservatives favor building a large wall along the border with Mexico compared to 11% of libertarians. Majorities of both conservatives (54%) and libertarians (90%) support offering some sort of legal status to illegal immigrants, however, 74% of libertarians favor offering a pathway to citizenship compared to 25% of conservatives. Forty-three (43%) of conservatives say illegal immigrants should be required to leave the country as do 8% of libertarians. 

Last December, Republican nominee Donald Trump called for a temporary ban on Muslims entering the US from other countries. However, majorities of both millennial conservative and libertarian attendees oppose such a proposal, but libertarians are far more opposed by a margin of 93% to 59%.  In fact, 70% of libertarians “strong oppose” the proposal compared to 37% of conservatives. 

Foreign Policy 

Conservatives and libertarian attendees have disparate visions about what role the U.S. military should have in the world. While 82% of libertarian millennials want to decrease U.S. military presence around the world, only 24% of conservatives agree. Instead, 25% of conservative attendees think the United States ought to increase its global military presence and 48% would keep it at present levels.

When it comes to dealing with ISIS, conservatives want the US to take a more proactive approach. Three-fourths (77%) of conservative attendees favor sending ground troops to participate in a campaign against ISIS while instead 70% of libertarian millennial elites oppose this action. However, these positions are not rock solid. Thirty-seven percent (37%) of conservatives say they “somewhat” support sending ground troops and 36% of libertarians “somewhat” oppose doing so. 

Different visions of the US’s role in the world likely explains why 88% of libertarians also favor cutting defense spending, while only 33% of conservatives agree. Instead 64% millennial conservatives oppose cutting defense spending. 

While 96% of conservative attendees and 90% of libertarian attendees agree that “military service is an honorable thing to do” libertarians are about half as likely (49%) to “strongly agree” compared to conservatives (87%).

National Security and Surveillance  

An overwhelming majority (85%) of libertarian attendees oppose government’s “collection of telephone and internet data as part of anti-terrorism efforts,”—including 60% who strongly oppose. However, a slim majority (53%) of conservative attendees instead support such collection, while 44% oppose. Conservative is support is tenuous, with only 13% who strongly support the program.

Conservative and libertarian attendees make the trade-off between freedom and security differently, explaining some of these results. While 80% of conservative millennials would “give up some personal freedom and privacy for the sake of national security” 70% of libertarian attendees would not.

Don’t Tread on the Economy 

While libertarians take more “liberal” positions than conservatives on a variety of issues, they are similar to conservatives on government intervention in the economy.

Both libertarians and conservatives overwhelmingly endorse the idea that government regulation of business too often does more harm than good (97% and 96%). Furthermore, 96-98% of both groups prefer a “smaller government” that offers fewer services and low taxes over a “larger government” that offers more services with high taxes.

While national polls find that about 6 in 10 Americans favor raising taxes on households making over $250,000 a year, fully 9 in 10 libertarian (89%) and conservative (91%) attendees oppose such an action, including 6 in 10 who “strongly oppose.”

Free Traders?

Despite vocal criticism of free trade from major presidential candidates this election cycle, overwhelming majorities of both conservative (79%) and libertarian (97%) attendees agree that free trade must be allowed, even if domestic industries are hurt by foreign competition. Nineteen percent (19%) of conservatives and 2% of libertarians say that trade restrictions are necessary to protect domestic companies. 

Should Every Kid Get a Trophy? 

Belief in free market competition is underscored by the overwhelming majority of libertarians and conservatives who think that not all kids who play sports should receive trophies but only the winning players (91% and 95%, respectively). While a majority of Americans nationally agree that only the winners should get trophies, libertarian and conservative attendees are about 30 points more likely to think so. 

Republican, Democrat, or neither? 

At first glance, conservative millennial attendees appear much more Republican than the libertarian millennial attendees. When first asked, 80% of conservatives identify with the Republican Party, compared to 11% of libertarians. However, once independents were probed, 64% of libertarians revealed they lean Republican, while 9% are Democrats, and 95% of conservatives are Republican, while 1% are Democrats. Nevertheless, a quarter of libertarian attendees (26%) say they are completely independent of either party, compared to 4% of conservatives.

For Trump or #NeverTrump?

Although the conservative attendees are overwhelmingly Republican, less than half (47%) say they plan to vote for the Republican presidential candidate Donald Trump in November. Instead, nearly a quarter (21%) of conservatives say they’d vote for Libertarian presidential candidate Gary Johnson, 3% say they’ll vote for Clinton, and 14% will vote for some either candidate or 15% won’t vote. Libertarian attendees are far more keen on Johnson with 84% who say they’ll vote for him, while only 7% plan to vote for Trump and 3% say they’ll vote for Clinton, and 5% who will vote for someone else or won’t vote. 

Implications

Since these attendees are politically engaged and tend to lean Republican, their agreements and conflicts may portend future debates the GOP may have to confront in the future. 

If these results have any external validity for party insiders in the future, the GOP will find itself largely in agreement around limiting government intervention in the economy. However, the GOP will have to contend with significant disagreements over the future of American foreign policy, balancing freedom and national security, the influence of religion on politics, its approach toward immigration and immigrants—legal or not, whether it will make concerted efforts to include LGBT people and understand the experiences of minorities in the country.

Who Won the Debate Depends on Whom You Ask

  • Among libertarian millennial attendees, 80% said the libertarian team won and 18% said the conservative team won.
  • Among conservative millennial attendees, 88% said the conservative team won and 11% said the libertarian team won.
  • If you combine the libertarian and conservative attendees 50% said the libertarian team won, and 47% said the conservative team won.
  • Among the remaining moderate, liberal, and progressive attendees, 60% said the libertarian team won and 32% said the conservative team won.

Sam Henick contributed to this report.

