Policy Institutes

This was a news headline in the Wall Street Journal yesterday: “States’ Revenue Shortfalls Exacerbate Budget Crunch.” The article said that, “Faced with weak revenue, sluggish growth and possible federal funding cuts, many governors and state lawmakers face a tough budget season.”

That made me laugh. “States as victims” is a common storyline in the mainstream media anytime that state budgets are not growing gangbusters. States need to balance their general fund budgets each year, and so it is true that state policymakers must be more responsible that the spend-and-borrow politicians in Washington. But news stories on the states rarely provide the important context of how much budgets have grown over time.

The chart below—based on NASBO data—shows general fund revenues since fiscal 2010, with projected revenues for fiscal 2017. To achieve annual balance, the “tough” task of state policymakers is simply to keep spending rising no faster than these revenues.

Does the chart look like a “crunch” to you with “weak” revenue? And if 33 percent revenue growth over seven years and 3.6 percent projected growth in 2017 creates a “shortfall,” what do you think the problem is?

In a committee vote the tightness of which surprised no one, this morning President Trump’s nominee for education secretary, Betsy DeVos, was approved on a purely partisan basis by the Senate Health, Education, Labor and Pensions committee. DeVos’s nomination now moves to the full Senate.

While the rhetoric surrounding DeVos has been heavily targeted at her competence, the main issue seems to be that Democrats generally oppose private school choice programs while Republicans generally do not. Even questions about the Individuals with Disabilities Education Act (IDEA) at DeVos’s confirmation hearing—would she support attaching IDEA rules to public funding that disabled students could take to a chosen school?—were primarily about choice.

Choice is fundamentally different from public schooling. With choice, families have real power—the power to leave a school not serving them and take their education dollars elsewhere. This is why Florida’s McKay scholarship program for children with disabilities—which DeVos tried to defend before being cut off in questioning at her nomination hearing—has very high satisfaction levels among parents using it. Public schools, in contrast, get taxpayer money no matter what, and require seemingly endless political, bureaucratic, and legal combat to hopefully—just hopefully—get improvements made.

Of course, choice needs freedom from stultifying rules and regulations to be meaningful. Specialization, competition, innovation—none can meaningfully exist without educators having the freedom to engage in new and different ways of delivering education.

The powerful inclination to wrap programs in incapacitating layers of red tape…er, “accountability”…is a major reason that the federal government should not try to deliver school choice, or govern education at all. (The Constitution is the other big one.) It is simply too dangerous to have one government—the federal government—supply choice nationwide. But there is good reason to fear that the Trump administration will try to do it nonetheless, based on Trump’s promise to make a  $20 billion choice “investment.”

Empowering parents with choice is the right way to deliver education. But the clear and present danger of freedom-smothering rules and regulations, as we’ve seen brightly illustrated by the debate over DeVos, accompanies any government funds. Which is why choice must not be delivered by Washington.

Following a day of feverish rumors to the contrary, the White House has flatly denied that it plans to reverse an Obama administration directive extending nondiscrimination protections to lesbian, gay, bisexual and transgender federal workers. “ ‘President Trump continues to be respectful and supportive of L.G.B.T.Q. rights, just as he was throughout the election,’ the White House said in a statement. “The president is proud to have been the first ever G.O.P. nominee to mention the L.G.B.T.Q. community in his nomination acceptance speech, pledging then to protect the community from violence and oppression.”

The White House did not rule out revisiting other decisions by its predecessor administration on gay rights, such as an order requiring federal contractors to adopt nondiscrimination policies, which pointedly did not provide conscience exemptions for private religious agencies. A year and a half ago in this space I myself took issue with what the Obama administration was up to on this front.

The effect of a contractor ban without religious objector provisions, I argued, would be to kick various religious agencies out of social service work in public settings in adoptions and foster care, as well as some prison, drug rehab, and various other settings. Ousting conservative religious groups from participation in social service adoption is likely to cut down on the number of successful placements made of children in public care, which would hurt the taxpayer, hurt adoptive parents, and, not least, hurt kids. The more genuinely pluralist approach, I argued, would be to acknowledge conscience exemptions while fully opening these systems to participation by contractors that gladly serve gays, persons of no given sect, religious unbelievers, and so forth. 

Further reaction is probably best postponed until things get past the rumor stage.

At noon on January 20th, Barack Obama stepped aside, leaving Donald Trump as the leader of the free world. In his inaugural address, Trump pledged to implement an ‘America First’ doctrine. But while the implications for trade and immigration are relatively clear, his speech brought us little closer to understanding what this will mean for foreign policy.

Indeed, thanks to the incoherence of the president-elect’s foreign policy remarks during his campaign, the range of potential outcomes is wide. But Trump’s past comments suggest four potential paths that his ‘America First’ Doctrine could take.

The first option is true isolationism. Though it remained unclear throughout the campaign the extent to which Trump truly understood the historical baggage that came with the term ‘America First,’ many commentators assumed that he would indeed pursue a classic isolationist policy. And Trump seems to mean it literally in some cases: only a week into office, he has already sought to erect trade and immigration barriers. He may also seek to withdraw from the world in military terms, abandoning alliances, and refusing to engage in even the diplomatic resolution of international problems which don’t directly concern the United States.

Yet elements of Trump’s own statements call this assumption into question. From his insistence on increased military spending to his promise in the inaugural address to eradicate radical Islamic terrorism ‘completely from the face of the Earth,’ Trump has repeatedly implied that he is likely to pursue a relatively hawkish foreign policy.

A second option for the Trump Doctrine could be described as ‘pragmatic power.’ In his rare scripted speeches devoted to foreign policy, Trump’s speechwriters did a good job of working his off-the-cuff remarks into a relatively coherent and pragmatic approach to the world.

While unscripted Trump calls NATO ‘obsolete’ and a rip-off, for example, his speeches highlighted the need for wealthy allied states in Europe to pay more towards their own defense. Rex Tillerson, Trump’s nominee for Secretary of State, seems to share this worldview, noting in his confirmation hearings that his background as an engineer leads him to seek logical solutions to international crises.

Yet this level of coherent pragmatism appears unlikely given Trump’s own reactive personality. Intensive efforts by aides to reshape Trump’s inflammatory statements into a broader, saner critique of flawed U.S. democracy promotion and regime change efforts are often swiftly undone by the President himself. Within one day of his inauguration, for example, Trump reiterated his remarks on ‘taking the oil’ while visiting the headquarters of the Central Intelligence Agency.

A third option for Trump’s America First Doctrine is thus a far less pragmatic ‘global crusade.’ Drawing on the views of key advisors like Michael Flynn and Steve Bannon, Trump could instead embrace a ‘clash of civilizations’ approach to the world. This would subordinate all other foreign policy crises to a campaign against radical Islam, a philosophy that he and various advisors believe includes elements as diverse as Iran, al Qaeda, ISIS and the Muslim Brotherhood.

Indeed, in his augural address, Trump promised to “unite the civilized world against radical Islamic terrorism.” To that end, Trump’s conciliatory approach to Russia – in which he often cites terrorism as a key joint concern – suggests a willingness to work together on counterterrorism.

However, it remains uncertain whether Trump – not known for his cerebral qualities —will explicitly pick any such coherent strategy. Instead, the ‘America First’ doctrine that appears most likely to emerge is a reactive form of Jacksonianism, or a modified version of Reagan’s ‘Peace Through Strength.’

