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One of my favorite journalistic tropes is when a reporter goes on a vacation with his ideological enemy and tells us what he learned from the experience. The reporter invariably returns with his ideology unchanged but a modicum of respect for the people on the other side, at least on a personal basis. The New York Times recently sent David Brooks (that David Brooks) to spend time with their enemy du jour--the evil one percenters, and he dutifully followed the script.  

The event was a 21 day around-the-world luxury trip that cost a cool $120,000 per person. The group went from locale to locale on a private jet, stayed in luxurious suites in top hotels, and had every single arrangement taken care of for them, to the point that the tour leader handed them spending money in the local currency at each destination.

Brooks admitted that he was initially skeptical of such a trip, assuming that he would have little in common with the sort of person who can afford such luxury and that being insulated from the day-to-day vicissitudes of travel would take some of the meaning out of travel. But he quickly came to realize that complaining about excellent service is petty and churlish, and that the people weren’t so bad either.

He also discovered was that his fellow travelers did not inherit their wealth–most of them had started their own businesses and worked hard to earn their money. What’s more, none of these people seemed truly rich. While a $120,000 vacation isn’t a middle-class excursion, this trip represented a relatively large expenditure for most of the travelers and had a bit of a “trip of a lifetime” feel to it.

Brooks seemed genuinely surprised by how much he enjoyed the company of those on the trip, an interesting a priori assumption I never would have expected from one of the paper’s token conservatives, although anyone paying attention to his column these days (and I can just barely bring myself to do so) recognizes that he’s changed a bit. He devotes more column inches worrying about our souls than the mis-steps of government.

The people were gregarious and eager to make friends, and by the time Brooks joined the trip near the end of the excursion they seemed more content to socialize with one another than to push themselves to see the sights at each new locale. It was his perception of a lack of curiosity on the part of the travelers that ultimately bothered him the most about the trip. Here they were, he lamented, traveling in some of the most important historical sites in all Christendom, yet they all seemed more interested in chatting about their families and hometowns with the other travelers than learning more about the genesis of western civilization.

Of course, what Brooks chalks up as a character flaw happens to be an essential attribute for an entrepreneur. Being an extreme extrovert who can talk to anyone about anything–and feels compelled to do so–is an incredibly useful trait to have for someone running a business.  While people may go on vacation to get away from work, extroverts don’t become quiet and contemplative when they’re away from their job. He also doesn’t account for the fact that the 50 and 60 something couples he was traveling with may have been a bit piqued after the first two weeks of their trek that Brooks skipped, a cost measure I’m glad that Johnny Apple isn’t alive to read about.

The most interesting part of the piece was the ending, when Brooks conforms to the trope and declares that despite how much he liked his new friends his views haven’t changed and that we all have a responsibility to reduce income inequality.

I hope that this coda keeps him in good stead with his Times colleagues, but I’m not at all prepared to accept his vacuous and banal charge. I would eagerly embrace the notion that reducing poverty is important and I’m affiliated with a think tank that’s devoted a lot of resources into thinking about that question. It has come up with a wide list of things to do about it, some small and no doubt shrinking fraction of which David Brooks agrees with.

But the gap between the wealthy and the poor is not a fight I’m signing up for, because in a world where the left gets to decide how to fight poverty, the next step after that fails is to reduce the wealth of the people on top, regardless of the outcome.  And once the moral satisfaction from that dissipates we’re all worse off for it. 

Is NATO a military alliance or social club? The “North Atlantic” Treaty Organization just invited Montenegro to join. With 2,080 men under arms, Podgorica is a military nullity.

As I point out on National Interest online: “Adding Montenegro to NATO is like accumulating Facebook Friends. They do little more than allow preening Washington officials to wander the globe gloating how popular the U.S. is.”

During the Cold War NATO was viewed as deadly serious. For years war seemed to be a real possibility.

Then the Soviet Union collapsed. The quintessential anti-Soviet alliance no longer had anything to defend or defend against.