Full LvCDebate Attendee Survey results found here

More About the Post-Debate Survey of Attendees

The Cato Institute conducted a post-debate survey of attendees of the Libertarianism v Conservatism intern debate hosted by the Cato Institute and Heritage Foundation in which interns at both organizations debated whether conservatism or libertarianism is a better political philosophy on August 4, 2016.

At the conclusion of the debate, an email was sent to every person who registered or walked-in with a link to a Qualtrics survey. Emails were sent to 565 people. In total, we collected 203 surveys from debate attendees, producing a response rate of 36%. Of respondents, 75 identified as conservative, 88 as libertarian, 40 as either moderate, liberal, progressive, or something else.

While the survey is not a representative sample of all millennial conservatives and libertarians, this survey offers a snapshot of engaged conservative and libertarian millennial “elites” who are politically engaged, have more education and political information, and who chose to come to this event. To date, little information exists on young conservative and libertarian elites. Since these attendees are politically engaged millennials, their responses may provide some indication of the direction they may take both movements in the future.

Last month, a scandal erupted in Chile. The media discovered that the former director of the Chilean gendarmerie, the country’s penitentiary service, was receiving a pension of about $8,000 per month. Chile privatized its pension system in 1980. Instead of sending retirement money to the government, workers there put their money in private accounts that invest and accumulate savings to be used in old age. When Chile approved the reform, the military and some law enforcement agencies (such as the gendarmerie) remained in the old public system.

Although the abuse occurred within the old public pension system, which benefits a minority of Chileans, and the beneficiary in this case was a socialist political activist and ex-wife of the head of the lower house of Congress (also a socialist), the episode was used to attack the private system to which almost every Chilean worker belongs. The left declared that the private accounts managed by the private pension fund companies (known by their Spanish acronym AFP) provide low pensions, something that incensed many Chileans who saw that the AFPs do not pay the same level of pension evident in this particular case.

Before long, protests involving hundreds of thousands of people took place throughout the country under the slogan “No + AFP,” and demanded a return to the old pension system. Last week, President Michelle Bachelet announced a series of reforms that would give the state a larger role in peoples’ retirement.

The extent to which the campaign against the private pension system relies on deception, falsehoods, and distortions is impressive. The Chilean case matters because it is the model that has inspired reforms in dozens of countries around the world, from Sweden to Hong Kong, and from Peru to Poland. To avoid falling victim to demagoguery, it is important to contrast facts with ill-founded criticisms, something that neither the Chilean AFPs nor many others in the region do well.

Critics in Chile assert that the average pension provided by the private pension fund companies is around $340 per month, which is not better than the public pension system. But as the Chile-based Liberty and Development institute (LyD) has shown, that is like comparing apples to oranges. To calculate the private system’s figures, all those affiliated with it are taken into account, even if they have only contributed to their accounts once in their lifetime. The corresponding figure for the public pension system, however, only takes into account the pensions of those who have contributed for a minimum of 10 to 15 years, something that leaves out half of the people affiliated with that system. In addition, pensions under the private system are obtained through contributions that amount to 10 percent of wages, while in the public system the contribution is 20 percent. Correcting for those distortions shows that the value of the pensions the AFPs provide is three times higher than that of the public system.

To properly evaluate the private system, one has to consider its performance with respect to those who have contributed to it regularly. According to data from AFP Habitat, a pension fund company, the average monthly pension for those who have contributed for more than 30 years is almost $1,000 for men and $500 for women. And while it’s true that many Chileans do not contribute regularly to their retirement accounts because too many work outside the formal sector and getting work is still too precarious for many, that is a problem that affects any pension system, whether public or private, and can only be solved with labor reforms.

Nor is it true that the state has no role in providing pensions or that the AFPs steal from their clients, as is regularly asserted. As LyD Institute reminds us, the state has provided a pension for those who could not save a minimum amount from the beginning. And the fees charged by the AFPs are equivalent to 0.6 percent of funds managed, below the average of OECD countries.

Chile’s private pension system can certainly be improved, but the reality is that it has been extremely successful. Over the course of 35 years, private accounts have produced an average real return of 8 percent annually, and old-age pensions no longer represent a burden on the treasury. Pension savings have reached $168 billion, about 70 percent of GDP, which has stimulated high growth and domestic investment, and has put Chile on the verge of becoming a developed country—a remarkable achievement.

 

Remember Bill Murray’s Groundhog Day, the 1993 comedy classic about a weatherman who experiences the same day over and over again?

Well, the same thing is happening in Japan. But instead of a person waking up and reliving the same day, we get politicians pursuing the same failed Keynesian stimulus policies over and over again.

The entire country has become a parody of Keynesian economics. Yet the politicians make Obama seem like a fiscal conservative by comparison. They keep doubling down on the same approach, regardless of all previous failures.

The Wall Street Journal reports on the details of the latest Keynesian binge.

Japan’s cabinet approved a government stimulus package that includes ¥7.5 trillion ($73 billion) in new spending, in the latest effort by Prime Minister Shinzo Abe to jump-start the nation’s sluggish economy. The spending program, which has a total value of ¥28 trillion over several years, represents…an attempt to breathe new life into the Japanese economy… The government will pump money into infrastructure projects… The government will provide cash handouts of ¥15,000, or about $147, each to 22 million low-income people… Other items in the package included interest-free loans for infrastructure projects…and new hotels for foreign tourists.

As already noted, this is just the latest in a long line of failed stimulus schemes.

The WSJ story includes this chart showing what’s happened just since 2008.

And if you go back farther in time, you’ll see that the Japanese version of Groundhog Day has been playing since the early 1990s.

Here’s a list, taken from a presentation at the IMF, of so-called stimulus plans adopted by various Japanese governments between 1992-2008.

And here’s my contribution to the discussion. I went to the IMF’s World Economic Outlook database and downloaded the numbers on government borrowing, government debt, and per-capita GDP growth.

I wanted to see how much deficit spending there was and what the impact was on debt and the economy. As you can see, red ink skyrocketed while the private economy stagnated.

