Cato Op-Eds

Individual Liberty, Free Markets, and Peace
Subscribe to Cato Op-Eds feed

Earlier this week, Sen. Rand Paul put forth an amendment that would sunset the 2001 AUMF and 2002 Iraq AUMF after 6-months. Somewhat unsurprisingly, the amendment was defeated as nearly all Senate Republicans (and a handful of Democrats) voted to strike it down.  

As I looked through the roll call, however, I was surprised by the vote of one Senator in particular: Jeff Flake. In 2015 and again this year, Flake, along with Tim Kaine of Virginia, introduced legislation for a new AUMF. Yet, Flake voted to table (i.e. kill) Paul’s amendment. 

Why would a Senator who clearly wants a new AUMF vote against this measure?

I wouldn’t have to wait long for an answer. Yesterday, I attended a “Conversation with Senator Jeff Flake,” hosted by the Council on Foreign Relations, and was able to ask the Senator directly about the rationale behind his recent vote. Here is an excerpt from Sen. Flake’s response:

I didn’t support the Paul amendment because I’m trying to be a stickler for regular order. And when we have an opportunity to actually move something through in regular order, that’s what I’d like to do. And it is proper for this bill—we have had a hearing on it already—the next move would be a markup to actually amend it and…it will be a bipartisan bill that will move. I spoke to Chairman Corker… just yesterday, and got a commitment that this bill is going to move. So I’m confident that it will. Had I not been confident, then I would have voted for the forcing mechanism.

His justification has merit. And I hope that he is correct, and that Chairman Corker moves on AUMF legislation in the coming months. But if that fails to happen, and Sen. Paul again offers his amendment, Senator Flake is now on record that he would support it.

You can see my exchange with Senator Flake in full here.

Congress may loosen 401(k) rules to allow Harvey and Irma victims to access their retirement savings without the usual 10 percent penalty on early withdrawals. The Washington Post reports mixed views from experts on the idea. In the past, the government has allowed “hardship loans” against 401(k) assets in the wake of disasters.

Individuals own the money in their 401(k) accounts, and after disasters they may need to use it. However, a better way for Congress to address that need is to create Universal Savings Accounts (USAs).  

As Ryan Bourne and I describe in this study, USAs would provide a tax-efficient vehicle for families to save for all purposes, including saving for unplanned costly events. USAs would be simpler and more flexible than current single-purpose accounts in the tax code, including those for retirement, education, and other purposes.

When a disaster happened, families could simply withdraw money from their USAs as needed without government paperwork or penalties. They could leave their retirement accounts untouched.

Ryan and I discuss how current tax policies favor saving for some purposes over others. But all saving is beneficial because it improves financial security and funds capital investment in the economy. USAs would reduce the tax bias against saving in an across-the-board manner for all individuals, and the accounts would encourage people to save for future expenses rather than rely on debt, retirement accounts, or government aid.

In Congress, Senator Jeff Flake (R-AZ) and Representative Dave Brat (R-VA) have introduced companion bills to create USAs. Ryan and I would tweak their plan to allow individuals to build even larger accounts than proposed.

We think USAs would be very popular, a real boon for individual saving and financial stability. Both Britain and Canada have created USA-style accounts, and large shares of people in all age and income groups in those countries use them.

So rather than fiddling with 401(k)s, Congress should be bolder and create a liquid and flexible savings vehicle to help all families. USAs would be a great addition to the tax reform plan that Congress and the Trump administration are assembling.  

For more on USAs, see https://tinyurl.com/lks75ug.

President Trump will support legislation to provide legal status to young immigrants who, as he said on Twitter, “have been in the country for many years through no fault of their own—brought in by parents at young age.” The legislation with the most cosponsors in the House and the Senate that would do so is titled the Dream Act. The proposal would help many unauthorized immigrants who deserve help, but for reasons that I cannot explain, the Dream Act prioritizes them above legal immigrant children in virtually the same position who meet all the eligibility criteria.

Most high-skilled immigrants initially enter the United States on temporary H-1B visas. H-1B workers can bring with them their spouses and minor children. As I have explained before, H-1B children live here, attend U.S. schools, grow up and attend U.S. universities, but on their 21st birthday, they lose their legal status, and the law requires them to self-deport if they cannot find another temporary legal status. Most stay at least for a few years longer by switching to a student visa, but this status prohibits work and expires again as soon as they graduate, leaving them in the same position they were before.

These children were “brought in by their parents” through “no fault of their own” and have “been in the country for many years”—the three criteria that President Trump mentioned for his dreamer legislation, yet the Dream Act, which would provide permanent residency, explicitly excludes them. This is not an oversight. The authors—Senators Graham and Durbin in the Senate—had to write that the law would apply only to a person “who is inadmissible or deportable from the United States” (p. 4) or who is in “temporary protective status,” which is typically given to unauthorized immigrants who can’t be deported due to a crisis in their home country.

In other words, the only way for legal dreamers to obtain status under this bill would be to somehow find a way to violate the law in order to become “deportable.” Even then, the Dream Act makes applicants ineligible if they have violated the rules of a student visa (p. 5), which most legal immigrant dreamers have to switch to when they turn 21 to avoid deportation, unless the Secretary of Homeland Security decides that it is necessary for “humanitarian purposes or family unity” or “otherwise in the public interest” to allow them to apply. Who knows whether he would decide that in any particular case? Few legal immigrants would take the chance that he wouldn’t and risk being deported and banned from the United States for life. 

But why is the requirement to violate the law necessary in the first place? What would change if the highlighted of the portion of the bill below was removed? Everyone that the current bill protects would still receive protection. The standards for inclusion would be just as tough. All participants would still have had to reside in the country for 4 years, enter before the age of 18, not have committed any significant crimes, be a high school graduate, etc. So why prioritize unauthorized immigrants over those who are here legally? It creates perverse incentives.

Dream Act Requirements (pp. 4-6)

As I have also explained before, the existence of legal immigrant dreamers is a product of a broken legal immigration system. Current law allows H-1B employers to sponsor H-1B workers, their spouses, and minor children for green cards or legal permanent residency. The green card waits for these workers are decades long (see here for a detailed explanation of that problem), so the law also allows H-1Bs waiting for a green card to extend their status and the status of their spouses and minor children indefinitely while they all wait for green cards. But despite having waited in line for many years, children of H-1B workers still lose their status as soon as they turn 21. Those who don’t self-deport then become foreign students, which provides temporary status but they cannot work and lose status again as soon as they graduate.

Children of other high-skilled immigrants on less used visa categories—primarily L, O, and E—also face the same problem. The Recognizing America’s Children Act in the House, which some 32 Republicans have signed onto, would allow E-2 nonimmigrant children to apply for permanent legal status with unauthorized immigrant dreamers but it would exclude all other legal immigrant dreamers (p. 5). That’s better than nothing, but E-2 nonimmigrant children are only a very small portion of the legal immigrant dreamers. Why would these members open themselves up to prioritizing illegal immigrants over legal immigrants? Many members have explicitly said that they oppose a “special pathway” for illegal immigrants.

It’s not that they want to limit the number of applicants, since both bills dramatically expand eligibility beyond the criteria for the DACA program that President Trump just announced would wind down. DACA protects only unauthorized immigrants who entered under the age of 16 before June 15, 2007 and who were under 31 as of June 15, 2012. The Dream Act would raise the age of entry to 18, the date of entry to 2013 or 2014, and remove any age requirement at the time of application (see above). The RAC Act would move the date of entry to before 2012 (p. 6). These changes would allow far more people to apply.

In any case, the decision to ignore the plight of legal immigrant dreamers is baffling from a political standpoint. Including legal immigrant children in the Dream Act would 1) remove the criticism that the bill is unfair to legal immigrants, 2) create a new constituency to advocate for the bill, and 3) not increase the applicant pool any more than the Act’s existing changes to DACA eligibility. Someone should ask these members why they have chosen to limit their bills in this way.

About a month ago, a Facebook post drew my attention to an attempt, by Casey Pender of Prague’s CEVRO Institute, to test my thesis that free banking contributes to NGDP stability using statistical evidence from Canada, which had a relatively free banking system between 1867, the year of Canada’s confederation, and 1935, when the Bank of Canada was established.

In “Some Odd Data on Free Banking in Canada,” a blog post discussing his preliminary findings, Pender reports that he had hoped to be able to show that Canada, from 1867-1935, had a more stable NGDP percent change from year to year than the U.S. And I thought this would be an easy and quick historical example that I could use to bolster my underlying theory. But things seem like they just ain’t so.