As Public Choice economists would predict, institutional instinct took over. Supporters subordinated the military to the political, and NATO became a geopolitical Welcome Wagon for former Warsaw Pact members.

The good times came to a halt last year with the Ukraine crisis. The Baltic States suddenly looked vulnerable and alliance members remembered Article 5, which committed them to battle against a nuclear-armed power to protect largely indefensible nations. Americans and Europeans were expected to risk nuclear war as an act of international charity.

Proposals to add Georgia and Ukraine would multiply the dangers. Russian aggressiveness, though unjustified, illustrates how important Moscow views its influence in both nations. Nothing in Kiev or Tbilisi is worth a nuclear confrontation.

The problem is not just NATO’s recent expansion. Turkey also is undermining U.S. and European security.

Ankara spent years prosecuting a brutal campaign against Kurdish separatists and occupied more than one-third of the Republic of Cyprus. Turkey has turned in an ever more authoritarian and Islamist direction as President Recep Tayyip Erdogan dropped his liberalizing pretensions.

Worse is Ankara’s irresponsible shoot-down of the Russian plane. Turkey may have been protecting the illicit oil trade or insurgents in an area dominated by the al-Qaeda-linked al-Nusra Front, or attempting to punish Moscow for backing Syria’s President Bashar al-Assad.

The first two undermine American interests. The latter runs against the more fundamental objective of destroying the Islamic State. Nothing justifies allowing Ankara to drag NATO into a war with Russia.

Finally, Europe could, if it was so inclined, defend itself. Why, 70 years after the conclusion of World War II, are Europeans still dependent on America?

Why can’t an area with a larger economy and population than the U.S. provide its own soldiers for defense? Why can’t an area of such economic prowess, which has around eight times the GDP and three times the population of its only possible antagonist, Russia, deter any threats?

The reason the Europeans don’t do so is because they don’t want to and don’t have to. Some don’t believe that Moscow actually poses much of a threat. Others figure only the nations bordering Russia face any risk, and there’s little interest in “Old Europe” for confronting Moscow over “New Europe.” And almost everyone assumes America will take care of any problems.

Particularly striking is the lack of military effort from those supposedly threatened by the supposed new Hitler to the east. Over the years American officials have pleaded, cajoled, contended, and begged the Europeans to do more.

To no effect. Reported Jan Techau of Carnegie Europe: “while European membership in NATO has nearly doubled since 1990, defense spending by Europeans has gone down by 28 percent since then.”

The U.S. should announce that the world has changed since creation of a U.S.-dominated NATO. It was time to refashion the alliance.

One possibility for the future would be a European-run NATO, with America perhaps as an associate member. Another alternative would be a continental defense run alongside the European Union. Maybe there’s something else.

But the time for subsidizing, coddling, and reassuring the Europeans is over. American taxpayers finally deserve at least as much consideration as European ones. 

Highlights from my op-ed today at Real Clear Policy on last week’s Senate vote repealing the majority of ObamaCare:

Health-care entitlements are supposed to be a political third rail — touch them, and you die. This Senate vote means majorities in both chambers of Congress will approve a bill repealing not one but two health-care entitlements…That alone makes yesterday’s vote historic.

Even more remarkable, it is doubtful Republicans will suffer at the polls for it. Republicans have done well by running against Obamacare. Most recently, Matt Bevin won the governor’s race in Kentucky by campaigning against ObamaCare’s Medicaid expansion, which his predecessor implemented.

The history-making doesn’t end there. A bill repealing the majority of ObamaCare is now almost certain to land on President Obama’s desk. It is not often that presidents have to veto a law repealing most of their signature legislative achievement.