Though we shouldn’t be surprised. Keynesian economics didn’t work for Hoover and Roosevelt, or Bush and Obama, so why expect it to work in another country.

By the way, I can’t resist making a comment on this excerpt from a CNBC report on Japan’s new stimulus scheme.

Abe ordered his government last month to craft a stimulus plan to revive an economy dogged by weak consumption, despite three years of his “Abenomics” mix of extremely accommodative monetary policy, flexible spending and structural reform promises.

In the interest of accuracy, the reporter should have replaced “despite” with “because of.”

In addition to lots of misguided Keynesian fiscal policy, there’s been a radical form of Keynesian monetary policy from the Bank of Japan.

Here are some passages from a very sobering Bloomberg report about the central bank’s burgeoning ownership of private companies.

Already a top-five owner of 81 companies in Japan’s Nikkei 225 Stock Average, the BOJ is on course to become the No. 1 shareholder in 55 of those firms by the end of next year…. BOJ Governor Haruhiko Kuroda almost doubled his annual ETF buying target last month, adding to an unprecedented campaign to revitalize Japan’s stagnant economy. …opponents say the central bank is artificially inflating equity valuations and undercutting efforts to make public companies more efficient. …the monetary authority’s outsized presence will make some shares harder to buy and sell, a phenomenon that led to convulsions in Japan’s government bond market this year. …the BOJ doesn’t acquire individual shares directly, it’s the ultimate buyer of stakes purchased through ETFs. …investors worry that BOJ purchases could give a free ride to poorly-run firms and crowd out shareholders who would otherwise push for better corporate governance.

Wow. I don’t pretend to be an expert on monetary economics, but I can’t image that there will be a happy ending to this story.

Just in case you’re not sufficiently depressed about Japan’s economic outlook, keep in mind that the nation also is entering a demographic crisis, as reported by the L.A. Times.

All across Japan, aging villages such as Hara-izumi have been quietly hollowing out for years… Japan’s population crested around 2010 with 128 million people and has since lost about 900,000 residents, last year’s census confirmed. Now, the country has begun a white-knuckle ride in which it will shed about one-third of its population — 40 million people — by 2060, experts predict. In 30 years, 39% of Japan’s population will be 65 or older.

The effects already are being felt, and this is merely the beginning of the demographic wave.

Police and firefighters are grappling with the safety hazards of a growing number of vacant buildings. Transportation authorities are discussing which roads and bus lines are worth maintaining and cutting those they can no longer justify. …Each year, the nation is shuttering 500 schools. …In Hara-izumi, …The village’s population has become so sparse that wild bears, boars and deer are roaming the streets with increasing frequency.

Needless to say (but I’ll say it anyhow), even modest-sized welfare states eventually collapse when you wind up with too few workers trying to support an ever-growing number of recipients.

Now maybe you can understand why I’ve referred to Japan as a basket case.

P.S. You hopefully won’t be surprised to learn that Japanese politicians are getting plenty of bad advice from the fiscal pyromaniacs at the IMF and OECD.

P.P.S. Maybe I’m just stereotyping, but I’ve always assumed the Japanese were sensible people, even if they have a bloated and wasteful government. But when you look at that nation’s contribution to the stupidest-regulation contest and the country’s entry in the government-incompetence contest, I wonder whether the Japanese have some as-yet-undiscovered genetic link to Greece?

On Monday Aetna announced that it will significantly reduce the scope of its participation in the Affordable Care Act’s health insurance exchanges, pulling out of 11 of its 15 states. The company will only continue offering exchange plans in Delaware, Iowa, Nebraska, and Virginia. In the related press release, Aetna Chairman and CEO Mark T. Bertolini pointed to the sizable losses the company had incurred through its business on the exchanges: $200 million in pretax losses in the second quarter and $430 million total since January 2014. Aetna covered almost 850,000 people through its exchange plans as of June 30th, and most of those people will have to find new plans in the next open enrollment, and these customers the latest group to find out first hand that “if you like your plan you can keep it” was not actually a guarantee.

Aetna 2017 Exchange Participation

 

Sources: Bloomberg, Aetna.

Note: Created using DataWrapper.

Aetna is not the only insurer scaling back its participation, and their announcement references “more than 40 payers of various sizes have similarly chosen to stop selling plans in one or more ratings areas in the individual public exchanges.” Major insurers Humana and UnitedHealthcare had previously signaled that they would exit most exchanges, and Anthem and Cigna have both indicated that they are struggling with increasing costs and mounting losses.

This reduced insurer participation could cause people in many counties to have few choices and no real competition when it comes to shopping on the exchanges. One report from the Kaiser Family Foundation estimates that the number of counties with a single insurer offering products on their ACA exchanges surged from 225 counties in 2016 to 664 counties in 2017, and that does not incorporate the Aetna pullback or any other issuers subsequently deciding to scale back their involvement. The final number of counties with only on issuer on their exchange will ultimately be much higher.

In rarer instances, even one issuer might seem like a luxury. As of now, Pinal County in Arizona has zero insurers offering plans through the exchange for 2017.

Many insurers that will continue offering plans have requested considerable premium increases for the 2017 open enrollment in an attempt to staunch the bleeding on their exchange losses. One source estimates a weighted average requested hike of 23.3 percent across all 50 states and D.C. While the final approved rate increases might be slightly less, premiums are going up significantly in most states. It is troubling for the law’s prospects that so many major insurers were unable to avoid losses of this magnitude on the exchange even with an individual mandate that penalizes the uninsured for failing to buy insurance and substantial subsidies for the majority of enrollees. 

Prior to the rollout in 2014, the administration and the Department of Health and Human Services made a concerted effort to rebrand the exchanges as “marketplaces” in an effort to emphasize the role competition and choice they hoped would play a role. There are a multitude of reasons the ACA exchanges are not real marketplaces, from restrictions on how much they can vary premiums to mandates on what benefits must be included, but even aside from those caveats, can they really be called marketplaces if no one is willing to sell on them? The current situation is a far cry from what President Obama promised when he described “marketplaces” that would deliver “more choices, more competition, and in many cases, lower prices.” 