Such a strategy would take a more hands-off approach to global affairs, and enact substantive trade and immigration restrictions. But at the same time, it would follow through on Trump’s promises to rebuild and expand the U.S. military, increase military spending, destroy ISIS, expand the military’s rules of engagement, and take a reactive, hardline stance on Iran, China, nonproliferation and a host of other issues any time he feels that America’s honor is threatened.

The differences between these four potential Trump Doctrines cannot be overstated, yet all four remain politically viable paths, a testament to the campaign’s scattershot foreign policy pronouncements. And the internal politics of the incoming administration – where advisors appear to have a dizzying selection of different views – also matter. Trump’s inaugural address – apparently written by Steve Bannon – may only reflect one faction within the administration.

Trump’s inaugural address provided a name for his foreign policy doctrine, yet its content remains largely a mystery. Few presidents have ever come to office with so little background in governance and so ill-defined a foreign policy worldview. A rocky first week, filled with crises, has only exacerbated the confusion. Only as President Trump begins to settle into his new role will we finally start to learn which ‘America First’ doctrine we can expect for the next four years.

People have been asking me about the final few people President Trump seems to be considering for Supreme Court nomination. I know them and especially their work to varying degrees and am confident that they’re each worthy of elevation. Here’s a summary of their judicial profile.

Neil Gorsuch is probably the most like Scalia. He has a well thought out conception of constitutional interpretation and the way that structure protects liberty. He’s most known for his opinions supporting religious liberty and pushing back on the administrative state. In a Trumpian world, his biggest weakness is that he went to Harvard Law. He was confirmed unanimously to the Tenth Circuit and should not face significant opposition.    Thomas Hardiman is a judge’s judge. He decides the issues before him generally in a way that should be pleasing to conservative legal elites and does not go beyond the four corners of the case. He brings no ideological agenda to his tasks and so may be less like Scalia in that respect—and also he’s probably more deferential to law enforcement that Scalia was. He also was confirmed unanimously and should face no significant opposition except that some activists will glom on to his strong defense of the right to keep and bear arms.    William Pryor is a courageous and forthright judge. He would generate the most controversy because of his extra-judicial writings and speeches, most notably in stern opposition to Roe v. Wade. He has been attacked from both the left and the right (unjustly in my view) and his previous confirmation was itself not without controversy. He is best known for his writings on religious liberty and the proper judicial role.     It would be impolitic of me to name my preference, but let’s just say that the American people would be served well by any of them (or the others who’ve been mentioned).

On Friday, the Heritage Foundation hosted a panel of experts to discuss prospects for infrastructure policy during the Trump administration. You can watch the event on C-SPAN.

I discussed why infrastructure activities should be devolved to the states and private sector, and why the Trump plan to subsidize equity investments in infrastructure is not a good approach.

There were numerous points of agreement on the panel, which included Michael Sargent of Heritage, Robert Puentes of the Eno Center, and Marc Scribner of CEI. We all favored greater private investment in traditionally public infrastructure, and we all agreed that the Trump administration should put a high priority on air traffic control reform this year.

I make the case for privatizing air traffic control in a new op-ed in The Hill.

Last Friday, President Trump issued a misguided executive order affecting migration from seven majority-Muslim countries. In December 2015 Trump called for a “total and complete shutdown of Muslims entering the United States,” until (as his fans never tire of pointing out) elected officials “can figure out what is going on.” News from last week confirms that Trump’s rhetoric related to Muslims was not just campaign bombast; it was a serious policy proposal. Another immigration proposal touted during the campaign was also codified into policy by executive order last week, with Trump directing the Department of Homeland Security (DHS) to expand an interior immigration enforcement program that will grow the federal government’s role in state and local law policing while harming police departments’ relationships with the communities they are tasked to serve. 

Under §287(g) of the Immigration and Nationality Act, local and state police departments can enter into agreements with Immigration and Customs Enforcement (ICE) to enforce federal immigration laws. Thirty-four law enforcement agencies in 16 states are now taking part in the 287(g) program. Up until 2013 this program included “task force” agreements, which allowed participating officers to arrest suspected immigration law violators in the field, and “jail enforcement” agreements. Under “jail enforcement” agreements officers at state and local correctional facilities can seek to identify aliens via interviews and checking their biographic details against DHS databases.

Currently, only jail enforcement agreements are in place. The Obama administration abandoned the “task force” agreements at the end of 2012 amid worries about their negative effect on police-community relationships and accusations of racial profiling.

Trump said that he would “expand and revitalize” 287(g) during a speech last August. An executive order signed last week makes it clear that the Trump administration is serious about such a revitalization and expansion, including a reinstatement of “task force” agreements.

Section 8(b) of the executive order in question reads (emphasis mine): 

Sec. 8. Federal-State Agreements. It is the policy of the executive branch to empower State and local law enforcement agencies across the country to perform the functions of an immigration officer in the interior of the United States to the maximum extent permitted by law. 


(b) To the extent permitted by law and with the consent of State or local officials, as appropriate, the Secretary shall take appropriate action, through agreements under section 287(g) of the INA, or otherwise, to authorize State and local law enforcement officials, as the Secretary determines are qualified and appropriate, to perform the functions of immigration officers in relation to the investigation, apprehension, or detention of aliens in the United States under the direction and the supervision of the Secretary. Such authorization shall be in addition to, rather than in place of, Federal performance of these duties. 

Under jail enforcement agreements 287(g) was reserved for custodial situations (excluding the field). The executive order allows DHS to authorize state and local police departments to “perform the functions of immigration officers” not only for the detention of aliens but also their apprehension. This is a sad return to agreements that pose threats to federalism and social cohesion.

As was noted in a November 2012 American Immigration Council (AIC) study, “287(g) agreements have resulted in widespread racial profiling.” A Department of Justice (DOJ) investigation found that Maricopa County (Arizona) Sheriff’s Office, which took part in the 287(g) program, had “poisoned the relationship between law enforcement and Latinos, hindering general law enforcement efforts within the Latino community.”

The same AIC study cites a DOJ investigation into Alamance County (N.C.) Sheriff’s Office and an ACLU study of Gwinnet County, Georgia, both of which highlight racial profiling.

The International Association of Chiefs of Police has stated, “local police agencies depend on the cooperation of immigrants, legal and illegal, in solving all sorts of crimes and in the maintenance of public order. Without assurances that they will not be subject to an immigration investigation and possible deportation, many immigrants with critical information would not come forward, even when heinous crimes are committed against them or their families.”

A 2009 Police Foundation paper also mentioned the negative effect 287(g) had on police-community relations: “[Police executives] were concerned that public safety would suffer because of destroyed trust and cooperation with immigrant communities. Participation in the 287(g) program, or at least the media coverage and fear generated by it, would undermine years of community-policing efforts, which in turn would compromise public safety,” adding that “the costs of the 287(g) program outweigh the benefits.”

The problems associated with using local police to enforce federal law was expressed bluntly by New Orleans mayor Mitch Landrieu, who shortly after the executive order was signed issued a statement saying in part, “the NOPD will not be coerced into joining Trump’s deportation army via the 287(g) program. Doing so would require the NOPD to pull officers focused on fighting crime off the street.”

It has been a little more than a week since Donald Trump took the Oath of Office. In that short time, he has demonstrated that he intends to convert his campaign rhetoric into policy. When it comes to 287(g) this will result in worsened police-community relations, a growth in federal government power, and local and state police officers siphoning resources towards immigration enforcement, all of which should be avoided. 

President Trump reportedly spoke with the king of Saudi Arabia on Sunday about imposing safe zones in Syria, presumably for the purpose of protecting civilians from rebels and Syrian and Russian bombardment. Such a policy carries a lot of risk, would likely violate international and U.S. law, and is strategically unwise.