Finally, the vote is historic for what it portends: It proves that America is just one presidential election away from repealing ObamaCare…

With that prospect on the horizon, states that have not implemented ObamaCare’s Medicaid expansion will now be even more reluctant to do so. This vote may even encourage Governor Bevin to make Kentucky the first state to withdraw from the expansion…

Republicans and Democrats should replace ObamaCare not with “ObamaCare-lite,” but with reforms like large health savings accounts (HSAs), which would drive down medical prices and deliver an effective tax cut of $9 trillion — greater than the Reagan and Bush tax cuts combined.

 

Even failed candidates sometimes had good ideas. So it was with Louisiana Gov. Bobby Jindal. He sharply challenged conventional wisdom when he proposed a tax reform plan that ensured everyone paid at least some income tax.

His bottom rate was just two percent. But he would have killed most of the deductions and credits that allow those with low incomes to pay nothing.

Jindal’s idea should outlive his dismal candidacy because other GOP presidential wannabees propose going in the other direction. Former Gov. Jeb Bush would double the standard deduction and figured that another 15 million Americans would “no longer bear any income-tax liability.”

Billionaire turned populist Donald Trump would do much the same. He figured that the percentage of households paying no income tax would rise from 36 percent to 50 percent, knocking 31 million households off of the rolls. In fact, the Tax Policy Center figures that already 45.3 percent of American households—77.5 million out of 171.3 million—won’t pay any income tax this year.

The idea of reducing taxes to nothing, especially on those who don’t earn much, is superficially attractive. But it’s actually dangerous for a democratic republic, especially one based on limited government and individual rights.

As Jindal explained, “We simply must require that every American has some skin in this game. If we have generations of Americans who never pay any taxes, it will be very easy for them to turn a blind eye to absurd government spending.”

His point was simple but powerful. If government programs don’t obviously cost you something, there’s no reason to be against government programs. Even stupid ones, so long as you perceive some possible benefit from them.

Of course, many who don’t pay income taxes are hit by payroll taxes. But income taxes are the most visible federal levy and are what formally funds most of the programs received by nonpayers.

The Tax Foundation concluded: “Basic economic theory tells us that consumers will respond to a drop in the price of a product by demanding more. By extension, economists predict that as the price of government goes down for a citizen, he or she will then demand more of it.”

That certainly appears to be our experience. The federal income tax has become the engine of big government growth.

Of course, government expenditures have risen year in and year out, irrespective of the share of nonpayers. The system’s overall bias toward an expanded state may overwhelm any additional impact from the rising number of nonpayers.

Nevertheless, the Tax Foundation recorded a stronger relationship between that number and transfer payments: “After the late 1960s, with the start of the Great Society programs, the growth of transfer payments and the growth of nonpayers begin to move closer together.” Indeed, “over the past 25 years, the two trends seem to track each other quite closely, with both reaching their 60 year peak in 2009 and 2010.”

As I point out in the American Spectator online: “This suggests that real tax reform, while simplifying and reducing taxes, also should ensure a minimum level of burden-sharing by everyone, including lower-income workers.”

The wealthy already pay the vast majority of income taxes. The top one percent of taxpayers paid 38.1 percent and the top five percent were responsible for 58.9 percent of income tax collections in 2012 (the latest available figures).

Thus, proposals to massively expand the welfare state by shaking a bit of change loose from the pockets of the rich are a delusion. Expanding the number of nonpayers inevitably increases the burden on fewer and fewer payers.

Bobby Jindal won’t be president, but he got tax reform right. As he explained, “in America, everyone is expected to help row the boat. Independence, not dependence, is the root of the American dream. It’s time we had the guts to say so in public.” He did. The rest of the presidential candidates should follow.

This week, The Economist magazine has an article reporting that U.S. health insurance companies are making lots of money right now:

the share prices of America’s five biggest health insurers—UnitedHealthcare, Aetna, Humana, Cigna and Anthem—have all roughly tripled over the past five years. The big insurers have been consistently and highly profitable … . Unlike most big American firms, the trend is still upward. All five will probably report record profits for this year, next year and several more to come, predicts Ana Gupte, an analyst with Leerink, a research firm. For that, they owe a debt of gratitude to an unlikely creditor. The results of most financial firms may have buckled under the weight of new regulation, but health insurers appear to be thriving in the complicated new regulatory environment.