In yesterday’s update regarding school choice lawsuits, I noted that a judge recently denied a request to fast-track one of the two anti-school-choice lawsuits (Citizens for Strong Schools v. Florida Board of Education). Today, a three-judge panel unanimously dismissed the other lawsuit (McCall v. Scott), in which the state teachers’ union alleged that Florida’s tax-credit scholarship program unconstitutionally supported a “parallel” system of public education and violated the state constitution’s historically anti-Catholic Blaine Amendment, which prohibits publicly funding religious schools. Last year, a trial court judge dismissed the case, holding that the plaintiffs lacked standing to bring the case because the scholarships were privately (not publicly) funded and that they were unable to prove that the scholarship program adversely impacted the district school system. The appellate judges unanimously agreed with the trial court, as Travis Pillow of RedefinED explains:

“[D]espite arguing that public funds have been diverted from the public school system, [the plaintiffs] make no argument whatsoever that public school funding has actually declined,” they wrote. Further, the court called the diversion theory “incorrect as a matter of law.”

The appellate judges held the case centered on political questions about school choice and education funding, and wrote that the ultimate “remedy is at the polls.”

“This is precisely the type of dispute into which the courts must decline to intervene under the separation of powers doctrine,” they wrote.

Earlier this year, thousands of parents and students held a rally calling on the teachers’ union to drop the suit.

Joanne McCall, the president of the Florida Education Association and lead plaintiff in the lawsuit, said she is still deciding whether or not to appeal and complained that the “merits of the case aren’t being argued” because the case was decided on standing. In reality, the judges directly addressed her central allegations. Following the U.S. Supreme Court and every other state supreme court to address the question, appellate judges rejected the plaintiffs’ allegation that the scholarships are publicly funded, holding instead:

No funds under the [Florida Tax Credit Scholarship Program] are appropriated from the state treasury or from the budget for Florida’s public schools. Rather, all funds received by private schools under the FTCSP come from private, voluntary contributions to SFOs, after a parent or guardian has exercised their choice to enroll their child in a private school. Further, […] tax credits received by taxpayers who have contributed to SFOs are not the equivalent of revenues remitted to the state treasury.

The judges also dismissed the plaintiffs’ argument that the forgone tax revenue would have benefited them as “founded entirely on supposition.” There is no way to know, in absence of the program, how much revenue the state would have collected or how it would have allocated it. The judges concluded: “The cloudy crystal ball the trial court would be required to gaze into in order to identify a particularized harm to Appellants underscores the speculative nature of their arguments for standing.”

In short: the union can identify no special harm that it has suffered from the state of Florida expanding the educational opportunities of low-income students through privately funded scholarships. If the union does decide to appeal the decision, the Florida Supreme Court should dismiss the case as well.

Whenever I write about immigration from Latin America, I am deluged with complaints that regardless of the economic or social benefits, Latinos are anti-libertarian “socialists.” But a new Fox News Latino poll shows something else. The libertarian presidential candidate Gary Johnson does nearly twice as well among Latino Americans as among the general public—16 percent compared to 8 percent.

Far from being socialists, a wide range of evidence shows that on average, Latino views track libertarian views as closely as any other demographic. This is not to say that Latinos are libertarians overall, but that they are just as open to the libertarian perspective as anyone else.

As my colleague Emily Ekins has pointed out, libertarians are more racially and ethnically diverse than some people believe. Pew also found in 2014 that just as many Latinos identify as libertarian and understand it as a “belief in limited government” as all Americans (11 percent for both). In 2015, Ekins found that averaging nine polls conducted by Reason-Rupe and Cato-YouGov, Latinos make up 14 percent of self-identified libertarians, while being 13 percent of the U.S. population.

Given that Latinos are already least likely to identify as a Democrat or Republican, Latinos’ disproportionate support for a libertarian option in this election makes sense. Currently, they are stuck between a party led by a president who has deported more of their relatives than any other and one led by a candidate who thinks that wasn’t good enough. By contrast, Johnson has adopted the most pro-immigration position of any in this election—not only favoring legalization for those already here but also open legal immigration in the future with Mexico—and he mentions the issue in every television interview.

But Latinos are open to the libertarian option because they side with libertarians on a variety other issues as well.

Hillary Clinton and Donald Trump have both made their opposition to trade a major campaign issue. Yet Latinos are the most likely to support freer trade of any ethnic or racial group. According to a March 2016 Pew poll, Latinos are 27 percentage points more likely than whites to consider free trade agreements “a good thing for the United States.” Compared to 51 percent of the public, 72 percent of Latinos supported freer trade. Nearly half of all Latinos told Pew that free trade agreements “helped [their] family’s personal finances.” Only 28 percent disagreed.

Clinton and Trump have both championed an interventionist foreign policy. But last year, Pew found Latinos were the only ethnic or racial group with a majority opposed to “drone strikes to target extremists.” Latinos were the most opposed to the occupation of Iraq in 2006, according to Pew, as well as its reinvasion in 2014. It’s no wonder that they oppose military conscription.

Clinton and Trump have also defended new surveillance powers for the NSA. Yet in January 2014, a majority of Latinos were against “the government’s collection of telephone and internet data as part of anti-terrorism efforts.” They are also strongly opposed to profiling Muslims.

While Latinos do favor a “bigger government which provides more services to a smaller one providing fewer” two to one, asking about specific policies reveals much less enthusiasm about big government. Latinos are equally split, for example, on the topic of Obamacare, according to a 2014 Pew (47 percent in favor and 47 percent opposed). Kaiser’s tracking poll shows that this split has continued—only 45 percent see the law favorably compared to 40 percent unfavorably in 2016.