Instead, in comparing the fluctuations of Canadian and U.S. NGDP using data from the Macrohistory database, Pender found that Canadian NGDP was not less but more volatile. Moreover that conclusion held not just for the full 1870-1935 sample period, but also for the sub-period 1870-1914, which omits various extraordinary Canadian government interventions during WWI and the Great Depression.

Here is Pender’s chart showing his results from the full sample period:

Having now been made privy to these findings, I suppose that you are looking forward to seeing ol’ Doc Selgin eat humble pie. Well, you can quit holding your breath ‘cause that won’t be happening anytime soon. In fact, for the moment at least, I remain thoroughly impenitent.

How come? First of all, I never claimed that free banking alone could achieve any particular degree of absolute stability of nominal spending. What I have claimed is that, by tending to offset changes in the velocity of money with opposite changes in its quantity, free banking makes for a more stable relationship between the level of overall spending and the available quantity of base or high-powered money than might exist otherwise. To the extent that the available quantity of base money itself changes, however, the quantity of money will also tend to change independently of its velocity. Total spending will then tend to vary also.

What’s more, under an international gold standard regime like the one in place during Canada’s free banking episode, the amount of base money in any particular gold standard country was hardly likely to remain stable or grow at a very steady rate. On the contrary: changes in trade patterns and international capital flows were bound to routinely alter the distribution of gold among gold standard countries, just as changes in trade patterns and capital flows within individual countries are bound to alter the distribution of gold among those countries’ various regions. To the extent that it consisted of holdings of monetary gold, Canada’s monetary base was no less subject to change than the monetary base of, say, Nova Scotia.

In fact during the free-banking era Canada’s base money consisted of both monetary gold and paper “Dominion notes” first issued by the Canadian government in 1866. While some portion of these had to be fully backed by gold, there was also an un-backed or fiduciary component, the quantity of which rose from just $8 million in 1868 to $30 million by the outbreak of World War I. Until 1885 or so at least, those fiduciary issues, instead of being linked even loosely to gold flows, or otherwise regulated for the sake of economic stability, varied according to the Canadian governments’ fiscal needs. Consequently Dominion note issues tended to be an additional cause of irregular changes to Canadian NGDP.

A proper test of the theory that free banking helped to stabilize Canadian NGDP must therefore consider, not just fluctuations in Canadian NDGP as such, but the relationship between those fluctuations and underlying changes in Canada’s monetary base. So long as Canada’s NGDP fluctuations were driven by underlying changes in Canada’s stock of base money, instead of being independent of such changes, the fluctuations were perfectly consistent with the theory.

So, what does the record have to say about it? To find out, I had Tyler Whirty, the CMFA’s trusty RA, run some simple regressions for me, with Canadian NGDP as their dependent variable, and Canada’s stock of base money (M0) as the independent variable. The NGDP estimates are the same ones employed by Pender, from the Macrohistory database[1], while the monetary base numbers are from Metcalf, Redish, and Shearer (1998). So far we’ve looked only at the pre-WWI record, as that era is most aptly described as one of relatively unblemished free banking. We also ran the regressions both using raw data and after taking logs. I shall report only the log results, as those fit the data best; but the general conclusions to be reported here don’t depend in the least on the log transformations.

The results, shown in the next figure, are not just consistent but remarkably consistent with the theory, and especially so given that Canada’s arrangement involved some not entirely trivial departures from the theory’s assumptions, one of which is that paper money is supplied by commercial banks alone. (In fact, Canada’s banks were prohibited from issuing notes worth less than $5.) The regression R-squared is .980254, while the coefficient on M0, about .80, seems quite reasonable allowing for the fact that some Canadian base money, including smaller Dominion notes, circulated instead of serving as bank reserves.

Although the Canadian results seem perfectly consistent with the theory, we still have to compare them with evidence from the U.S. as a step toward establishing that the stable relationship they point to might be attributable to Canada’s having had a free banking system: were a similarly close relationship to exist in the U.S. data, that would suggest that Canada’s distinct institutional arrangements, including free banking, didn’t really make any difference.

For our base U.S. regression, we drew again upon the Macrohistory database, using its U.S. NGDP estimates (which were originally developed by Louis Johnston and Samuel H. Williamson[2]). For the U.S. monetary base, we subtracted national bank notes from Philip Cagan’s monetary base figures: while Cagan himself justified including those banknotes by noting that they were practically claims against the U.S. Treasury, we exclude them because, despite that, they were neither legal tender nor capable of satisfying banks’ legal reserve requirements.

Because Cagan’s numbers only start in 1875, the U.S. regression covers a somewhat shorter period than the Canadian one.

While the results of the U.S. regression suggest a relationship between U.S. NGDP and M0 that’s broadly similar to the Canadian one (M0 coefficient .825), that relationship, as depicted in the next figure, is considerably less tight, with an R-squared of .908. That the Canadian relation should be so much tighter now seems all the more remarkable, given both the relatively small size and openness of Canada’s economy, and its heavy dependence upon U.S. exports to the U.S.

To check the robustness of these U.S. results, we performed the same regression using Angus Maddison’s NGDP estimates in place of the Johnston-Williamson numbers. Although the R-squared, of about .0935, is a bit higher in that case, the coefficient (.769) is similar:

In brief, both our Canadian regression results themselves, and a comparison of those results with results using U.S. data, seem fully consistent with the theory that free banking helps to stabilize the relationship between NGDP and the monetary base.

Does that mean they confirm the theory? Alas, it doesn’t. Freedom in banking is but one of many differences between the pre-WWI Canadian system and its U.S. counterpart. Furthermore, even if Canada’s more stable NGDP-M0 relationship were in fact due to its having had a relatively free banking system, it wouldn’t follow that my theory is correct. Free banking could well have contributed to the stable relationship in question for reasons apart from the one my theory points to. We know, for example, that branch banking — itself an element of free banking — made Canada’s system less fragile, and therefore less vulnerable to financial crises, than the U.S. system. We also know that financial crises tend to involve a collapse in bank credit and spending. So the relative stability of the Canadian NGDP-M0 relationship, instead of reflecting a tendency for changes in M to offset opposite changes in V, may instead simply have reflected a relative lack of banking crises and associated increases in the ratio of bank reserves to bank credit.  Although all this is still good news for fans of free banking, it leaves my particular hypothesis unproven.

In short, while my theory has yet to be discredited, it also has yet to be confirmed. I hope that either Mr. Pender or some other enterprising econometrician will eventually settle the matter, one way or the other.

__________________
[1] Òscar Jordà, Moritz Schularick, and Alan M. Taylor, “Macrofinancial History and the New Business Cycle Facts,” in NBER Macroeconomics Annual 2016, volume 31, edited by Martin Eichenbaum and Jonathan A. Parker. 2017. Chicago: University of Chicago Press.

[2] Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” MeasuringWorth, 2017.

[Cross-posted from Alt-M.org]

In April, President Trump’s Office of Management and Budget (OMB) launched a year-long effort to improve management of federal agencies and to cut spending. I testified to a Senate committee yesterday on the OMB effort, and provided suggestions on how to cut the bloated federal budget.

The OMB memo that launched the reform effort said that there is “growing citizen dissatisfaction with the cost and performance of the federal government.” That is certainly true, as I discuss in this study. The federal government has grown much larger over the decades—and is thus providing more “services” to the people—yet trust in federal competence has plunged.

Why? One reason is that the government has grown far too large to adequately manage and oversee. The federal government funds 2,300 aid and benefit programs today, more than twice as many as in the 1980s. And the federal budget at $4 trillion is 100 times larger than the budget of the average U.S. state of $40 billion.  

So the OMB-led effort to dig through federal agencies to find savings is crucial. The government would perform far better with fewer failures if it were much smaller.

My full testimony is here.

Fear is the main source of superstition, and one of the main sources of cruelty. To conquer fear is the beginning of wisdom.

- Bertrand Russell, Unpopular Essays

Do you have the strong sense that the United States has become a more anxious and fearful place during the Trump era? If so, you are certainly not alone. Recent news stories reveal all sorts of concerns including the fate of the Dreamershealthcare, North Korea, and even America’s democratic norms and institutions.

But exactly how worried are we today compared to other times?

As it turns out, the answer is: quite a bit more worried.

In this blog post I introduce a simple measure called the American Fear Index. The index is an attempt to improve our understanding of fear and its role in American politics by tracking the level of fear in our public discourse about the nation, the world, and the challenges we face.