… in America, at least, health care turns out to be the most exciting corner of the [insurance] industry. The vast expense and unintelligible complexity of American health care may be a national disgrace, but they are a huge opportunity for firms that can navigate the system and minimise costs.

It’s not particularly surprising that regulation benefits the rich and powerful in this way.  So what can be done about it?  One obvious solution is to pull back on all that regulation, but that has been politically difficult.  Another option, which I’ve mentioned before, is to encourage foreign insurance companies to enter the U.S. market.  As noted, there’s plenty of money being made right now, which makes it a great time to get in.  No doubt many foreign companies find the U.S. regulations daunting, and perhaps this is why they have stayed out of the market so far.  But when you realize that regulation leads to such high profits, navigating the rules becomes worth the effort.  And what helps foreign insurance companies also helps U.S. consumers, as increased competition brings prices down.

I can imagine that federal and state regulations make it difficult for foreign insurers to operate in the U.S.  This is where trade negotiations can be helpful.  For example, in the trade negotiations going on right now with the EU, European companies can ask the EU trade negotiators to press for rules ensuring that U.S. regulations don’t discriminate against foreign insurance providers.

From today’s Washington Post:

Has this war on marijuana worked?

“No, it hasn’t,” said Clive Weighill, chief of the Saskatoon police force, president of the Canadian Association of Chiefs of Police and a veteran of the August raids.

Times, however, are beginning to change in Canada.

The new Liberal government has promised to act quickly to legalize marijuana for general use, which would make Canada the first Group of 20 country to end cannabis prohibition on a national level….

“Our system is badly, badly flawed,” said Eugene Oscapella, a law professor at the University of Ottawa and a longtime advocate for legalization. “I keep asking myself a question that I have been asking for 30 years: ‘Could we have done a worse job if we tried? Could we have found a way to create more dysfunction than we managed to create?’ ”

Politicians in this country don’t like this subject. I think Hillary Clinton’s latest position is that medicial marijuana ought to be studied or something. The success of the marijuana legalization movement here has come by referendum thus far. Looks like California voters will approve it in 2016. In the meantime, dysfunction continues all over.

Related Cato work here and here.

Syed Farook and Tashfeen Malik were killed last week in a gun battle with police after they committed a mass shooting in San Bernardino, California.  Malik entered the U.S. on a K-1 visa, known as the fiancé visa, accompanied by Farook.  Their attack is the first perpetrated by somebody on the K-1 visa - igniting a debate over increasing visa security.   

The government issued approximately 262,162 K-1 visas from 2005 to 2013 – 3177 or 1.21 percent of the total to Pakistani citizens. 

Senator Rand Paul’s (R-KY) SECURE Act identifies 34 countries as particularly terror-prone.  There were 32,363 K-1 visa, 12.34 percent of the total, issued to citizens from those countries from 2005 to 2013. 

The top ten countries for sending fiancés are the Philippines (17.34%), China (6.45%), Vietnam (5.56%), Mexico (4.99%), Colombia (3.77%), Russia (3.14%), Dominican Republic (3.12%), United Kingdom (3.12%), Thailand (2.72%), and Canada (2.67%).  Those top ten countries are responsible for 52.77 percent of all K-1 visas issued from 2005 to 2013.  Russia is the only country in the top ten that Senator Paul considers a risk.  Pakistan is number 24.