On education, a larger majority of Latinos than of whites wants to see more school choice, charter schools, and school vouchers. An American Federation for Children poll found that 78 percent of Latinos support school choice. In a Friedman Foundation poll, they were 10 percentage points more likely than the general public to favor school vouchers.

Other Pew polls show that Latinos support gay marriage and want gays and lesbians to be accepted. They oppose mandatory drug sentences, want marijuana to be legalized, and favor treatment over prosecution for other drug users.

The point is not that most Latinos have embraced across-the-board libertarianism. A majority of Latinos favor, for example, a higher minimum wage and more gun control. But no demographic fully embraces the limited government philosophy. The point is that Latinos do not hold views that widely differ from those of other Americans. Indeed, on many issues, they are more libertarian than other voters, so it’s not shocking that many Latinos are choosing to go for the libertarian option in November.

Let’s put to rest the tired canard that Latino Americans are “socialists.” They are just as interested in liberty as any other Americans.

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger. While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic. Here we post a few of the best in recent days, along with our color commentary.

We’ve got a lot cover this week, so let’s get right to it.

On the science front, we want to highlight two new papers that both suggest that attributing heavy precipitation events in the United States to human-caused climate change is a fool’s errand (not that there aren’t plenty of fools running around out there). This is a timely topic to explore with the big rains in Louisiana over the weekend leading the news coverage.

One paper by a research team from the University of Iowa found that “the stronger storms are not getting stronger” and that there has not been any change in the seasonality of heavy rainfall events by examining trends in the magnitude, frequency, and seasonality of heavy rainfall events in the United States. They did report that the frequency of heavy rain events was increasing across much of the United States, with the exception of the Northwest. As to the reason behind the observed patterns, the authors write “[o]ur findings indicate that the climate variability of both the Atlantic and Pacific Oceans can exert a large control on the precipitation frequency and magnitude over the contiguous USA.”

The other paper, from a research team led by NOAA/GFDL’s Karin van der Wiel, examined climate model projections and observed trends in heavy precipitation events across the United States and concludes:

Finally, the observed record and historical model experiments were used to investigate changes in the recent past. In part because of large intrinsic variability, no evidence was found for changes in extreme precipitation attributable to climate change in the available observed record.

Pretty emphatic and straightforward summary.

So, the next time you read that such and such extreme precipitation event was made worse by global warming, you’ll know that there is precious little actual science to back that up.

We’ll note that the more astute science writers are actually familiar with findings like these but rather than fess-up about them, they prefer to further the climate change narrative through the use of weasel words like “is consistent with” expectations from climate change. This particularly useful phrase encompasses virtually all possibilities and allows every weather event to be linked to the nefarious burning of fossil fuels. And we do mean every—bad or good. But in practice, it is reserved by the media to be applied only to bad events or trends. For good-seeming goings-on, “dumb luck” is the preferred descriptor, despite plenty of science that could be used to show that good things, too, “are consistent with climate change expectations.” Go figure.

This unseemly situation is well-summed up in a recently uploaded video by PragerU featuring Bjorn Lomberg titled “Climate Change: What’s So Alarming?” The video is short, roughly 5 minutes, but Lomborg hits on many alarmist talking points and why they are unhelpful in the discussion of how to best approach the climate change issue. 

And if you liked that video from PragerU, the next video in the series (that autoplays in some browsers) is by our Alex Epstein looking into that whole “97% of Scientists Agree” thing.  It too is worth a watch.  

And if you still haven’t gotten your fill of the role of natural viability in the climate system, check out the just-dropped report from the National Academy of Sciences (NAS) on its role in decadal scale climate change.  Judith Curry has her thoughts about the report here, including:

It is certainly gratifying to see this topic being addressed by the NAS, since decadal variability is too often dismissed by the ‘establishment’ as climate ‘noise.’ The questions asked in the report, and the knowledge gaps, raise the important unresolved issues….

What is missing from the report is the longer term context of multidecadal to millennial variability, and the importance of paleoclimate observations. Without this context, we are not going to make much progress on understanding and predicting the decadal variability in the Atlantic, Pacific, Indian Oceans….

Until these issues and knowledge gaps are sorted out, we don’t have the basis for making the above statements with high confidence.

Here’s to hoping that the climate community is ready to take more seriously the natural climate variability on time scales from decades to millennia.

And we found this quote in the report from Geophysical Fluid Dynamics Laboratory’s Dr. Tom Knutson on the global warming slowdown (a.k.a. hiatus) and the interplay between natural variability and climate sensitivity in producing it (and determining how long it will last) particularly interesting:

With a lower [transient climate sensitivity], models can produce slowdown periods that match observations to date and can extend to about 2030.

It seems that the global temperature evolution over the next few years may produce some pretty important insights for coming near-term (this century) greenhouse-gas-induced temperature change and a test of climate model utility and formulation.

We’ll be watching!

You can check out whole NRC report “Frontiers in Decadal Climate Variability: Proceedings of a Workshop (2016),” here.

 

References:

Mallakpour, I., and G. Villarini, 2016. Analysis of changes in the magnitude, frequency, and seasonality of heavy precipitation over the contiguous USA. Theoretical and Applied Climatology, doi 10.1007/s00704-016-1881-z.

van der Wiel, et al., 2016. The resolution dependence of contiguous US precipitation extremes in response to CO forcing. Journal of Climate, doi:10.1175/JCLI-D-16-0307.1, in press.

A common narrative we hear from the news media this election cycle is that Donald Trump has become popular by tapping into anti-trade sentiment among blue collar workers “on the losing side of trade globalization.”  The basic premises of this narrative are that (1) trade has harmed a large segment of the U.S. population and (2) those people are voting for Trump.  But neither one of those premises is true.

The narrative has been fueled by a paper released earlier this year by economist David Autor, David Dorn, and Gordon Hanson titled “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade.”  The paper has gotten a lot of attention from people on all sides of the trade policy debate.