The study of fear is far from just an academic matter. Fear is a powerful political force. At times, a well-warranted fear is an important motivator of caution and prudent behavior. History provides numerous examples of publics without sufficient concern about the behavior of their government leaders. But on the other hand, fear also has the ability to cloud people’s senses, to destroy their ability to conduct rational debate, and to warp their decision-making. Fear has always been a useful tool for propagandists and zealots. 

Measuring Fear: Data and Methods

The American Fear Index (AFI) is simply the percentage of all news stories during a given time period that contain at least one of four fear-related keywords: fear, risk, danger, or threat. The choice of these words reflects the desire to identify a small set of general words that were very likely to appear in discussions of things that worry people across as broad a set of topics as possible.

Of course, not every story containing one of these words is entirely focused on fear or terrible things. And some stories contain just one of these words; in other stories the words appear many times. But a review of stories containing these words shows that the passages in which they appear do in fact tend to focus on issues and events that Americans find threatening, dangerous, risky, and scary.

Though this is an exceedingly simple and blunt approach to measuring fear, previous studies have shown the effectiveness of similar approaches at tracing complex phenomenon such economic policy uncertainty, partisan conflict, and interstate tensions. Moreover, the simplicity allows us to apply the AFI across more data and over time far more easily than more complex measures. Ideally, of course, more complex approaches should complement simpler tools like the AFI.

The universe of news stories for this analysis was a list of sixty or so of the top U.S. newspapers available in the Dow Jones Factiva “Top U.S. newspapers” database. This allows the AFI to trace the dominant themes in national discourse, which typically originate with major newspapers like the New York Times, the Wall Street Journal, and the Washington Post, while also casting a wide net encompassing the other major city and regional dailies. Though each paper has a unique AFI score across time (a topic I will address in a future post), the goal of bundling them together is to create a metric that measures fear-related discourse at the national level.

To calculate the AFI, I first ran a search using the Factiva search engine to establish how many stories were published each year since January 1, 1981. I did this by searching for the word “the,” which shows up in all (or at least almost all) stories. I then ran a search for all stories containing at least one fear keyword using the search string “fear or risk or danger or threat.” To calculate the AFI I divided the number of news stories containing a fear keyword by the total number of stories published each year, and then multiplied the result by 100.

With the general fear index measured, I then turned to topic-specific AFI levels, tracking how often the fear keywords appeared in stories that also mentioned various issues of potential concern. To produce an AFI score specific to cancer, for example, I ran a search using the search string “cancer and (fear or risk or danger or threat).”

Fear in America

Figure One displays the American Fear Index from 1981 through June 30, 2017. Two important things stand out.

First, the results provide stark support for anyone who has suspected that we are living through unusually turbulent times. Through the first eight months of 2017, 17.9% of all news stories contain at least one fear keyword, the highest level recorded in the analysis and well above the historical average of 10.8%. Making the recent spike even more interesting is just how stable the annual fear index was until recently. The index averaged 10% between 1981 and 2008, with a low of 9% in 1996 and a high of just 11% in 2002 and 2003.

Second, Trump may have poured gas on the fire of America’s recent worries, but he certainly didn’t start the fire. The fear index jumped sharply to 11.4% in 2009 as the Great Recession hit and hovered right at that level during Obama’s first administration. Since 2013, however, the index has risen each year.

Figure One. The American Fear Index 1981 - 2017

What Are Americans Afraid Of?

Figure Two provides a snapshot of the fear associated with a variety of issues in 2017. Though this figure by no means contains a comprehensive account of American fears, it includes many of the hot button issues of the day and a slew of perennial risks, threats, and dangers of all kinds.

Given the turbulent 2016 election campaign and the prospects for a bruising set of Congressional midterms in 2018, it is perhaps depressing but not surprising to see that the word election has been most closely associated with fear so far in 2017. Nor are most of the other top fears much of a surprise given Trump’s campaign rhetoric and initial policy decisions on issues such as Syria, North Korea, and the travel ban.

Figure Two. Snapshot of American Fears, 2017

 

As it turns out, most fears rise and fall over time. Figure Three examines the historical evolution of three of them, chosen to illustrate just a few of the different patterns that emerge. 

Figure Three: Climate Change, Murder, and War

 

 

Rising American Fears

At this point we know that American discussion of fear, risk, threat, and danger is up sharply over the past few years. We also have a sense for the relative level of anxiety across a range of important issues.

Figure Four extends the analysis to provide a sense of how much more worried Americans are in 2017 about these specific issues compared to the past. The gray columns indicate the AFI scores for 2017, while the black bars represent the average AFI score between 1981 and 2016.

Strikingly, the average AFI score for these issues in 2017 is 120% higher than in 2016 and 278% higher than the historical average. In short, the level of fear-related discourse in major American newspapers  - for these specific issues – doubled between roughly 2013 and 2016, and then doubled again (plus some) between 2016 and 2017.

Figure Four. Rising Fear by Issue, 2017 vs. Historical Average

Explaining Patterns of American Fear

Fear related discourse is clearly at an all-time recent high in 2017. The big question is why. The world certainly has been exciting in 2017, but is this really about the threats facing the United States, or is it more about how Washington is addressing them? More specifically, how much of the 2017 spike in fear talk is related to Donald Trump himself?

Figure Five suggests that the answer is a great deal. Trump’s 2017 fear index (7.2%) is almost 11 times higher than Obama’s highest score (0.72%). The average historical “presidential fear index” – stories mentioning both the president and at least one of the keywords – is just 0.32%.

Figure Five. Trump: Threat Inflator in Chief?

 

Unfortunately, this simple metric does not help us determine the extent to which Trump himself is actively inflating threats, others are blaming Trump for problems, or Trump as president is simply at the center of more fear related discourse thanks to the general craziness of the world today. The most likely case is that some of all of these things are happening, leading to Trump’s unprecedented personal fear index.

I cannot resolve that puzzle here, so for now I offer the following hypotheses to explain Trump’s elevated fear index:

  1. The surprise outcome of the election, combined with Russian election meddling and the pursuant investigation into the Trump campaign has generated more stories mentioning Trump and various fears
  2. The unprecedented opposition to Trump by both liberals and conservatives has generated more Trump related fear discourse in the news
  3. Trump’s decision to focus on highly controversial and fear-laden policy issues (immigration, healthcare, etc.) has inserted Trump into fear related discussions on those topics
  4. Trump’s controversial and clumsy foreign policy efforts that have stoked tensions abroad (North Korea, in particular), leading to news stories that mention both Trump and various international threats
  5. News media bias (whether a liberal bias or just a “Trump = news” bias) has led to far more coverage of Trump than other presidents and to far more negative (i.e. fear related) coverage
  6. Trump’s inexperience, his nontraditional and cavalier approach to governance, and the lack of discipline exhibited by his White House have raised fears about democratic institutions, leading to a higher fear index for Trump

The Implications of Fear

How should we interpret the pattern of American fears and the fact that fears seem to be rising across the board over recent years? Again, I will not try to draw sweeping conclusions at this point. Instead, I note two important questions raised by the data presented here.

First, are we worrying the right amount about the right things? As noted above, fear can be an important motivator for self-protection. Americans should discuss the threats and risks to national security, to public health, and the future of the planet. But even a cursory glance at the pattern of topical fear indexes suggests that threat perception is not an entirely rational process. What is not helpful, in particular, is hyping threats to such a degree that society over invests in policies to deal with them, while underinvesting in dealing with other threats. An important agenda, therefore, is the attempt to determine how closely the nation’s fear discourse mirrors the real world and what sorts of factors tend to distort it.

Second, what exactly is the AFI telling us? If the increase in fear related discourse is simply a response to an increasingly dangerous world, then the AFI is a measure of a healthy marketplace of ideas. If, on the other hand, the AFI reflects competition among elites to use fear for political purposes, then the AFI represents not a healthy marketplace of ideas but instead one held captive to propaganda. Or, perhaps even worse, rising fears may reflect the loss of public confidence in the ability of the democratic process to meet the challenges of the day. If this is the case, then the AFI may be a measure of our society’s weakening cohesiveness and resilience.  

Few people probably remember the post-punk band Timbuk 3, but maybe they can recall that wonder’s one hit: “The Future’s So Bright,” about a kid who was doing so well his future required him to “wear shades.” If a new survey of Millennials is any indication, that song may well apply to school choice.