Safe zones have a mixed record at best for protecting civilians. In the 1990s, Iraqi Shia in United Nations’ safe zones turned out to be not so safe from Saddam Hussein. Bosnian Muslims were unprotected in Srebrenica, the city now associated with a terrible massacre despite an established safe zone there. Even beyond the logistical challenge of setting up safe zones in the middle of a chaotic civil war, keeping the civilians safe inside is no piece of cake. Humanitarian relief would have to be supplied, which requires an additional commitment of resources and coordination. And it would be difficult to prevent Syrian rebel groups from infiltrating, targeting, or otherwise taking advantage of them. On-the-ground forces would be required to police the area and distinguish between militants and civilians seeking refuge. Moreover, safe zones would require, at the very least, sustained use of airpower to protect the skies over them and the territory around them. The Syrian air force and the Russian air force are already crowding those skies. U.S. intervention would be subject to direct challenge, or at the very least massively increase the chances of accidental confrontation.

Americans should also consider the legality of such a move. Establishing safe zones requires imposing on the territorial integrity of another sovereign nation and defending those zones with military force. Under international law, that’s illegal in the absence of host nation permission or an authorization from the UN Security Council. There is little chance Syria is going to give such permission to the United States and Saudi Arabia, and given Russia’s alliance with the Syrian regime, a Security Council authorization will not be forthcoming.

The Trump administration would be on similarly shaky ground as far as domestic U.S. law is concerned. U.S. military action in Syria during the Obama and now Trump administrations has no specific authorization from Congress. It has so far been justified legally by reference to the 2001 and 2002 Authorization for the Use of Military Force (AUMF), which authorized action against those groups and individuals who carried out the 9/11 attacks and then against Saddam Hussein’s Iraq. Neither authorization could plausibly justify imposing safe zones and no-fly zones in Syria, operations that would clearly be unconnected to those past missions.

The practical and legal considerations here certainly present obstacles. But it’s in the realm of strategy that the plan for safe zones really falls flat. Pursuing such a dangerous mission, so fraught with practical complications and the potential for mission creep, without specifying the greater strategic end that it is supposed to serve, is profoundly irresponsible. And what strategic objective might safe zones achieve? Even if they are successful in protecting some civilians, they won’t resolve the underlying political issues in Syria that are driving the conflict in the first place. In fact, they will more likely complicate them. Furthermore, establishing safe zones in the absence of the political will and resolve necessary to fully enforce them undermines the case for imposing them in the first place. If the American public and their elected officials don’t fully understand the potential consequences and support the prospect of an expanded mission in case of unexpected contingencies, imposing safe zones in Syria is the height of strategic folly.

To date, proposals to set up safe zones in Syria appear to be proposals to “do something,” or at least to appear to be doing something, even if that something ignores the likely adverse consequences and is unconnected to viable strategic goals. 

President Trump created a stir by dismissing as “too complicated” the border adjustability feature in the House Republican corporate tax reform. Yet a few days later his press secretary Sean Spicer suggested the seemingly rejected border tax could pay for a Mexican border wall.   

Meanwhile, the President suggested the dollar is “too strong” even though (1) Commerce Secretary Wilbur Ross boasted about Trump having talking the Mexico peso down 35% and (2) Martin Feldstein and other economists pushing border adjustability predict that the plan would push the dollar 25% higher. 

To call border adjustability too complicated is starting to look like a huge understatement. 

In the House Republicans’ tentative “Better Way” plan, border adjustment means corporations could no longer treat expenses of imported materials, parts, or equipment as a cost doing business. Manufacturers of electrical machinery or plumbing parts could not deduct the cost of copper (36% of which is imported).  Retailers could not deduct the cost of imported goods. Refiners would pay a 20% tax on crude oil from Canada.

Exports, by contrast, would not count as income for U.S. tax purposes. Big exporters might even qualify for a federal check. “Any border adjustment should include cash refunds for exporters,” writes economist Alan Viard.   

This “border adjustability” is said to be comparable to the way we exempt foreigners from our sales and excise taxes and other countries likewise exempt us from their equivalent value added taxes (VAT). But that analogy depends on treating a tax on corporate cash flow (essentially income minus expensed investments) as equivalent to a tax on sales. I plan to discuss the VAT analogy in a separate blog.

Tax Policy Center economist Bill Gale notes, “Many economists—but very few non-economists—believe that the international trade effects of border adjustments will be small.” Indeed, the architects of the House GOP plan, as well as potential winners and losers among business leaders, depict the House GOP tax proposal as an export incentive and import penalty. So does economist Diana Furchtgott-Roth who writes, “Border adjustability taxes are essentially tariffs under another name.” Carolyn Freund of the Peterson Institute likewise shows how a “Maryland-produced sweatshirt will face a lower tax rate than the Chinese-produced sweatshirt, exactly as if a tariff were applied.” Foreign trading partners will surely see it the same way.  

How can economists disagree? “In a simple textbook model,” explains Alan Viard, “a border adjustment would trigger a real increase in the value of the dollar that would raise the cost of U.S. exports and reduce the cost of U.S. imports by an amount that would exactly offset the direct effects of the border adjustment.”

This textbook model claims the so-called “destination-based cash-flow tax (DBCFT)” will not affect the U.S. trade deficit because, as Paul Krugman explains,  “wages and/or the exchange rate would change.” Rather than dealing with changing wages, border adjustment enthusiasts claim the real exchange rate of the dollar would supposedly rise “exactly” enough to make U.S. exports sufficiently expensive to foreigners to “exactly” offset the export subsidy. And the dollar prices of foreign imports would likewise fall by “exactly” the right amount to compensate for the importers’ extra 20% tax, neither more nor less.  

“If the dollar doesn’t rise quickly enough or high enough,” notes The Wall Street Journal, “a border-adjusted tax is expected to penalize big retailers and other large corporations reliant on lower-cost foreign production.” Even if we could be certain of the real exchange rate rising by 25%, past experience does not suggest that is likely to happen in fewer than four years, or that import prices would fall proportionately or uniformly.

As the graph shows, the broad trade-weighted measure of the dollar’s real exchange rate rose 27.5% from 1995 to 2002, but the GDP deflator for import prices fell just 8.3%. 

Be careful what you wish for. As Krugman notes, “there might be a lot of short-to-medium financial consequences from a stronger dollar.” Indeed. 

Recall 1981-85, when the real dollar also rose 27.1% from 1981 to 1985 and the GDP deflator for import prices also fell more modestly, by 12.1%. Deflation of dollar-based commodity prices proved so devastating to dollar-indebted LDCs that five major central banks made a concerted effort to push the dollar back down between the Plaza Accord of September 1985 and the Louvre Accord of February 1987.

Those who predict a border adjustable corporate tax will be exactly neutralized by exactly perfect changes in exchange rates and import prices seem to be saying it would have no effect on trade. That can’t be right. If it had no effect on trade, then it would have no effect on exchange rates. After all, the reason the dollar is assumed to rise is because (1) subsidizing exports will make foreigners demand more dollars to buy more U.S. exports, and (2) taxing imports will make dollars more scarce by shrinking U.S. imports. To argue that trade will not be affected in the long run, theorists must first agree that the balance of trade will indeed be greatly distorted in some undefined short or medium run.  

“Border adjustments do not distort trade,” write Alan Auerbach and Douglas Holtz-Eakin, “as exchange rates should react immediately to offset the initial impact of these adjustments.”  