The key finding of the paper is best summarized by this sentence from the abstract: “At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize.”  The idea is that trade with China has been so disruptive that many people who lost their jobs due to increased imports from China have not been able to find new work. 

Last week, the Wall Street Journal posted a long article tying the picture painted by the Autor, et al. paper to “disillusionment with globalization” and ultimately support for Donald Trump. 

What happened with Chinese imports is an example of how much of the conventional wisdom about economics that held sway in the late 1990s, including the role of trade, technology and central banking, has since slowly unraveled.

The aftershocks are sowing deep-seated political discontent this election year. Disillusionment with globalization has fed one of the most unconventional political seasons in modern history, with Bernie Sanders and especially Donald Trump tapping into potent anti-free-trade sentiment.

It’s understandable that journalists would be attracted to the idea that Trump’s rise fits into broader storylines about economic change and inequality.  But there are a number of reasons why the narrative just doesn’t make sense. 

For one thing, trade isn’t actually the main driver behind the decrease in manufacturing employment, which began in 1979, long before China became a major U.S. trading partner.  Part of the decline is due to trade but the vast majority is due to technological improvements that have enabled greater efficiency and automation.  That’s why even as manufacturing employment has decreased, manufacturing output has continued to rise and is now at an all-time high. 

Also, many of the places where a decrease in manufacturing employment can be tied to competition from Chinese imports are actually doing quite well economically.  If some places affected by trade are doing well and some are doing poorly, that should give us a hint that trade (or other drivers of creative destruction and growth) is not itself responsible for a community’s inability to absorb economic shock. 

My colleague Scott Lincicome has done an excellent job of explaining how the “China shock” is really a story about the lack of labor dynamism in the U.S. economy.  Government policies, many of which differ from state to state, can significantly impact the likelihood that people will find new work after their job becomes obsolete.  Policies that reduce dynamism in the labor market—minimum wage laws, protectionist occupational licensing, various taxes and regulations—make it more difficult for businesses and workers to match up after economic disruption.

So, the first premise of the narrative—that trade is responsible for economic decline in many American communities—is false.   

But maybe people are supporting Trump because they falsely blame trade for their troubles.  A new study using extensive survey data from Gallup blows that theory away.  As the Washington Post reports:

Economic distress and anxiety across working-class white America have become a widely discussed explanation for the success of Donald Trump. It seems to make sense. Trump’s most fervent supporters tend to be white men without college degrees. This same group has suffered economically in our increasingly globalized world, as machines have replaced workers in factories and labor has shifted overseas. Trump has promised to curtail trade and other perceived threats to American workers, including immigrants.

Yet a major new analysis from Gallup, based on 87,000 interviews the polling company conducted over the past year, suggests this narrative is not complete. According to this new analysis, those who view Trump favorably have not been disproportionately affected by foreign trade or immigration, compared to people with unfavorable views of the Republican presidential nominee. The results suggest that his supporters, on average, do not have lower incomes than other Americans, nor are they more likely to be unemployed.

The study found that although Trump supporters may live in the sorts of places people consider to be harmed by trade, those supporters personally enjoy above-average economic performance.  So the second premise of the narrative—that people’s economic troubles are leading them to support Trump—also appears to be false. 

Let’s recap:

America’s manufacturing sector is thriving.  Manufacturing employment has continued to decrease, because America has a modern, developed economy where we make more things than ever before using less labor and people have better employment options than working on a factory floor.  However, as manufacturing jobs disappear (due mostly to increased automation) some people have struggled to find new work (due to various economic and policy realities unrelated to trade).

The Gallup analysis shows that this group of people is, in any event, not the demographic most represented among Trump supporters.  

So, the question remains: “Why has Trump been able to gain support by falsely blaming trade with China for an economic decline his supporters have not experienced?”

The Gallup analysis has an interesting theory based on their data:

The evidence is in favor of contact theory is quite clear. Racial isolation and lack of exposure to Hispanic immigrants raise the likelihood of Trump support. Meanwhile, Trump support falls as exposure to trade and immigration increases, which is the opposite of the predicted relationship.

The idea is that Trump supporters are opposed to trade and immigration, not because they have had bad experiences with them, but because they have had very little experience with them.

It’s worth remembering that, although Donald Trump has been particularly vociferous in his condemnation of trade, there’s nothing especially new about the public’s willingness to buy into anti-trade rhetoric during an election or for politicians to take advantage of that.

Politicians are excellent at deflecting the blame for their own failed policies onto people or institutions that voters already mistrust.  That may be foreigners (especially foreign governments) or corporations (especially multinational corporations).  The success of Trump’s anti-trade message is most likely due to his willingness to take advantage of some people’s distrust of things that are foreign. He will have the most success among people for whom trade and immigration are most foreign.  Much the same can be said of the popularity of Sen. Bernie Sanders’s brand of populist trade-bashing among the anti-corporate Left.

Trying to tie support for trade to economic factors is going to lead you to bad results, because all Americans benefit immensely from open trade.  Trade has made Donald Trump’s supporters wealthier, and taxing imports for the sake of economic nationalism won’t help them, even if they used to work in a factory.

Billionaire investor Wilbur Ross, a supporter of Donald Trump, made the following comment in a letter to the Wall Street Journal (Aug 15): “It’s Econ 101 that GDP equals the sum of domestic economic activity plus “net exports,” i.e., exports minus imports.  Therefore, when we run massive and chronic trade deficits, it weakens our economy.”

In reality, the last sentence –beginning with “Therefore”– does not follow from the first.

Mr. Ross is alluding to the demand side of National Income Accounts, wherein Y=C+I+G+ (N-X). That is, National Income (Y) equals spending on Consumption (C) plus Investment (I) plus Government (G) plus Net Exports (Imports N minus Exports X).  

Taking such accounting too literally, a reduction in imports may appear to be mathematically equal to an increase in overall real GDP.  But that is dangerously incorrect, as the 1930s should have taught us.

The accounting is true by definition (a tautology). But economics is about behavior, not accounting identities.