According to a survey of adults ages 18-34 from GenForward, a project based at the University of Chicago, a whopping 71 percent of Millennials “strongly” or “somewhat support” using “government funds in the form of vouchers to pay some of the tuition of low income students who choose to attend private schools.” Yes, even with the dreaded “v” word—vouchers—in the question, private school choice garners massive support. Unsuprisingly, when broken down by race, the highest level of support is among African Americans at 79 percent, and the lowest is among whites at 66 percent.

Support declines when the proposal opens vouchers to “all students” instead of just “low income,” but it is still pretty impressive. 57 percent of all respondents are at least somewhat supportive, with the range going from 69 percent support among African Americans to 49 percent among whites.

If this holds up as millennials age, and if such support is replicated in the generation to follow, school choice will, indeed, have to start wearing shades. Hopefully, those super dark eclipse ones…

Over the last decade and a half, we’ve heard over and over again that “September 11th changed everything”—but maybe September 14 was the pivotal date. Sixteen years ago today, Congress passed the 2001 Authorization for the Use of Military Force (AUMF). Aimed at the perpetrators of the 9/11 attacks and those who “harbored” or “aided” them, the AUMF has been transformed into an enabling act for globe-spanning presidential war.  

“I don’t think one generation should bind another generation to war,” Sen. Rand Paul (R-KY) insists, but that’s exactly what’s happened: the AUMF Congress passed in 2001 still serves as legal cover for “current wars we fight in seven countries.”

Sixteen years ago, Barack Obama was an unknown state senator and part time law professor, and Rep. Gary Condit (D-CA) was, up till 9/11, the biggest story in American politics. Steve Jobs had yet to introduce the first iPod, and some people thought it was the Segway that was really going to “change everything.” In that faraway time, believe it or not, the federal government actually had a budget surplus

Two-thirds of the House members who voted for the 2001 AUMF and three quarters of the Senate are no longer in Congress today. But judging by what they said at the time, the legislators who passed it didn’t think they were committing the US to an open-ended, multigenerational war. They thought they were targeting Al Qaeda and the Taliban. The 2001 AUMF was nothing like the Gulf of Tonkin Resolution that underwrote the Vietnam War, then-Sen. Joe Biden (D-DE) insisted after the vote: “we do not say pell-mell, ‘Go do anything, any time, any place.’”

The 2001 AUMF has now been in effect over twice as long as the Gulf of Tonkin Resolution, and three imperial presidents in a row have stretched it into the boundless grant of power Biden disclaimed: broad enough to cover an ever-expanding succession of “associated forces” (a term absent from the AUMF), as well as everything from “boots on the ground in the Congo” to drones over Timbuktu.

Undeclared wars and drive-by bombing raids were hardly unknown before 9/11. But most of the military excursions of the post-Cold War era were geographically limited, temporary departures from a baseline of peace. No longer: war is now America’s default setting; peace, the dwindling exception to the rule.

Barack Obama left office as the first two-term president in American history to have been at war every single day of his presidency. In his last year alone, U.S. forces dropped over 26,000 bombs on seven different countries.

Seven months into his presidency, Donald Trump has almost certainly passed Obama’s 2016 tally already. The Trump administration used the AUMF for an additional troop surge against the Taliban, in the never-ending quest to “Make Afghanistan Great Again,”—and may yet use that authority for airstrikes in the Philippines. The administration recently sent a letter to Sen. Bob Corker (R-TN), chairman of the Senate Foreign Relations Committee, suggesting they view the authorization as broad enough to underwrite the use of force against the Assad regime in Syria. Moreover, they’re “not seeking revisions to the 2001 AUMF or additional authorizations to use force.” And why would they? As Lyndon Johnson once cracked about the Gulf of Tonkin resolution, like “grandma’s nightshirt,” it’s big enough to cover everything.

“Ten to 20 years” is the standard, recurring answer Pentagon officials give, whenever they’re asked how long the various wars on terror will go on, perhaps “a generation or more.” The droning will continue until morale improves.

Convinced that at least once a generation, Congress should vote on the multiple wars we’re fighting, this week Senator Paul forced that vote by threatening to hold up the Defense appropriations act. Yesterday, Paul’s amendment sunsetting the existing war authorization after six months went down to defeat, 61-36.

Sen. Jeff Flake (R-AZ), explained his vote to scuttle Paul’s amendment in terms of the “real risk associated with repealing such a vital law before we have a something to replace it with.” If it’s such a vital law and they’re such vital wars, presumably Congress could motivate itself to address the issue in the space of six months, and would be more likely to act if forced to. Still, Flake expects Senator Corker to hold hearings on repealing and replacing the AUMF in the near future.

We’ll see. The debate can’t end with the defeat of Paul’s amendment—if it does, he warns, we’ll find ourselves embroiled in far-flung conflicts and foreign occupations “another 16 years down the road.”

 

On Wednesday, Senator Orrin Hatch of Utah came out in support of medical marijuana and, in particular, removing federal barriers to medical marijuana research. This is a welcome development. Hatch, the longest serving senator in U.S. history, comes from a state where there is a strong aversion to intoxicating substances. Nevertheless, lawmakers in Utah recognized the medical potential of cannabis-derived medicines when they legalized cannabidiol oil (CBD) in 2014.

The MEDS Act, first introduced by Senator Brian Schatz of Hawaii, would greatly streamline the arduous process of research into marijuana’s medicinal applications. As I recently discussed at a Capitol Hill event, as well as in a recent article and on a recent Cato Daily Podcast, it is unnecessarily difficult to research marijuana. All research on controlled substances must satisfy various legal requirements in order to be authorized by the federal government. Marijuana researchers, however, must jump through the additional hoop of acquiring government-authorized marijuana from the only place where it is legally grown: the University of Mississippi. The government’s supply, however, is often inadequate to the needs of researchers, as well as being generally low quality. Nevertheless, the federal government has consistently argued that, under various UN treaties, it cannot authorize more than one source of legal, research-grade marijuana. This is despite the fact that there are many sources from which researchers can acquire nearly every other Schedule I drug.

Late in the Obama administration, the DEA opened up applications for more suppliers of research-grade marijuana. After taking office, Attorney General Sessions apparently shut down that program by simply not considering the 25 or so applications that were submitted. Among other things, the MEDS Act forbids the attorney general from establishing a quota for marijuana manufacturers and requires all applications to be acted on within 30 days.

Sessions has also asked Congress to repeal the Rohrbacher-Farr amendment, which prohibits the Department of Justice from using federal funds to interfere with states that authorize medical marijuana. In other words, while much of the country is moving on to legalizing marijuana for recreational use, Sessions is still trapped in the past and fighting against medical marijuana.

That’s not surprising, as much of our marijuana policies are trapped in the past. From the Marihuana [sic] Tax Act of 1937 to the Controlled Substances Act of 1970, our marijuana policy was largely created by people who believed Reefer Madness is a level-headed and reasonable portrayal of the effects of marijuana use. That’s like running the Smithsonian’s natural history museum based on insights gleaned from Raquel Welch’s 1,000,000 Years B.C. or The Land Before Time. I applaud Senator Hatch for pushing to update our prehistoric laws.

Last month, President Trump outlined his new strategy for Afghanistan that calls for increasing troops on the ground, a reverse of the Obama administration’s policy of gradual withdrawal. The President also reprimanded Pakistan for continuing to harbor militants while urging India to assist the United States in developing Afghanistan’s economy.

The long awaited strategy has three fundamental faults that if ignored will create an even more dire situation in Afghanistan and more fissures in the already fragile U.S.–Pakistan relationship, all the while further undermining U.S. interests.

First, the strategy is not new. It’s really a repackaging of old strategies that have already been tried and tested—and have failed. For example, prioritizing the capturing and killing of terrorists over the building of sustainable institutions has been tried in Afghanistan before, and in Iraq from 2003–2010, and has been ineffective in the long run. Weeding out safe havens and ensuring that they do not redevelop is the job of a law enforcement agency, not a military. Putting more U.S. troops on the ground, therefore, is not a solution. Instead, it’s a recipe for more—and unnecessary—U.S. casualties. It also puts the U.S. military in a role to conduct nation-building—despite the President’s comments against it—which is an unpredictable, slow, and costly strategy with a low success rate.