Unfortunately, what “should” happen in a simple textbook model is not a plausible prediction of what will happen—immediately or otherwise. The tax-induced drop in imports would happen immediately, but any resulting change in exchange rates and prices would happen later.

How much later? Nobody says because nobody knows.

Any economist who asserts a predictable and tight connection between exchange rates and all import prices is substituting theory for facts. And any economist who could predict exchange rates would quickly become a billionaire by betting on foreign exchange futures.

The “Better Way” plan would allow firms to write-off the cost of new capital equipment immediately, but corporations would no longer be able to deduct interest expense. Firms with big debts are not necessarily the same firms with big capital investments, so this alone builds potential political conflict among interest groups supporting or opposing reform. Expensing and disallowing interest deductibility will be tricky bridges to negotiate. Trying to add border adjustability for direct taxes would be a bridge too far.

The corporate tax needs to be reduced more than it needs to be “reformed.” Holding a lower corporate tax rate hostage to complicated and divisive border adjustments could easily make it impossible for an overly-ambitious House GOP tax package to win the approval of business leaders, foreign trading partners or the U.S. Senate.  


You Ought to Have a Look is a regular feature from the Center for the Study of Science. 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.

This week we focus on an in-depth article in Slate authored by Sam Apple that profiles John Arnold, “one of the least known billionaires in the U.S.” Turns out Mr. Arnold is very interested in “fixing” science. His foundation, the Arnold Foundation, has provided a good deal of funding to various research efforts across the country and across disciplines aimed at investigating how the scientific incentive structure results in biased (aka “bad”) science. His foundation has supported several high-profile science-finding replication efforts, such as those being run by Stanford’s John Ioannidis (whose work we are very fond of) and University of Virginia’s Brian Nosek who runs a venture called the “Reproducibility Project” (and who pioneered the badge system of rewards for open science that we previously discussed). The Arnold Foundation has also provided support for the re-examining of nutritional science, an effort lead by Gary Taubes (also a favorite of ours), as well as investigations into the scientific review process behind the U.S. government’s dietary guidelines, spearheaded by journalist Nina Teicholz.

Apple writes that:

In my conversations with Arnold and his grantees, the word incentives seems to come up more than any other. The problem, they claim, isn’t that scientists don’t want to do the right thing. On the contrary, Arnold says he believes that most researchers go into their work with the best of intentions, only to be led astray by a system that rewards the wrong behaviors.

This is something that we, too, repeatedly highlight at the Center for the Study of Science and investigating its impact is what we are built around.

Apple continues:

[S]cience, itself, through its systems of publication, funding, and advancement—had become biased toward generating a certain kind of finding: novel, attention grabbing, but ultimately unreliable…

“As a general rule, the incentives related to quantitative research are very different in the social sciences and in financial practice,” says James Owen Weatherall, author of The Physics of Wall Street. “In the sciences, one is mostly incentivized to publish journal articles, and especially to publish the sorts of attention-grabbing and controversial articles that get widely cited and picked up by the popular media. The articles have to appear methodologically sound, but this is generally a lower standard than being completely convincing. In finance, meanwhile, at least when one is trading with one’s own money, there are strong incentives to work to that stronger standard. One is literally betting on one’s research.”

Another term for “betting on one’s research” is having some “skin in the game”—a concept that Judy Curry expounds upon on in her blog piece on her transition from academia to her weather and climate forecasting business, for  

reasons hav[ing] to do with my growing disenchantment with universities, the academic field of climate science and scientists…The reward system that is in place for university faculty members is becoming increasingly counterproductive to actually educating students to be able to think and cope in the real world, and in expanding the frontiers of knowledge in a meaningful way (at least in certain fields that are publicly relevant such as climate change).

Further, she said

I said in my post JC in transition that I thought that the private sector is a more ‘honest’ place for a scientist than academia. In this context, in the private sector you have skin in the game with regards to weather forecasts (and shorter term climate forecasts), whereas in academia scientists have no skin in the game in terms of the climate change projections.

Making shorter term weather or climate forecasts, with some skin in the game, would be very good experience for academic climate scientists. And this experience just might end up changing their perspectives on uncertainty and forecast confidence.

In the Slate article, Apple sees the ultimate efforts of Arnold and those he’s helping to support, as trying to tap into scientists’ natural inclination towards providing valuable research, and, much as Curry suggests, finding ways to alter the existing incentive structure towards that goal:

Scientists really do want to discover things that make a difference in people’s lives. In a sense, that’s the strongest weapon that we have. We can feed off that. Figuring out exactly which rewards work best and how to simultaneously change the incentives for researchers, institutions, journals, and funders is now a key area of interest…

We couldn’t agree more.

Be sure to check out Apple’s full article for some great background on John Arnold and more details from the efforts that he supports, as well Judy’s excellent set of posts her reasons for leaving academia and heading full-time into the private sphere. You ought to have a look.

And before we go, we wanted to pass along this bit of carbon tax news:

Tesla Motors Inc. founder Elon Musk is pressing the Trump administration to adopt a tax on carbon emissions, raising the issue directly with President Donald Trump and U.S. business leaders at a White House meeting Monday regarding manufacturing.

A senior White House official said Musk floated the idea of a carbon tax at the meeting but got little or no support among the executives at the White House, signaling that Trump’s conservative political orbit remains tepid on the issue. 

Hold firm fellas!

Privately funded efforts to address social problems, enrich culture, and strengthen society are among the most significant American undertakings and have been for hundreds of years. The United States is among the most generous nations in the world when it comes to charitable giving, with gifts by individuals (including bequests) totaling over $298 billion in 2015—a record-breaking sum. Over one million nonprofit organizations benefited from those donations, including religious groups, schools, hospitals, foundations, social-welfare organizations, and, yes, think tanks. This number includes approximately 118,000 registered charities in California alone.

America’s culture of charitable giving has flourished because its legal framework—including the national individual deduction for charitable donations and income-tax exemption for charitable organizations—marks a critically important boundary between government and civil society, one enshrined in our Constitution. Regrettably, the state of California has pushed to collect, in bulk, the names of charitable donors who choose to give anonymously—without any immediate need. Nearly an eighth of all U.S. charities are registered to solicit donations in California, so the stakes for donor privacy and freedom in this case implicate donors and charities across the country.

Americans for Prosperity Foundation is resisting this request, but a district court ruled against them. Now before the U.S. Court of Appeals for the Ninth Circuit, Cato has joined the Pacific Research Institute and Competitive Enterprise Institute on an amicus brief.

The Supreme Court ruled unanimously in NAACP v. Alabama (1958), that “freedom to engage in association for the advancement of beliefs and ideas is an inseparable aspect of the ‘liberty’ assured by the Due Process Clause of the Fourteenth Amendment.” As a result, the state of Alabama could not compel the NAACP to reveal the names and addresses of its members because doing so would expose its supporters “to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility” and thereby restrain “their right to freedom of association.”

This case implicates the same concerns. It cannot seriously be questioned that many donors simply will not give unless they can keep their donations confidential. Many donors, for example, give anonymously out of deeply held religious or political convictions. Some do so to live a more private life. Others do so for the same reasons articulated by the Supreme Court in NAACP v. Alabama—to avoid “economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility” associated with supporting unpopular or controversial causes. Others may fear public or private retaliation and harassment, while still more do so to avoid unwanted solicitations by other groups.

Forced disclosure of donor names to state governments threatens serious consequences for both donors and charitable organizations. At the same time, California already has ample tools for carrying out its proper role in protecting the public from fraud and deceptive solicitation practices, including targeted use of the attorney general’s supervisory authority and subpoena power.