If trade deficits “weaken our economy,” as Mr. Ross asserts, then we should expect to see real GDP slow down when trade deficits get larger and see real GDP speed up when trade deficits get smaller or become surpluses.  What the data show is much different – the exact opposite in fact.  

The graph compares net exports (N-X) as a percentage of GDP with the annual growth of real GDP.  What it clearly shows is that trade deficits fall in recessions and grow larger in periods of strong economic growth. Trade was in surplus during the recession of 1970 and 1975, and the trade deficit shrank to trivial size in the recessions of 1980-82 and 1990-91. Trade deficits were largest in 1983-89 and 1997-2000 when real GDP was growing by 4.4 percent a year. Trade deficits also expanded in 2003-2006, when real GDP was growing by 3.2 percent a year. As real GDP growth slowed to 2 percent from 2011 to 2015, the trade deficit stabilized near 2.9 percent of GDP.

The main reason trade deficits are inversely related economic growth, contrary to elementary accounting, is that U.S. industry needs more imported parts and raw materials when the economy expands, and consumers can afford more imported luxuries when their incomes and investments are rising. A secondary reason is that whenever the United States is growing faster than the economies of major trading partners (such as Japan, EU, Canada), their demand for U.S. exports is likely to lag our demand for their exports.

Does Y=C+I+G+(N-X) imply that raising tariffs to increase the cost of imports to U.S. families and firms will somehow make their real incomes grow faster?  Of course not. Paying more for less would make Americans poorer, not richer.  If the price of widgets went up by 35 percent because of a tariff, fewer widgets would be sold and fewer Americans would be employed making them.

Writers across the political spectrum claim that immigrants are naturalizing at a higher rate to vote against Donald Trump in the 2016 presidential election.  No doubt some lawful permanent residents (LPR) are naturalizing in order to vote against Trump, who has made his anti-immigration position a major component of his campaign, but the annualized number of petitions filed in the first two quarters of FY 2016 don’t show a big increase over 2015 (Figure 1).

Figure 1

Naturalization Petitions Filed Annually

 

Source:  DHS & USCIS.

The Migration Policy Institute notes that the number of FY2016 naturalization petitions filed through March is up 21 percent over the same time in FY2015.  If that holds until the end of the year, then there will be about 164,000 additional naturalizations compared to 2015.  The annual standard deviation for naturalization petitions filed from 2008-2015 was about 121,000. So, although FY2016 petitions are likely to exceed those of FY2015 by more than a standard deviation, it pales in comparison to increases in previous years.    

A better measurement is the annual number of petitions filed as a percent of all eligible LPRs. Department of Homeland Security reports provided most of the numbers while I had to make some estimates for the years 2014-2016 based on trends. According to this rough measurement, the annualized number of FY2016 petitions is only slightly above those of 2015 and below that of 2012 (Figure 2).

Figure 2

Naturalization Petitions Filed as a Percent of All Eligible LPRs

 

Sources: DHS & Author’s Estimates for 2014-2016.

The 2007 spike was caused by people filing their petitions before an 80 percent increase in naturalization fees went into effect. 

Surges in naturalization petitions have occurred in the past, particularly as a result of the enforcement propositions in California in the mid-1990s and after the Reagan amnesty. Although 2016 naturalization petitions are up, reports of a massive surge are exaggerated.         

Taiwan long has been one of the globe’s most dangerous tripwires. Other than a brief period after World War II, the island has not been ruled by the mainland for more than a century. The 23 million people living on what was once called Formosa have made a nation.

However, the People’s Republic of China views Taiwan–also known as the Republic of China (ROC)–as part of the PRC. As China has grown wealthier, it has created a military increasingly capable of defeating Taiwan.

At the same time, economic ties between the two nations have grown, yet the Taiwanese population has steadily identified more with Taiwan than the PRC. The election of Tsai Ing-wen of the traditional pro-independence Democratic Progress Party as president in January greatly discomfited Beijing.

As Chinese patience wanes, American policy based on ambiguity grows riskier. Washington’s commitment to Taiwan developed out of the World War II alliance with the ROC.

However, Washington loosened its commitment to Taipei with President Richard Nixon’s opening to China. President Jimmy Carter furthered the process when the United States shifted official recognition to the PRC.

The American military commitment has become steadily less certain. Would the United States really risk Los Angeles for Taipei, as one Chinese general famously asked?

Washington officials hope never to have to answer that question, but the recent Taiwanese missile misfire offers a dramatic reminder of the danger of guaranteeing other nations’ security. A Taiwanese vessel mistakenly shot an anti-ship missile toward China, destroying a Taiwanese fishing boat, killing the captain and injuring several other crewmen.

While nothing today suggests that the PRC is planning war, at some point Beijing might find a casus belli to be convenient. And then America would be in the middle.

Of course, American officials want to believe that the mere mention of America would be enough to thwart Chinese ambitions. However, history is full of cases when deterrence fails.

Moreover, security guarantees tend to make their recipients more irresponsible. President Chen Shui-bian, the first DPP president, lost few opportunities to poke the great dragon across the strait, feeling secure with the United States seemingly on his side.

Worse, security guarantees effectively transfer the power to choose war to other states. Indeed, alliances often act as transmission belts of war.

Americans must decide just how committed they are to Taiwan’s independence, and do so now, rather than in the midst of a crisis. Such a crisis could emerge after an errant Taiwanese missile sinks a Chinese ship, followed by an ultimatum from Beijing to Taipei to begin reunification talks.

Taiwan is a good friend and the Taiwanese people are entitled to decide their own future. Unfortunately, however, the island abides in a bad neighborhood.

It is hard to imagine a greater catastrophe than war between the United States and the PRC. It would be virtually impossible to justify Washington not only threatening but actually following through on its military threats against China if the latter moved against Taiwan.