Second, Trump’s strategy reinforces the security dilemma between Pakistan and India. It is true that as a non-NATO ally, Pakistan has been a recipient of millions of dollars in aid. It is also true that it is sympathetic to the Taliban and supports the Haqqani Network in its attempts to establish a Pakistan-friendly Afghani government. But chastising Pakistan while encouraging India to invest even more in Afghanistan’s economic development in the same breath merely intensifies the animosity between the nuclear rivals while threatening regional stability and U.S. interests. For example, the United States has become increasingly interested in building economic ties in Central and South Asia, and cannot do so without some kind of relationship with Pakistan. More significantly, U.S. troops rely heavily on routes within Pakistan for NATO supplies. Aid cuts, sanctions, increasing drone strikes or designating Pakistan as a “state sponsor of terrorism” will all jeopardize U.S. troops’ access to these vital supplies. Alternative routes, such as going through Central Asia, are available but will be costlier. Furthermore, utilizing alternative routes will involve cooperation with Russia, a potentially less reliable partner than Pakistan.

And third, the strategy largely ignores China, who has reinforced its position as a key player in the form of the China–Pakistan Economic Corridor (CPEC). China is beginning to serve as a mediator between the United States and Pakistan. Earlier this year, Hafiz Saeed, the leader of Jamaat-ud-Dawa, affiliated with the banned Lashkar-e-Taiba, the perpetrator of the 2008 Mumbai attacks, was put under house arrest. While it seems plausible that Pakistani authorities did so to curry favor with newly elected President Trump, Michael Kugelman of the Wilson Center concludes that Saeed’s arrest was mainly done to satisfy the steady progression of CPEC. While Saeed does not pose a direct threat to China or CPEC, any militant attack within the Pakistani state could turn into a liability for Chinese investors and citizens working there. CPEC, therefore, is opening avenues for China to exert its influence on Pakistan, which may or may not work in the United States’ favor.

After 16 years, the United States remains entrenched in a war in Afghanistan that remains troublesome and lacks a clear end state. The President’s strategy does little to overcome these challenges. Repeating failed strategies, further aggravating unreliable allies, and ignoring other powerful states engaged in Afghanistan will destabilize the region and damage U.S. interests.    

On July 31st, Arizona, Maryland, and Wyoming became the latest states to sign up to the Department of Homeland Security’s Records and Information from DMVs for E-Verify (RIDE) program. RIDE is an add-on to E-Verify that draws upon state-level motor vehicle departments’ records to supposedly improve E-Verify’s accuracy. The three states join Florida, Idaho, Iowa, Mississippi, Nebraska, North Dakota, and Wisconsin as participants in the RIDE program.

Driver’s licenses and non-driver ID cards account for nearly 80 percent of proof of identity documents submitted by users of E-Verify. RIDE allows the E-Verify system to run a license issued by a participating state against state driver’s license databases, ostensibly in order to check the document’s validity. As all of the participants in the RIDE program are also participants (or actively working towards full participation) in the REAL ID federal national identification program, joining the former further integrates a state’s driver’s database with federal systems.

As with REAL ID, the RIDE program represents the creeping use of non-law enforcement “civilian” state and local databases by government agencies for purposes far beyond their original intent. With the increased use of E-Verify and DHS’s renewed push on REAL ID enforcement, expect more states to join RIDE in the future, putting more and more personal and state data in the hands of the federal government and DHS.

Edith Windsor, a heroine of property rights as well as constitutional protection for gay persons, has died at age 88. After the IRS levied a $363,053 estate tax bill following the death of her spouse, Thea Spyer, Windsor went to federal court to challenge the constitutionality of Section 3 of the 1996 Defense of Marriage Act, which prohibited the federal government from recognizing same-sex couples. She scored a notable 2012 victory at the U.S. Court of Appeals for the Second Circuit, in an opinion written by Chief Judge Dennis Jacobs, one of the most respected conservatives on the federal bench. The case then went up to the U.S. Supreme Court, with Cato supporting her cause in an amicus brief.

As the Cato amicus program page describes our role: 

In a case of interesting bedfellows, Cato joined the Constitutional Accountability Center (CAC) [a progressive outfit more usually opposed to our positions] on a brief arguing that DOMA violated the Fifth Amendment’s guarantee of equal protection….

A five-justice majority agreed with Cato and CAC, holding Section 3 unconstitutional “as a deprivation of the liberty of the person protected by the Fifth Amendment.” Justice Anthony Kennedy, writing for the majority, held that the federal government cannot intrude into a state’s traditional role in recognizing marriages to bring disfavor onto an unpopular minority.

After supporting marriage equality for longer than nearly any institution in Washington, it was gratifying to see the Court adopt Cato’s position. This was a trailblazing decision and an important step on the road to equal rights for the LGBT community.

Elizabeth Wydra of CAC looked back on the case and its results in the next (2013) Cato Supreme Court Review. 

Litigants whose names wind up on landmark cases can sometimes be a tiny bit disappointing to meet in person, but not Edith Windsor. She gave delicious interviews, like this with the NYT in 2013 (“I would trust no Clinton anywhere any time.”) Accomplished, outspoken, life-loving, and successful, she cut a comprehensively cool figure – and helped make American history. 

In the wake of the over-militarized response to protests in Ferguson, Missouri, then-President Obama restricted certain items like grenade launchers and bayonets from going to local police departments through the Defense Department’s 1033 program. The Trump Administration recently reversed the Obama-era decision in a misguided gesture to support local law enforcement.

This afternoon, a broad coalition of over 60 civil liberties and public policy organizations signed open letters to Congressional leadership to put a moratorium on the 1033 program and hold hearings on its efficacy. The signatories include The Constitution Project, the ACLU,  the R Street Institute, FreedomWorks, the NAACP, the National Association of Criminal Defense Lawyers, the Law Enforcement Action Partnership, and a bevy of other groups across the political spectrum who question the need for these weapons of war in domestic law enforcement. Police officers should be supplied with what they need to protect and serve their communities, but it’s difficult to imagine how bayonets fill that role. If such a role can be identified, then someone should explain it to Congress and the American people.

This administration’s actions and rhetoric appeal to the worst and most notorious aspects of police culture. Aggressive, antagonistic policing abuses the communities that need effective law enforcement the most. Outrageous bluster about roughing-up detainees and passing out military hardware that officers don’t need is faux support from the Trump Administration that further undermines local police priorities and diminishes public safety.  

The full text of the letters and list of signatories can be found here (House) and here (Senate). 

Responding to President Trump’s cancellation of the Deferred Action for Childhood Arrivals (DACA) program, Congress is moving toward a compromise that could legalize the DREAMers in combination with more immigration enforcement and cutting legal immigration through the RAISE Act.  This blog estimates the fiscal effects of these policies.  The following estimates are based on the 75-year NPV estimates (3 percent discount rate) of immigrants and their descendants for all levels of government as calculated in table 8-14 in the National Academy of Sciences (NAS) report on the economic and fiscal impact of immigration.  Legalizing the DREAMers reduces deficits while more enforcement and the RAISE Act increases them.

Table 1 displays my results in two ways: “Current Base” and “Base Zero.”  The “Current Base” column shows the fiscal effects with a base of the current fiscal effect with “No DREAM & No DACA (Current).”  The “Base Zero” column shows the fiscal effects of the various policies relative to a base of zero whereby the “No DREAM & No DACA (Current)” is set to zero and the fiscal effects are displayed relative to zero.  “Base Zero” is a clearer estimate of how these policies will affect deficits relative to the current policy “No DREAM & No DACA (Current).”  The “Current Base” column provides a frame of reference. The cost of the border wall, mandatory E-Verify, and the RAISE Act start at “Base Zero” in both columns because they are currently not in effect.

There are about 2.3 million DREAMers and their current fiscal NPV is +$497 billion (Table 1, Current Base).  That means that they and their descendants will pay that much more in taxes than they will receive in benefits over the next 75 years.  That number is positive because the DREAMers arrived at a young age.  Under a clean DREAM Act that legalizes all DREAMers without any educational standards, the fiscal NPV of deficits improves by $117 billion (Table 1, Base Zero).  Legalizing all of the former 700,000 DACA recipients increases net revenue by a net $35 billion up to $532 billion (Table 1).

In contrast, immigration enforcement policies have a large and negative fiscal impact on budgets.  Immigration enforcement is expensive to run, increases regulatory costs, and lowers economic output that then diminishes tax revenue.  The cost of building and maintaining a border wall is $74 billion, the regulatory cost of mandatory E-Verify is $89 billion, and the RAISE Act would cost $2.3 trillion in net-foregone revenue.  Deporting 700,000 DREAMers will diminish future tax revenue by $158 billion, including the cost of $12,500 per deportation.