In Americans for Prosperity Foundation v. Harris,* the Ninth Circuit should reject the attorney general’s policy of unfettered donor disclosure and its chilling effect on constitutionally protected activity. This bulk disclosure policy—which has no statutory basis, serves no compelling state interest, and could be accomplished by less restrictive means—adversely affects the rights of all donors and nonprofit organizations operating in the nation’s largest state.

*For some reason the change hasn’t yet been made, but with Kamala Harris’s departure to the U.S. Senate and Xavier Becerra now California’s attorney general, the case will very soon be known as Americans for Prosperity Foundation v. Becerra.

In environmental policy, the precautionary principle states that a new product, method, or proposal whose effects are disputed or unknown should not be introduced if it is harmful. The burden of proving that it is harmless falls on its backers—virtually guaranteeing that it won’t be produced. In contrast, a cost-benefit analysis that compares the probability of harm with the expected magnitude of the benefits is a better method. 

The methods of the precautionary principle are implicitly applied by many opposing the resettlement of Syrian refugees because they deem any risk of terrorism as too great. The precautionary principle is as improper a standard for determining refugee policy as it is for guiding environmental policy. 

Arguments derived from the precautionary principles are often emotionally driven. Senator Shelby (R-AL) made such an appeal when he stated, “We don’t know much about these people. They haven’t really been vetted. They come from an area where there’s a lot of turmoil, a lot of terrorists come from. We don’t need one more terrorist; we got enough right now.”

Senator Shelby is correct that we don’t need another terrorist, but he didn’t explain that the risk of a terrorist coming through the refugee system is low. 

3,252,493 refugees were admitted to the United States from 1975-2015. During that time period, 20 of those individuals attempted to carry out a terrorist attack or succeeded in doing so inside of the United States. That is a single terrorist for every 162,625 refugees admitted or one every two years since 1975. 

Although there were only 20 refugee terrorists admitted since 1975, they have only succeeded in murdering three Americans. Each one of those murders is a tragedy but the chance that an American would be successfully killed by a refugee terrorist was one in 3.6 billion. Each year an American had a 0.000000028 percent chance of being murdered by a refugee terrorist (for those with poor eyesight, that’s seven zeros to the right of the decimal point). That’s a small risk.

But, as the implicit proponents of the precautionary principle claim, the costs of refugees in the future could be greater. Letting them in today could set up a whole raft of unforeseeable future problems unlike those of the past. That is possible. So even if the annual rate of murder from future refugee terrorist attacks is 100 times greater than it was during the 1975-2015 period, the chance of an American being murdered each year would rise to one in 36.4 million annually.

Anything could change in the future. The precautionary principle always rigs the outcome in favor of immigration restriction because it’s impossible to prove that all refugees will be harmless just like it is impossible to prove that any other person will be harmless. If the precautionary principle becomes a starting point for debate, those favoring refugees will always fail. No debate should be stacked this way.        

Perhaps the victims of terrorism from refugees should be very heavily weighted than other deaths in any risk calculation. Perhaps the threat from ISIS or Syrian refugees is unlike any ever faced and more caution is warranted (highly, highly unlikely). Perhaps our social, political, economic institutions are more fragile than they appear and could be easily undone by a few refugee terrorists. Any of those factors being true could tilt the cost-benefits scales against admitting Syrian refugees, but such dire predictions are currently unwarranted and must be weighed against the costs of not admitting Syrian refugees. 

Unforeseen Costs of Barring Refugees

There are costs to current Americans for not granting entry to some Syrian refugees. Barring their admission could create a greater security risk in the future. Refugees who languish in refugee camps for years or decades are more likely to be radicalized and become terrorists. Under such a situation, allowing them to resettle in the United States could drain the swamp and decrease the fecundity of terrorist breeding grounds.

Refugees going to other countries, like Sweden, often settle in horrid welfare-subsidized situations in over-regulated labor markets where their LFPRs are initially less than half those of natives—producing another fertile breeding ground for violence. Their LFPRs do increase over time but do not converge with natives.  Allowing many of those refugees to instead settle in the United States where they are about as active in the labor market as native-born Americans and usually build themselves out of poverty without much welfare would also decrease the long-term global terrorism risk. 

Syrian refugees could also be valuable foreign intelligence assets, just like many Hungarian, Vietnamese, and Cuban refugees were during the Cold War. As my colleague Patrick Eddington noted, refugees should be especially motivated to help contain ISIS. More accurate intelligence decreases the risks of future terrorist attacks, all else being equal.

Other Policy Changes to Further Reduce the Risks

If the refugee gate is widened, other policy changes can reduce the risk of violent extremism now and in the future as well as the short-term fiscal costs that turn net-positive after 10 to 15 years. Cutting off government welfare benefits for refugees will decrease the public expense and incentivize economic self-sufficiency, self-confidence, and decrease alienation—all character attributes correlated with terrorism. Allowing private sponsorship of refugees is another way to decrease the public risk by outsourcing the monitoring of refugee integration to committed NGOs and individuals spending their own money. Canada has successfully used this strategy and some Senators are now interested.      

Not overreacting to small terrorism risks would aid in the assimilation of immigrants with the same religious background. 


The precautionary principle emphasizes the “better safe than sorry” mentality but shelters us from the reality that nothing is absolutely safe. Risk exists on a spectrum, it is not binary. The fear of high risks and uncertainty should not stop the resettlement of Syrian refugees here, only if a realistic projection that the long-term harms would exceed the long-term benefits should convince the government to further block Syrian refugees. A cold, hard look at the risks and benefits of allowing more Syrian refugees favors a more open policy.

President Trump signed an executive order yesterday that would ban all Syrian refugees and almost all refugees from all countries from entering the United States for six months, while cutting the overall annual limit for refugees in half and banning for at least 90 days all immigration from seven majority Muslim countries. It implies that this ban could continue indefinitely for certain countries. These policies will not improve national security and will undermine America’s efforts to combat Islamic extremism and terrorism around the world.

1) The order violates the law. Under the Immigration Act of 1965, the president may not refuse to give visas to immigrants coming to live in the United States permanently due to their nationality. The provision is unequivocal in stating that no person may “be discriminated against in the issuance of an immigrant visa because of the person’s race, sex, nationality, place of birth, or place of residence.” While this does not apply to temporary visitors or refugees, I have previously explained in detail why the president cannot legally enforce this order against immigrants who are sponsored by employers or family members in the United States.

2) Refugees and immigrants from Muslim-majority countries are not a serious threat to Americans. The order would ban all people entering the United States from Iraq, Iran, Syria, Somalia, Sudan, Libya, and Yemen, and yet no terrorist from these places has carried out a lethal attack in the United States. Indeed, no Libyans or Syrians have even been convicted for planning such an attack. Moreover, the likelihood of being killed by any refugee from any country is just 1 in 3.64 billion a year. This discrimination is arbitrary and cannot be rationally justified based on a assessment of the risk. It is worth remembering that German Jews were turned away on a similar pretense that they could be Nazi spies—only to be killed in death camps.

3) The order aids the Islamic State. ISIS has said that it wishes to “compel the Crusaders to actively destroy the gray zone themselves,” forcing Western Muslims to “either apostatize… or [emigrate] to the Islamic State and thereby escape persecution from the crusader governments and citizens.” They want this overreaction. The only thing keeping ISIS from imploding are its new recruits which makes winning the propaganda war critical. Accepting refugees deprives ISIS of human resources. The Caliphate’s main source of income is the people it extorts. One refugee told the Times. “ISIS would not let us leave. They said, ‘You are going to the infidels.’” What could be more important than making the “infidels” more popular than ISIS?