The United States needs to have a serious conversation with Taipei now, well in advance of the moment when the latter expects the American cavalry to arrive in a crisis. Moreover, Washington should consider a plan to back away militarily in seeking a Chinese commitment to an unhurried peaceful resolution to the issue. Doing so might encourage an economically embattled PRC to trim a military build-up that would be less necessary without the challenge of facing Taiwan backed by America.

As I point out for China-US Focus, “U.S. officials tend to assume that Washington’s commitments will never be challenged. But the Taiwanese mishap reminds us of the inevitable unexpected in international relations, and the terrible costs which often result.”

Is America really prepared to risk Los Angeles for Taipei? If not, Washington must decide what price it is willing to pay to assist Taiwan and then configure its foreign and military policies accordingly.

As school choice wins in the court of public opinion, opponents have resorted to fighting it in the courts of law. Here are a few brief updates regarding pending lawsuits against school choice programs around the country.

Colorado: Douglas County’s School Choice Grant Program

Last summer, the Colorado Supreme Court struck down Douglas County’s school voucher program with a plurality ruling that the law violates the state’s historically anti-Catholic Blaine Amendment, which forbids public money from being used at religious schools. District officials responded to the ruling by creating a new voucher program that excludes religious schools, which drew lawsuits from both opponents and supporters of school choice.

The Institute for Justice, which had previously defended the school voucher program, sued the county for unconstitutionally discriminating against religious groups. According to IJ, the “exclusion of religious options from the program violates the Free Exercise, Establishment, Equal Protection, and Free Speech Clauses of the United States Constitution, as well as the Due Process Clause, which guarantees the fundamental right of parents to control and direct the education and upbringing of their children.” IJ contends–correctly, in my view–that the First Amendment requires the government to be neutral both among religions and between religion and non-religion, but it may not actively favor nor discriminate against either religious or non-religious groups or institutions. This case is still pending.

In a separate lawsuit, opponents of school choice contended that the new voucher program was not materially different than the old one. Earlier this month, a district court agreed, striking down the program yet again. Although by excluding religious schools, the new program appears to be in compliance with the Colorado Supreme Court’s ruling, the district court explained that the state supreme court did not rule on the merits of several other alleged violations of state constitutional provisions under which the district court had previously invalidated the program. This case is likely going to return to the state supreme court for resolution.

Florida: Tax-Credit Scholarships

There are currently two lawsuits pending against Florida’s tax-credit scholarship program. As RedefinED reports, a judge recently denied an attempt to fast-track one of the two suits, which primarily concerns the adequacy of the state’s funding of district schools. A judge dismissed the portion of the suit related to the tax-credit program but plaintiffs filed an appeal and asked for the case to skip the appellate court and go straight to the state supreme court. That request has been denied, so the case will go before the appellate court first. That means the program is likely to serve more than 100,000 students by the time it comes before the state supreme court.

Nevada: Education Savings Account

As I noted a few weeks ago, the Nevada Supreme Court held oral arguments in two lawsuits against the state’s education savings account (ESA) program. RedefinED provides a nice summary of the arguments from each side.

Meanwhile, a new poll finds that nearly half of Nevada voters (48 percent) support the ESA program compared to 37 percent who oppose it. Some are making hay of the fact that wealthier families are more likely to support the program, but the law’s legislative sponsor explains that the poor are likely to benefit the most in the long run:

Support rose to 69 percent for voters with an income above $200,000, compared to just 40 percent for those earning less than $30,000.

“That might be true right now,” [state senator Scott] Hammond said. “But like anything else, when new technologies and innovations come down, it does seem like the rich take advantage of those.”

He compared the favorability of ESAs to the adoption of smartphones and other electronics: Wealthy individuals can afford to pay for the cost of research and development for a new product before the price drops for everyone else.

If the Supreme Court rules in favor of ESAs, Hammond predicted the cost of private school tuition and other services will fall and build support for the program.

“The price point will decrease. The knowledge also will increase among groups of people who may not even know what an ESA is,” he said. “And then you’ll start to see more participation.”

Exactly so. As I noted last year, the iPhone was initially something that only wealthier folks could afford, but now Walmart carries a smartphone that has better specs than the original iPhone that costs just $10. Likewise, a market for education will require the participation of higher income families to bring needed capital, but over time the greatest benefit will redound to the poor. As we’ve seen in Arizona, it is the lowest-income families who were the least satisfied with their district schools and who were the most satisfied with the ESA.

New Hampshire: Croydon’s Town Tuitioning Program

The village of Croydon, New Hampshire (population 651) is too small to run its own K-12 school system, so it has long contracted with a neighboring town to educate its students. However, a few years ago, village officials decided to cover the tuition costs of students attending any school their parents chose, up to the amount they had been paying in their previous agreements. Unfortunately, state officials didn’t like the town bucking the government education monopoly:

Croydon had been spending about $12,000 per pupil to place them in Newport’s district school. The town would cover tuition at a family’s chosen school up to the amount Newport charged, and the parents would make up any difference. On the other hand, if a school charged less than that, then the town would reap the savings. This year, Croydon paid for four students to attend Newport Montessori School, a private school where tuition is $8,200 a year.

Although the taxpayers save money and, most importantly, the students’ parents believe that school is the best fit for their children, the New Hampshire Department of Education ordered Croydon to immediately cease paying for students attending private schools.

The DOE argues that Croydon does not have the statutory authority to pay for students to attend private schools. The Croydon School Board’s attorney, former New Hampshire Supreme Court Justice Charles Douglas III, disagrees, pointing to a statute authorizing districts to contract with other public or non-public educational institutions, which, in fact, some other districts already do.

Sadly, a district court recently ruled against Croydon, which is now considering an appeal. Because the town is so small, raising the funds necessary to mount a successful legal appeal is challenging, so some village officials have created a GoFundMe page for a legal defense fund. (Yes, my libertarian friends, they do take Bitcoin!) For more information on the case, see the School Choice for New Hampshire blog.

[Originally posted at Jay P. Greene’s blog.]

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