The preferred and more politically realistic policy combination for many immigration restrictionists is to legalize the 700,000 DACA kids in exchange for a border wall, mandatory universal E-Verify for all new hires, and the RAISE Act.  That deal would increase 75-year deficits by a present value of $2.4 trillion from current the current base of zero.  These findings are similar to those of my colleague Ike Brannon but presented over a different time horizon according to the NAS methods. 

 

Table 1

Net Fiscal Impact of Different Immigration Policies, 75-year NPV

Policy Decisions

Net Fiscal Impact

 

Current Base

Base Zero

DREAM Act

+$614,332,743,970

+$116,971,827,159

Legalize DACA Kids

+$532,445,793,820

+$35,084,877,009

No DREAM & No DACA (Current)

+$497,360,916,811

Base Zero

Deport 700,000 DACA Kids

+$339,431,007,262

-$157,929,909,549

Border Wall

-$74,141,599,397

-$74,141,599,397

E-Verify

-$89,105,478,830

-$89,105,478,830

RAISE Act

-$2,307,894,222,849

-$2,307,894,222,849

Wall, E-Verify, RAISE, & Legalize DACA Kids

-$1,938,695,507,257

-$2,436,056,424,068

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

Findings

This section estimates the fiscal impact of the various immigration proposals above except for the RAISE Act and the border wall.  A previous fiscal analysis of the RAISE Act and another co-authored analysis on the cost of constructing the border wall filled those gaps.  The RAISE Act will diminish net tax revenue by $2.3 trillion while the cost of building and maintaining the border wall is $74 billion.  This blog estimates all costs over 75-years and annually discounts them by 3 percent.    

The DREAM Act, Legalize 700,000 DACA Kids, and No DREAM or DACA

The findings in this section come from applying the estimated age-of-arrival and eventual education level of DREAMers to table 8-14 in the NAS report on the economic and fiscal impact of immigration.  The more educated and younger the immigrant is, the more positive his fiscal impact. The NPV fiscal estimate in Table 8-14 is positive for immigrants who arrive between ages 0 and 24.  All DREAMers must have entered the United States before their 16th birthday so they are fiscally positive according to the NAS.  

The next step was estimating the eventual level of education for DREAMers using the American Community Survey based on a residual statistical technique.  Next, I assumed that all DREAMers under the age of 25 would eventually be as educated as those aged 25 years or older, which likely undercounts their eventual education level and, hence, their net-contribution to the federal budget.  For each of the legalization scenarios, I assumed that unlawful immigrants consumed 35.7 percent fewer benefits and paid 10 percent lower taxes than other workers of the same age until 35 years old, based on estimates from Figure 8-21 of the NAS.

Allowing DREAMers to live and work unlawfully in the United States under the current policy nets the Treasury $497,360,916,811 in revenue over the next 75 years (Table 1, Current Base).  Legalizing the 700,000 former DACA kids increases that net-revenue by about $35 billion to $532,445,793,820 (Table 1, Current Base and Base Zero).  The deficit shrinks because the taxes they pay immediately go up but their consumption of social services is still small as I assumed an average legalization age of 35.  Legalizing all of the DREAMers regardless of education boosts net tax revenue by $117 billion (Table 1, Base Zero) to $614,332,743,970 (Table 1, Current Policy). 

E-Verify

E-Verify is a government program whereby employers can check their newly hired employee’s identity information against a series of government databases.  E-Verify is supposed to identify unlawful immigrants and exclude them from employment.  This program is not mandatory nationwide but several states have mandated it for all new hires with disappointing results.  Many immigration restrictionists portray E-Verify as a silver bullet solution to preventing unlawful immigration.  The costs from state E-Verify mandates are in addition to the 13.48 million hours a year that employers spend filling out I-9 forms. 

E-Verify will cost the economy about $5.8 billion in lost productivity in its first year, based on government methods for calculating the burden of I-9 forms.  This estimate is biased in favor of E-Verify as it doesn’t include the vast and difficult to predict economic costs of additional workplace regulations to other portions of the economy and complementary American workers.  The Congressional Budget Office estimates that E-Verify will cost the government an average of $3 billion per year to operate for its first ten years, including lost revenue.  Thus, mandatory E-Verify will increase federal deficits by $89 billion in present value (Table 1).

Much of that decline in federal tax revenue will come from unlawful immigrants working off the books and other labor market inefficiencies that will not result in many Americans seeking jobs destroyed freed up by E-Verify.  However, the inefficiencies of E-Verify may lower the cost of the program substantially as there are many ways to cheat it and they’d likely multiply after a mandate becomes law. 

Legalize DACA Kids, Build the Wall, E-Verify, and Pass the RAISE Act

A combination of these policies is simply the addition of the fiscal impacts described in Table 1 (Base Zero) that produces a fiscal NPV of -$2.4 trillion in increased deficits, relative to current policy, over the next 75 years.  That cost is overwhelmingly due to the RAISE Act’s slashing of future tax revenue.  The realist restrictionist-preferred policy of legalizing the 700,000 DACA kids in exchange for a border wall, mandatory E-Verify, and the RAISE Act would crash federal tax revenues because the last three policies would lower economic growth.   

Deport DACA Kids, Build the Wall, Mandate E-Verify, and Pass the RAISE Act     

This combination of policies would diminish federal tax revenue by a net $2.6 trillion in NPV terms (Table 1, Base Zero).  This type of proposal is likely off the legislative table but it shows how destructive immigration restrictionism and enforcement really are.  Federal outlays increase under most of these policies but the real tax revenue killer comes from their uniformly negative impact on economic growth.  A smaller economy cannot pay more taxes, all else being equal.  Immigration enforcement and restrictionism are so expensive because they lower economic growth by deporting laborers, entrepreneurs, investors, and consumers who, due to their age of arrival, have a net-positive impact on federal revenues.  In short, the major cost of these policies is their impact on economic growth and not the upfront price tag of implementing them.

Conclusion

Building a wall, enacting the RAISE Act, and mandating E-Verify would increase deficits over the next 75 years.  The DREAM Act or legalizing the DACA children would have a small positive impact because they are already here.  Legalized DREAMers would eventually have access to more means-tested welfare benefits but their young age of entry, education level, a boost in tax revenue from legalization, and the fact that they would gain access to these benefits at an older age minimizes the fiscal impact.  The alternative of deporting them is especially costly.

Research by Michelangelo Landgrave was indispensable in writing this blog post.

Yesterday was the 16th anniversary of the 9/11 attacks. Those attacks murdered 2,983 innocent people and remain the deadliest in world history by a factor of anywhere from 6.4 to 9.1 (many disagree whether the 1978 Cinema Rex fire in Iran that killed 470 people was terrorism). All of the 19 hijackers were foreign-born, 15 from Saudi Arabia, 2 from the United Arab Emirates, and one each from Lebanon and Egypt. They all entered lawfully, 18 on tourist visas and 1 on a student visa.

Many folks prophesied a new world of near constant destructive terrorist attacks on U.S. soil that would frequently rival 9/11. These predictions were repeated so frequently that a version of the phrase “a post 9/11 world” became clichéd.  That vision of a terrible future never happened.

Remarkably, the chance of dying in a terrorist attack after 9/11, no matter the origin of the attacker, was actually lower in the post 9/11 world of 2002-2016 than it was in the pre-9/11 world (14 years before the attacks). After 9/11, the annual chance of being murdered in an attack on U.S. soil committed by any terrorist was about 1 in 26.4 million per year – far lower than the 1 in 16.9 million per year prior to 9/11. The chance of being murdered by U.S. born terrorists in a domestic attack also decreased after 9/11 as it fell from about 1 in 18.1 million a year to 1 in 37.9 million per year (Table 1).

Foreign-born terrorists murdered 26 people on U.S. soil since 9/11 through the end of 2016, meaning the chance of being murdered in one of those attacks was about 1 in 176.6 million per year. That is more than double the 12 who were murdered by foreign-born terrorists on U.S. soil in the 14 years prior to 2001. In those 14 years prior to 9/11, the chance of being murdered in a terrorist attack committed by a foreign-born attacker was about 1 in 302.3 million per year.

Table 1 - Annual Chance of Being Murdered in a Terrorist Attack by the Attacker’s Country of Origin and Time Period

Source: Author’s expansion of “Terrorism and Immigration: A Risk Analysis.”

Obviously, a calculation of the terrorism risk over this entire time should include the murders committed by the 19 hijackers on 9/11, as I do here, here, and elsewhere. But the claim that the post-9/11 world is more deadly because those attacks jolted us into a new and more brutal terror equilibrium is simply not true (at least when considering domestic terrorism).