4) Muslim immigrants to the U.S. are reforming Islam. American Muslims are 81 percent first or second generation Americans who came from among the most socially illiberal countries in the world. Yet, they comprise the most socially liberal and tolerant Muslim in the world. In fact, during the most recent seven years when Muslim immigration was at its highest level, America’s Muslims grew increasingly socially tolerant of other religions and homosexuality. U.S. Muslim immigrants are spreading goodwill about America’s freedoms around the world. “When I talk to my family they ask, ‘How is the treatment of Americans,’ and I say ‘it’s wonderful,’” one Syrian refugee explained. U.S. immigration is creating a cohort of liberal Muslims who can confront radicalism worldwide.

5) America’s tradition of accepting refugees should be defended. Since World War II, the United States has accepted millions of refugees fleeing communism and totalitarianism around the world. The Roosevelt administration’s rejection of Jews fleeing the Holocaust was one of the more shameful acts of any American president. Rather than return to such a policy targeted at a new group of persecuted people, the United States should continue to accept humanitarian immigration, not because refugees can improve local economies—though they can—and not because they can provide tangible intelligence against ISIS—though they do—but because getting out of the way and allowing people to escape violence is the bare minimum of moral decency.

America may have no moral duty to put out fires around the world, but it does have a moral duty not to block the fire exits.

President Donald Trump has issued two executive orders on immigration so far—both of them undermine immigrants’ ability to live and work peacefully in the United States. The first focuses on the border crisis, mandating the construction of a virtually pointless border wall and cracking down on asylum seekers, and the second ramps up enforcement against immigrants residing illegally inside the United States. Here are three trends that put these orders in context.

1. The administration will target asylum seekers during the largest U.S. asylum crisis in decades. More people came to the border last year to claim asylum than at any time since the Mariel Boatlift brought 125,000 Cubans to Miami in 1980. Figure 1 provides those numbers back to the 1990s when asylum law was last changed. In addition, it shows the huge number of unaccompanied children who are entering—all of whom are automatically considered asylum seekers and are referred for a formal hearing. The influx reflects the tremendous violence in Central America—specifically, El Salvador, Guatemala, and Honduras. These asylum seekers are not “illegal immigrants.”

They are not attempting to sneak into the United States. They voluntarily turn themselves into Border Patrol at the border. These numbers are somewhat lower than those in a Homeland Security report obtained by the Associated Press that found 170,000 in 2014 and 140,000 in 2015, compared to 120,000 and 90,000 UACs and asylum seekers who made credible fear claims in those years in Figure 1.

Figure 1: Unaccompanied Alien Children (UACs) and Asylum Seekers to the United States Claiming Credible Fear in Home Country (FY 1997-2016)

Sources: Rempell (1997-2008); USCIS (2009-2016)

The border wall executive order seeks to prevent these asylum seekers from having their claims heard. It will “end the abuse of parole and asylum provisions currently used to prevent the lawful removal of removable aliens.” The administration sees asylum law as a loophole to prevent deportations as opposed to a protection to prevent deporting vulnerable people. The order requires new regulations to “ensure that the parole and asylum provisions of Federal immigration law are not illegally exploited.” It is not “exploitation” if the immigrants follow what the regulations require. Changing the regulations to make it more difficult to receive asylum does not end “abuse”—it ends the legal opportunity to receive safe haven in the country.

2. The administration will attempt to construct a border wall during a time with the fewest border crossers since World War II. The only measure of illegal immigration going back decades is the number of people apprehended by the Border Patrol. More apprehensions typically mean more people are attempting to cross, but more agents make it easier to apprehend people, so it is important to control for Border Patrol’s manpower. As Figure 2 shows, the number of people caught per border agent has not been this low since World War II, and it has consistently fallen year after year since 1993.

Last year, each border agent caught only 21 people all year, less than 2 people each month—the lowest level since 1943. Moreover, as previously mentioned, at least 1 in 3 of all of these “apprehensions” came from asylum seekers voluntarily turning themselves over to the agents. By all measures, the border has never been as secure.

Figure 2: Number of Apprehensions Per Border Agent (FY 1940-2016)

Source: Immigration and Naturalization Service, Customs and Border Protection

Nonetheless, President Trump’s executive order requires the construction of a wall along the southern border and the hiring of 5,000 new border agents. While he will need Congress to fund a portion of this order, it is not clear what these agents will be doing, especially if asylum seekers will be summarily removed.  

3. The administration will return to targeting non-criminal unauthorized immigrants at a time when deportations are the lowest in a decade. President Obama rightfully earned his reputation as the Deporter-In-Chief for removing far more immigrants from the interior of the United States than any other president in history. But by 2016, the number of removals had dropped to their lowest levels since 2005, as Figure 3 shows. Removals of individuals without a criminal conviction have also fallen to the lowest level since at least 2002.

Figure 3: Immigration and Customs Enforcement (ICE) Removals from the U.S. Interior By Type

Sources: MPI (2003-2013); ICE (2014, 2015, 2016)

This shift occurred thanks to Homeland Security policy memos that instructed agents to focus mainly on convicted criminals and recent border crossers. Although “criminals” included a large number of nonviolent and low-level offenders, it was a positive development. Immigrants who avoided run-ins with the law could mostly live in peace.

Despite President Trump’s post-election promise to focus only on criminal kingpins and “gangbangers,” his executive order on interior enforcement prioritizes the removal of many who have no criminal convictions at all. Indeed, it goes so far as to state that arrests should be made if an immigration officer even believes that the person has committed a “chargeable offense” without actually having been charged. It also prioritizes those who have ever misrepresented their immigration status, which would likely include almost all unauthorized immigrant workers and the 40 percent or so of immigrants who overstayed visas.

These priorities are actually more expansive than the Obama-Bush policies of 2008 to 2012, which could mean that they will cause interior removals to more than triple their current level. It is worth emphasizing that these expansive policies will consume resources that could be dedicated to removing criminals.

Twelve years ago Congress passed the Class Action Fairness Act of 2005, much of whose point was to curb the then-rampant practice in class actions of national forum-shopping, that is, filing a lawsuit in whichever of many possible courts around the U.S. was most favorable to the plaintiff, whether or not the state or district associated with that court had a natural link to the underlying controversy (such as being the place where the alleged misconduct occurred or where its defendant had its base of operations). But forum-shopping remains rampant and damaging in some other areas of litigation, such as product liability: thus pharmaceutical cases get taken to California and asbestos cases to Illinois and New York even if plaintiffs have never set foot in those states. And in perhaps the best-known litigation bazaar of all, a large share of patent cases (44% in 2015) are filed in the Eastern District of Texas, centered on Marshall, Texas, a rural community far from most defendants and their headquarters, and known for its exceedingly plaintiff-friendly judges and juries. The result has been a series of large verdicts even on dubious claims of infringement, coupled with enormous pressure on defendants to settle cases they would have resisted with confidence if filed in a different, randomly chosen district.

This scandalous situation has cried out for reform for years, and much of the tech and corporate community is hoping that the vehicle for doing so will be T.C. Heartland v. Kraft Foods, a case to which the Supreme Court granted certiorari last month on appeal from the Federal Circuit. The dispute turns on rather dry questions of statutory interpretation, both in its ultimate origins – the Federal Circuit opened the floodgates to forum-shopping in 1990 when it adopted an ultra-liberal interpretation of where a defendant business “resides” – and in the proposed solution, which is to interpret Congress’s 2011 amendments to a general venue statute as having implicitly overruled the 1990 ruling. The Federal Circuit declined to interpret the 2011 amendments that way. In favor of its position, it can be said that had it been widely noised about in 2011 that the amendments under consideration would close down the E.D. Tex. litigation gravy train, they would have been much more politically hard-fought. But then, it’s not as if the original green light for forum-shopping, 27 years ago, had resulted from clear Congressional deliberation or guidance either.

Isn’t it frustrating? Over the past quarter century, to the world’s astonishment, a jackpot patent litigation sector in the U.S. has grown up that shifts around billions of dollars, a good bit of it winding up in the hands of “patent trolls” and their lawyers. To its defenders, the dominance of Marshall and a couple of other special venues has improved the caliber of protection of intellectual property and put a scare into infringers; to its critics, it has opened up countless chances for abusive litigation and tactical extraction of money from innocent and productive players in the economy. Congress could clear up the matter in ten minutes – either by adopting a venue rule explicitly contemplating forum-shopping, or by closing it down in favor of narrowly defined venue – but it doesn’t. After all, making a decision might offend one side or the other. And so this enormous policy decision gets kicked over to the Supreme Court.

My own suspicion is that not in a thousand years would a thoughtful deliberative process have entrusted the future care of intellectual property in America’s tech sector to the bench and bar of Marshall, Texas, population 24,501. But that’s in no way a reflection on the quality of the able if wily legal talent to be found in East Texas. It’s a reflection on the quality of the lawmakers in the U.S. Congress.


Earlier this month, James Kwak penned an extensive critique for The Atlantic of the Econ 101 view that government-imposed minimum wage rates lead to job losses. There is a lot of muddled thinking in the article, not least that it constantly conflates poverty and inequality. But for the sake of brevity, here are 9 observations:

  1. The theoretical and empirical literature does suggest the minimum wage question is more complex than first imagined, and it should not surprise us that reality lies somewhere between the perfectly competitive model of the labor market and the monopsonistic one, depending on the time and sector analyzed.
  2. However, the bulk of the detailed empirical literature still supports Econ 101’s prediction that raising wages by government dictat reduces labor demand, particularly for certain groups (the young and lowest skilled). Of course, the “bite” of the minimum wage is significant. That an increase from $7.25 to $8 may not have a large effect on the labor market does not mean that a rise to $15 wouldn’t have a much bigger effect.
  3. Reductions in labor demand need not mean higher unemployment per se (and so tracking time series of unemployment against minimum wage rates is unhelpful.) It may affect hours offered, lower the quality of jobs as firms cut back on financing training, or lead to cuts to other employee benefits. More recent evidence also stresses the dynamism of the labor market – minimum wage hikes may not manifest themselves through immediate job cuts (not least because of redundancy costs and stickiness of contracts/orders), but can lower the propensity to hire in future and hence slow job growth.
  4. Kwak’s explanations for why Econ 101 might be wrong seem like motivated reasoning. One potential explanation is that firms in sectors affected by the minimum wage have significant market power. If a firm is a monopsonist, then theoretically you can increase both wages and employment by raising the minimum wage. In reality the days of the so-called ‘company town’ are over. Looking at the industries in which most minimum wage workers actually operate: food preparation, serving, sales, personal care and office support and administration – does anyone think these aren’t very competitive industries?
  5. Kwak uses Keynesian logic to claim that low paid workers’ higher marginal propensity to consume means minimum wages can boost demand in the economy. Of course, this ignores any contractionary effects arising from lower profits, higher prices or reduced employment. It’s worth noting Keynesian theories are also predicated on the idea that market wage rigidities are precisely what leads to unemployment when an economy contracts (so it’s difficult to see why that would be any different with state-imposed rigidities).
  6. Another argument outlined is that minimum wage hikes can improve productivity. It is said that firms paying more can reduce employee turnover and attract higher skilled workers. This is a variant of the ‘efficiency wage hypothesis.’ But the efficiency wage hypothesis is precisely a theory of persistent unemployment! Even in that theory, much of the productivity gains that firms can theoretically get from paying higher wages occur from being able to hire the best workers in an industry. If *every* firm is mandated to pay a higher wage, then these gains are lost, and so the line of argument cannot be generalized to the whole economy.
  7. The hurdle in assuming there is some form of free lunch that firms are not exploiting is that a government setting a minimum wage must know more about the potential productivity of individual firms’ workers than the firms themselves. Even if this were true, which is highly doubtful, it need not be the case that setting a minimum wage to reduce turnover would be good for economy-wide productivity. A higher wage in certain sectors might reduce the incentive for workers to move to higher-skilled, higher-paying sectors over time by building or investing in human capital – actually lowering the productive potential of the economy in the long-term.
  8. Kwak writes: “Even if a higher minimum wage does cause some people to lose their jobs, that cost has to be balanced against the benefit of greater earnings for other low-income workers.” This is undoubtedly true, but in the rest of the article he seems to really judge the morals of those who seek to protect the rights and opportunities of low-skilled individuals. If he and other advocates want to advocate for significant minimum wage increases, he also has to own the estimated 500,000 low skilled workers on the scrap heap from raising the minimum wage to $10.10. This might be uncomfortable, but then the minimum wage has uncomfortable roots – with UK Fabians desiring it precisely to exclude the low-skilled, disabled and migrants from working.
  9. Finally, despite repeated allusion to the idea that raising the minimum wage would be a good way of reducing poverty, Kwak produces scant evidence to that effect. Joseph Sabia’s work – reported in a Cato bulletin – actually suggests that minimum wages are a badly targeted anti-poverty policy. He found workers earning between $7.25 and $10.10 per hour overwhelmingly live in non-poor households (the unit by which we measure poverty). In fact, only 13 percent of those affected lived in poor households, while nearly two-thirds lived in households with incomes over twice the poverty line. In other words, many people earning slightly above the current minimum wage may be second earners (particularly part-time) or young people who live in households where total household income is above the poverty line.

Rumors are flying in Washington that Donald Trump is seriously considering an executive order which would lift at least some of the current U.S. sanctions on Russia. As with everything else the new president has ordered this week, details are sparse. But if the executive order would indeed lift sanctions unilaterally, with no attempt at negotiation, Trump won’t be sending a message of strength, but one of weakness.

I’ve never been a proponent of the U.S. sanctions regime. In fact, I’ve written extensively about the flaws of the sanctions regime on Russia, and even argued that they should be lifted before they calcify into a permanent impediment to improving relations with Russia. In Foreign Affairs last year, I argued that the sanctions have largely been a failure: they have been costly to U.S. and European business interests, and have not altered Putin’s aggressive policies towards Ukraine.

Nor is there good reason to believe that the sanctions will induce policy change in future. The underlying logic behind sanctions is to cause enough economic pain to the target state that leaders are compelled to change their policies. But though the Russian economy is in a terrible state, most of that damage was caused by falling oil prices, not by sanctions. Vladimir Putin was even willing to hurt his own people further by initiating countersanctions against European agricultural products, a move which served to substantially increase food prices for ordinary Russian citizens.

These conclusions are unfortunately supported by a substantial body of academic literature, which overwhelmingly finds that sanctions are rarely successful on issues of ‘high salience,’ such as questions of war and peace. Sanctions may be a useful tool for signaling to other states that their behavior is unacceptable, but when linked to unrealistic goals, they place policy makers in a difficult situation. Lifting them may be seen as a sign of weakness, yet there is little to be gained from leaving them in place. The path of least resistance can therefore end in situations like the half-century Cuban Embargo.