This post 9/11 safety effect could theoretically be the dividends of increased government anti-terror measures, though this is highly unlikely given this superb research on the lack of cost-benefit calculations in the allocation of anti-terrorism funding by experts John Mueller and Mark G. Stewart. The best explanation is that deadly terrorist attacks are rare because not many people are interested in killing strangers, most people who are interested in murdering strangers are incompetent, and many things have to happen for a terrorist attack to be successful – all while being chased by anti-terrorism police.  These four reasons, by themselves, explain why the risk is so small. We should all be thankful for that.

At a conference recently I defended the mainstream media. And who wouldn’t, really? But I was speaking on the closing panel at FreedomFest (or as my partner put it, I played the big room in Vegas), which is often called a libertarian conference but had plenty of Trumpists this July. So I wasn’t just preaching to the choir. Above, video of my three-minute filibuster. 

On the panel, Steve Forbes said that “the so-called mainstream media is becoming less and less relevant” thanks to new technology and social media, and that they are “ideological frauds” and “totalitarian frauds.” I disagreed with him. I noted first that I do think the mainstream media such as NPR fail to adequately examine the most important fact in modern history—what Deirdre McCloskey calls the Great Fact, the enormous and continuing increase in human longevity and living standards since the industrial revolution. But I went on to say that the mainstream media are our main source of news about the world. And for all the talk about the rise of conservative media, very few conservative media have reporters on the ground around the country and the world. The major media have “real reporters on the ground all over the world,…and a lot of what the right-wing media does is take potshots at those reporters and their reports, and that’s fine, that’s part of the checking process.” But we should remember that the mainstream media “also serve as a check on overbearing, abusive government in the United States and other places in the world.” 

And that’s why, I said, “it’s really discouraging to me to see a president of the United States constantly denouncing the independent media and the independent judiciary as enemies of the American people, as purveyors of fake news.”

I’ve criticized, here and elsewhere, plenty of examples of what I see as media bias. But I am in sympathy with Thomas Jefferson when he wrote, “Were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate a moment to prefer the latter. “

The whole FreedomFest panel video is not online but can be purchased.

Thousands of members of Congress and congressional staffers are benefiting from an illegal scheme that gives Congress special treatment both by exempting them from the harshest part of ObamaCare and by providing them each up to $12,000 in benefits that federal law prohibits them from receiving. Last week, the Heritage Foundation’s John Malcolm and I furnished additional evidence that the government officials who implemented this scheme violated federal criminal laws. (Malcolm is a former deputy assistant attorney general in the Department of Justice’s Criminal Division.) Few government officials or legal scholars are willing to defend this scheme. Those who are nevertheless have been unwilling to comment on these new revelations or to offer a legal basis for this scheme. At least one seems to suggest that, because the executive branch did it, it must be legal.

In brief, the Obama administration violated numerous federal laws, including criminal laws, to provide thousands of dollars of benefits to members of Congress for the purpose of preventing members from voting to change ObamaCare. Martha Stewart went to jail for less. Congress has proven unwilling to investigate this obvious fraud, precisely because members of Congress from both parties benefit from it. The Trump administration has kept this illegal arrangement going for the same reason the Justice Department has not investigated the crimes committed implementing it: the beneficiaries of this fraud are extremely powerful and united in their determination both to perpetuate it and to hide it from voters.

The scheme is illegal, as Malcolm and I explain, in part because it relies on Congress enrolling in coverage through the District of Columbia’s small-business Exchange (also known as a “SHOP” Exchange), even though both federal and D.C. law prohibits employers with more than 100 workers from participating in SHOP Exchanges. Congress employs thousands upon thousands of people. Congressional officials falsified the applications they submitted to the D.C. SHOP Exchange on behalf of the House and Senate by claiming each employs fewer than 100 people. All by themselves, those false statements are prosecutable under 18 U.S.C. § 1001, with each count exposing the responsible officials to up to five years in prison.

Malcolm and I found that after those false statements became public in late 2014, D.C. dropped the employer-size question from its SHOP Exchange applications. At a minimum, this means D.C. officials were not enforcing the limits federal and D.C. law place on SHOP Exchange participation. It also has the appearance of a cover-up: after congressional officials made potentially prosecutable false statements about Congress’ eligibility for a federal program, D.C. officials stopped asking all applicants about that eligibility criterion. And when those officials continued to make other false statements on their applications, the D.C. government just stopped requiring applications entirely. Finally, we found Congress has since admitted to D.C. that it employs thousands of people and that D.C.’s SHOP Exchange has never turned down any employer for participation based on the employer’s size.

One must admire the brazen evasiveness of the D.C. government’s response to this additional evidence of the illegality of this scheme:

Federal regulations prohibit the DC Health Benefit Exchange Authority, and all other state-based or federally-facilitated marketplaces, from checking employer size requirements when a small business submits a renewal application (45 CFR 155.710(d)). Thus, DC Health Benefit Exchange Authority cannot deny renewals to DC small businesses and their employees through the SHOP marketplace because that small business has grown beyond 50 full-time employees. [Italics added.]

The claim that federal regulations don’t allow D.C. to ask small businesses who renew their SHOP Exchange participation about how many people they employ merely begs the twin questions of whether Congress was ever a qualifying small business with fewer than 100 employees (obvious answer: no) and whether there was ever any justification under either federal or D.C. law for treating Congress as if it were. If D.C. officials are such sticklers about the law, perhaps they could answer that question. Or they could explain why they chose to eliminate the employer-size question for new applicants in 2015, and eliminate those applications altogether in 2016. The fact that D.C. has never turned down any employer based on firm size suggests D.C. officials may not such sticklers for the law after all. Their silence leaves us guessing.

University of Michigan law professor Nicholas Bagley commented on our latest revelations, yet he likewise evades the main issue. Bagley acknowledges congressional officials made false statements to the D.C. government, and that those false statements were part of an effort to draw money from the federal treasury to benefit members of Congress. But he says it’s all nice and legal because the Office of Personnel Management says so, and those false statements are not prosecutable because D.C. officials knew they were false, which means they were not “material” to the decision to allow Congress to participate in D.C.’s SHOP Exchange.

I see at least three problems with Bagley’s approach to this issue.

First, according to the United States Attorneys’ Manual, in which the Department of Justice provides guidance to federal prosecutors around the country, “the test for materiality under 18 U.S.C. § 1001 is not whether the false statement actually influenced a government function.” Instead, the Department of Justice explains, “To establish materiality as an element, it is sufficient that the statement have the capacity or a natural tendency to influence the determination required to be made.” Unless we are willing to argue that statements regarding eligibility criteria for federal programs do not have a natural tendency to influence eligibility determinations for federal programs, then these false statements satisfy the test for materiality under 18 U.S.C. § 1001.

Second, Bagley’s theory ultimately reduces to, “When the president does it, that means that it is not illegal.”

Imagine federal law creates Benefit A for some group. Maybe a subsidy or a tax break. Maybe for seniors or veterans. Imagine federal law denies eligibility for Benefit A to members of Congress. Finally, imagine a corrupt president—say, President Nixon—realizes that providing Benefit A to members of Congress would keep them from reopening a law important to the president, and therefore the president personally directs a federal agency to determine that Congress is “a special case” where those restrictions do not apply. Under Bagley’s theory, if implementing that exemption requires government officials to violate laws against false statements or other federal laws, they would be immune from prosecution. Even if their actions satisfy all the elements of a federal crime that conflict with an agency rule, they would be immune simply because the president said what they are doing is legal.

I suspect Bagley isn’t entirely comfortable with how much power this theory would give the executive branch—especially this one. Bagley’s theory would allow the executive to gift members of Congress by manufacturing exemptions to eligibility benefits throughout the federal code. It would even allow the president to find special exemptions for Congress where—as in this case!—the purpose of the provision the executive is interpreting is to deny Congress special treatment. And it would eliminate perhaps the only feasible remedy to stop such abuses.

To be fair, there is something to Bagley’s argument that the congressional officials who submitted those falsified applications to the D.C. SHOP Exchange were simply “relying on OPM’s decision.” But I was just following orders only gets you so far. If implementing an agency ruling requires you to satisfy the elements of a federal crime, that is an indication there is something wrong with the agency’s decision. If relying on the OPM’s decision requires you to falsify official government documents that require you to attest, under threat of legal penalties, that the information you are providing is truthful, that is also an indication that there is something wrong with your course of action, and ultimately with the OPM’s decision. The agency’s decision does not purify the act. The act indicts the agency’s decision.