All of this suggests that policymakers should be a lot more cautious about implementing sanctions in the first place, as it may place them in a difficult situation further down the road. Indeed, academic studies also suggest that sanctions are not so much an alternative to conflict as a first step on the road to war: they serve to raise the stakes, and make it harder for policymakers to back down.

The problem is particularly acute in this case. Though the impact of Russian disinformation on the outcome of the presidential election remains unclear, an investigation is ongoing into whether advisors to the Trump campaign had contacts with Moscow. Donald Trump’s willingness to seek a better relationship with Russia is a solid policy choice, but unilateral concessions of this sort will only serve to intensify the idea that he is somehow beholden to Moscow.

Ultimately, understanding the flaws of sanctions cannot explain how to resolve this dilemma. There is no good solution for today’s U.S.-Russian relations, just a series of poor choices. The best of these bad options is an open process of negotiation. Russian leaders may not be willing to abandon Crimea or make other high profile concessions in exchange for the lifting of sanctions. But the sanctions are causing some economic damage, enough that Russian leaders do want them lifted.

A process of negotiation which proposes to lift most of the sanctions in exchange for concessions in other policy areas – implementation of the Russian portions of the Minsk Agreement, Russian concessions on ending the Syrian civil war, or a variety of other issues – is a way for the Trump administration to end the sanctions regime without making a unilateral concession. For the man who wrote the Art of the Deal, this would surely be a better solution.

A fascinating new field experiment may cast light on the effectiveness of Ivanka Trump’s prospective mandated paid leave and child care initiatives.

In the Acting Wife study, researchers asked elite Masters in Business Administration (MBA) students questions about their job preferences. Students were told that the answers would be provided to the school’s career center and used to place the students in internship roles.

When single women thought that their responses would be public to their peers, they answered the career center’s questions differently – for example, by indicating they desire $18,000 less in annual compensation, are willing to travel 7 days less per month, and are willing to work four hours less per week than the control group. They also reported lower levels of career ambition and less leadership ability when they knew that peers could access the information.[1]

In the observational portion of the study, 73% of single women and 61% of non-single[2] women reported that they had avoided behaviors that they believed would help their career – like speaking up in meetings or asking for a raise or promotion – because they were worried about looking too ambitious. In other words, women are wary of sending signals that damage their social image.

According to the researchers, the results 

“…suggest that single women avoid actions that would help their careers because of marriage market concerns. Many schooling and initial career decisions – such as whether to take advanced math in high school, major in engineering, or become an entrepreneur – occur early in life when most women are single. These decisions can have labor market consequences that last long after these women get married.

Though not addressed directly in the study, it seems probable that women that signal faux professional apathy to male peers in the marriage market may have difficulty renegotiating when domestic responsibilities become material later in the relationship. This may partially help explain why 43% of highly-qualified women with children leave their careers or off-ramp for a period of time.[3]

Although Ivanka’s $300 billion solution to women’s professional dilemmas are well-intentioned, mandated paid leave and tax deductions for child care are not a panacea. In fact, short of re-programming women and their prospective mates, the most consequential barriers to women’s professional success appear difficult to overcome through government policy.


[1] Study results were statistically significant, and single male counterparts and married women did not behave this way.

[2] Where “non-single” indicates a woman who is in a relationship, cohabiting, engaged, or married.

[3] According to Sheryl Sandberg’s Lean In.

Regardless of whether wall construction is funded through a discriminatory tariff on imports from Mexico or the border adjustment taxes envisaged in the GOP tax proposal, U.S. consumers and taxpayers will be flipping the bill.  The very idea of building the wall in the first place is a disgrace, but demonizing our neighbors and hatching plans that could subvert the Mexican economy and put another Venezuela on our southern border, is belligerent and potentially disastrous.   Hitting all Mexican imports with a 20% tariff is, unfortunately, something the president could do.  Under the Constitution, Congress is authorized to regulate foreign commerce, which includes imposing tariffs.  But over the years, Congress has delegated some of that authority to the president through various statutes. All of those statutes require that some condition be met (findings of a surge in imports; subsidized imports; unfair foreign practices that hurt U.S. companies; national security crises; public health or safety threats, etc.) before restrictions can be imposed. Sometimes the restrictions are limited in magnitude and duration, sometimes not.  Sometimes the actions are subject to judicial review, sometimes not.   By and large, these statutes were passed in conjunction with legislation to implement trade agreements, lower tariffs, or otherwise liberalize trade.  They were crafted as safeguards to assuage those concerned that the country’s seemingly inexorable march toward free trade would bring rapid change, which would carry massive adjustment costs and other maladies and threats that the government would be incapable of addressing. The expectation was that the president would use this conditional power sparingly and in the service of greater openness and liberalization. In other words, unlike the Founding Fathers, U.S. Congresses during the 20th century failed to imagine adequately the likes of a Donald Trump as president.    There are a few statutes under which Trump could impose a 20% tariff on all Mexican imports and likely be within the letter of the law.  The most probable statute is Section 232(b) of the Trade Expansion Act of 1962, which permits the president to impose duties in the event of a “national emergency.”  This statute was invoked once before, by Nixon, in 1971 in response to a balance of payments crisis, involving Japan.  Nixon imposed a 10% surcharge on Japanese imports under this law.  Trump might claim that the loss of manufacturing jobs or the influx of illegal immigrants from Mexico is a national security crisis that justifies his invocation of this law, and imposition of the tariff.  Whether the action would pass muster in a NAFTA panel or at the WTO is another matter.  There has never been such a case – duties imposed to redress a national security crisis – brought to dispute settlement.   One thing is all but certain.  If Trump acts in this manner, the Mexicans will most certainly retaliate.  How all the king’s men don’t see the danger in this tack is what scares me the most.  

A New York Times report that Donald Trump continues to carry his ancient and insecure Android phone—despite having received a new Secret Service-approved secure device on Inauguration Day—has prompted a flurry of reports on the cybersecurity “risks” this entails.  But “risk”—the connotations of which are both future-oriented and hypothetical—seems like the wrong word here.  We should be asking how many foreign intelligence services have had access to the phone, for how long, and what sensitive information they’ve already gleaned from it.

Because let’s be clear: An American president’s personal smartphone may be a holy grail for foreign spies, but a phone belonging to a president-elect, or even a credible candidate, would be an extremely juicy target too.  It’s almost inconceivable it would not have been attacked already.  And given the laughable level of security provided by a phone that last saw an update in 2015, any serious effort to compromise it by a state-level adversary would likely have succeeded. The safe assumption that NSA’s overseas counterparts have a similar array of “implant” tools would mean that Trump’s movements could have been tracked, any credentials stored on the phone exfiltrated, and any conversation held in the same room as the phone, recorded.  

If the White House has been following the most basic protocols, we can at least expect Trump’s Android hasn’t been allowed into the Secure Compartmentalized Information Facilities where classified briefings are held, but even so, that’s a rich trove of intelligence on Trump’s strategic intentions and mindset, and may well include sensitive personal information that could be used for leverage.  So, by all means, he ought to ditch the phone immediately—but instead of tossing it in the trash, he ought to hand it off to NSA’s technical division for a thorough look, assuming they haven’t already had one.  It will be too late to undo the damage, but perhaps not too late to mitigate the consequences if the Intelligence Community can start piecing together what the adversaries would have obtained and how they’re likely to use it.