Third, and finally, in the four years since Judicial Watch’s Freedom of Information Act request first exposed these false statements, neither the OPM, nor Bagley, nor anyone else who defends Congress’ ObamaCare exemption has articulated a legal theory as to why the explicit employer-size limitations that federal and D.C. law impose on SHOP Exchange participation should not apply to Congress. Nor has anyone articulated a theory as to how OPM, whose authorizing statute allows it to pay only for health plans it has “approved” to participate in the Federal Employees Health Benefits Program, has any legal authority to contribute to the premiums of plans it has not so approved.

Instead, the OPM says we have determined it is legal, and its defenders say it is legal because they say it is.

Former Treasury Secretary Larry Summers claimed at a Wednesday lunch that the “Republican vow to significantly reduce the size of government is a foolish pipe dream” due to “structural economic realities.”

What are these realities, according to Summers?

  1. An aging population will mean upward pressure on entitlement spending on unchanged policy.
  2. The rise in inequality requires government spending to “ameliorate” the consequences.
  3. Prices tend to rise relatively quickly in service sectors such as education and healthcare, necessitating more government spending.
  4. Rising national security threats and increased military spending by geopolitical foes will necessitate more U.S. military spending too.

Where to start?

Summers is right that, on unchanged policies, government spending would balloon due to aging.

The Congressional Budget Office projects spending on Social Security would rise from 4.9 to 6.3 percent over the next 30 years, whilst Medicare spending would nearly double from 3.1 percent of GDP to 6.1 percent. The impact of all that extra spending, even as non-Social Security and healthcare spending is projected to fall from 8.9 percent of GDP to 7.6 percent, is a growing budget deficit and accumulated debt. This would raise net debt interest payments further, such that by 2047 the U.S. budget deficit stood at (a completely unsustainable) 9.8 percent of GDP.

These long-term projections come with all the usual caveats. They use assumptions about the likely path of productivity growth in the economy, population growth, and the extent of labor force participation. Nevertheless, this analysis does highlight the scale of the contingent liabilities embedded in current policy.

Summers is also right about movements in relative prices, at least if historic trends continue. Labor intensive service industries, particularly where government involvement and support is high, seem to have seen price explosions relative to general price indices. Absent a future productivity take-off in medicine and education, it is certainly plausible that government will be under pressure to spend even more in these areas to maintain services.

The main problem that I have with Larry’s argument is not his description of these economic phenomena. It’s that on the implications of these facts and his further points about inequality and defense spending, he conflates economics with politics. He is guilty of a category error, combining elements of positive economics with normative judgments, especially when it comes to necessity to tackle inequality.

If you assume (as others such as Will Wilkinson have argued) that the public will not accept a smaller government because they do not want it, that entitlements cannot be touched and that there is an income elasticity for government spending > 1 (Wagner’s Law), then the trends outlined above are likely to grow government. But this need not be the case from an economic perspective. There are plenty of other policy options available. In other words, Larry’s political judgments help drive what he describes as “economic reality”.

This reminds me of the Brexit debate, when multiple economic agencies, including the UK government’s own Treasury, proclaimed there could only be economic losses from the UK leaving the EU. Looking at their assumptions, one saw these results arose largely by construction. Assuming Britain would sign no new free trade deals and change no regulations, but still suffer reduced trade within Europe, then Brexit inevitably would make Britain poorer.

So what does Larry miss?

First of all, there’s a whole host of areas where the federal government could reduce spending outside of healthcare and Social Security spending. Though quantitatively some of these areas might be small, and others would be politically difficult, qualitatively they would reduce the scope of government substantially. Chris Edwards has outlined a potential $457.8 billion in savings in the recent Cato Handbook for Policymakers.

Second, though aging does put upward pressure on spending, the above figures show that the current entitlement framework is unsustainable without mammoth increases in the tax burden, which would reduce the potential growth rate of the economy. Entitlement reform in itself then is an exercise in “downsizing government” relative to current policy, and only reform here can maintain or reduce the size of government overall. Larry might be right that entitlement reform is politically difficult, but that is not an economic argument.

Third, and finally, though there are other economic explanations for the rising relative prices of education and health services, it seems likely that at least part of the story is precisely the role of administrative bloat and lack of competition brought about by government involvement. If so, then Larry’s argument gets things the wrong way round – the necessity of more government spending will be (in part) a consequence of government interference in the first place.

As my colleague Dan Mitchell has acknowledged, downsizing government is no doubt a difficult endeavor. That’s one reason why Cato has a whole stream of work dedicated to it. But Summers should not pretend that political choices are the same as economic realities.

Anwar Ibrahim, former deputy prime minister and finance minister of Malaysia and later leader of the opposition in the parliament, is currently in jail for the second time on trumped-up charges. His jailer, Malaysian Prime Minister Najib Razak, will be welcomed to the White House by President Trump on Tuesday.

A Wall Street Journal editorial notes:

A visit to the White House is a diplomatic plum that world leaders covet. So why is President Trump bestowing this honor on Malaysian Prime Minister Najib Razak, who jailed an opposition leader and is a suspect in a corruption scandal that spans the globe?

Mr. Najib will visit the White House next week for a presidential photo-op that could help him win the next general election and imperil Malaysia’s democracy. 

From 1981 to 1998 Anwar was a rising star in the UMNO party, which has produced all of Malaysia’s prime ministers since its formation in 1963. In the late 1990s, however, he became a vocal critic of what he described as the widespread culture of nepotism and cronyism within UMNO. This angered Prime Minister Mahathir Mohamad.

They also disagreed on how to respond to the Asian financial crisis, as Wikipedia describes:

[As finance minister, Anwar] also instituted an austerity package that cut government spending by 18%, cut ministerial salaries and deferred major projects. “Mega projects”, despite being a cornerstone of Mahathir’s development strategy, were greatly curtailed.

Although many Malaysian companies faced bankruptcy, Anwar declared: “There is no question of any bailout. The banks will be allowed to protect themselves and the government will not interfere.” Anwar advocated a free-market approach to the crisis, including foreign investment and trade liberalisation. Mahathir blamed currency speculators like George Soros for the crisis, and supported currency controls and tighter regulation of foreign investment.

Anwar was removed from office and then jailed in a trial that was criticized around the world. Amnesty International said that his trial “exposed a pattern of political manipulation of key state institutions including the police, public prosecutor’s office and the judiciary.” After his release from jail in 2004 he became leader of an opposition party and then in 2015 was sent back to jail. 

In 2005 Anwar visited the Cato Institute. In the photo above, I’m giving him a copy of my book Libertarianism: A Primer, which he told me had already read – in prison. What a thing for an author to hear! Understandably, the thought of the president of the United States honoring his jailer is especially painful.

When the English Leveller John Lilburne was tried for sedition and treason in 1649, he declared, “I shall leave this Testimony behind me, that I died for the Laws and Liberties of this nation.” American presidents should honor heroes who can make such claims, not their oppressors.

Discussions about global warming and hurricanes obscure the human tragedies unfolding before our eyes. With climate science being as politicized as it is, we’ve received quite a lot of inquiries as to whether those rushing to blame this on human emissions are onto something, and it’s natural to wonder what’s going on when the news cycle is dominated by storms. The truth of the matter is: we don’t yet have the data to know.

On August 30, National Oceanic and Atmospheric Administration’s Geophysical Fluid Dynamics Laboratory said:

It is premature to conclude that human activities–and particularly greenhouse gas emissions that cause global warming–have already had a detectable impact on Atlantic hurricane or global tropical cyclone activity.

This update cites research showing a “2 to 11%” increase in hurricane intensity by the end of this century. Given the enormous year-to-year variability in storms, the highest figure would take nearly fifty years to emerge from the noise in the data, and the lowest one—probably over a century.

As we said at the outset, this subject is better treated in a comprehensive fashion after the tragedies of today start to heal. For those of you who are thirsting for answers, I strongly recommend following my colleague here at Cato’s Center for the Study of Science, Ryan Maue, on Twitter. Ryan was one of the first to predict the extent of Harvey’s rainfall; you’ve likely seen his images atop the Drudge Report or journalists citing his work. In fact, the New York Times noted him in their article How to Follow Irmaand we agree.

Some use their voices to lift spirits of those impacted by natural disasters & others use opportunity to mock & score political points. https://t.co/pPlVngJvtg

— Ryan Maue (@RyanMaue) September 7, 2017

Pages