K-1 Visa Entrants, Country of Citizenship

 

2005-2013

Total

262,162

99.90%

Afghanistan

1,482

0.57%

Albania

468

0.18%

Algeria

309

0.12%

Andorra

0

0.00%

Angola

14

0.01%

Antigua and Barbuda

22

0.01%

Argentina

886

0.34%

Armenia

789

0.30%

Australia

1,993

0.76%

Austria

152

0.06%

Azerbaijan

152

0.06%

Bahamas

75

0.03%

Bahrain

0

0.00%

Bangladesh

143

0.05%

Barbados

42

0.02%

Belarus

865

0.33%

Belgium

242

0.09%

Belize

89

0.03%

Benin

36

0.01%

Bhutan

4

0.00%

Bolivia

367

0.14%

Bosnia and   Herzegovina

442

0.17%

Botswana

12

0.00%

Brazil

4,590

1.75%

Brunei

0

0.00%

Bulgaria

587

0.22%

Burkina Faso

49

0.02%

Burma

484

0.18%

Burundi

9

0.00%

Cambodia

5,744

2.19%

Cameroon

482

0.18%

Canada

7,004

2.67%

Cape Verde

306

0.12%

Central African   Republic

0

0.00%

Chad

0

0.00%

Chile

611

0.23%

China

16,916

6.45%

Colombia

9,880

3.77%

Comoros

0

0.00%

Congo   (Brazzaville)

82

0.03%

Congo   (Kinshasa)

34

0.01%

Costa Rica

691

0.26%

Cote d’Ivoire

105

0.04%

Croatia

182

0.07%

Cuba

3,324

1.27%

Cyprus

3

0.00%

Czech Republic

232

0.09%

Denmark

225

0.09%

Djibouti

12

0.00%

Dominica

113

0.04%

Dominican Republic

8,171

3.12%

East Timor

0

0.00%

Ecuador

1,383

0.53%

Egypt

1,337

0.51%

El Salvador

1,128

0.43%

Equatorial Guinea

0

0.00%

Eritrea

300

0.11%

Estonia

80

0.03%

Ethiopia

2,791

1.06%

Fiji

94

0.04%

Finland

213

0.08%

France

1,267

0.48%

Gabon

5

0.00%

Gambia

165

0.06%

Georgia

166

0.06%

Germany

2,619

1.00%

Ghana

2,150

0.82%

Greece

156

0.06%

Grenada

49

0.02%

Guatemala

785

0.30%

Guinea

184

0.07%

Guinea-Bissau

4

0.00%

Guyana

667

0.25%

Haiti

4,502

1.72%

Holy See

0

0.00%

Honduras

891

0.34%

Hungary

276

0.11%

Iceland

45

0.02%

India

6,690

2.55%

Indonesia

1,246

0.48%

Iran

3,280

1.25%

Iraq

1,143

0.44%

Ireland

730

0.28%

Israel

451

0.17%

Italy

738

0.28%

Jamaica

2,811

1.07%

Japan

3,630

1.38%

Jordan

673

0.26%

Kazakhstan

405

0.15%

Kenya

652

0.25%

Kiribati

0

0.00%

Korea,   North

0

0.00%

Korea,   South

2,706

1.03%

Kuwait

16

0.01%

Kyrgyzstan

252

0.10%

Laos

3,204

1.22%

Latvia

177

0.07%

Lebanon

1,288

0.49%

Lesotho

0

0.00%

Liberia

355

0.14%

Libya

122

0.05%

Liechtenstein

0

0.00%

Lithuania

224

0.09%

Luxembourg

0

0.00%

Macedonia

275

0.10%

Madagascar

35

0.01%

Malawi

12

0.00%

Malaysia

447

0.17%

Maldives

0

0.00%

Mali

81

0.03%

Malta

8

0.00%

Marshall Islands

0

0.00%

Mauritania

5

0.00%

Mauritius

15

0.01%

Mexico

13,077

4.99%

Micronesia,   Federated States of

0

0.00%

Moldova

473

0.18%

Monaco

0

0.00%

Mongolia

107

0.04%

Morocco

1,798

0.69%

Mozambique

20

0.01%

Namibia

8

0.00%

Nauru

0

0.00%

Nepal

409

0.16%

Netherlands

754

0.29%

New   Zealand

506

0.19%

Nicaragua

806

0.31%

Niger

64

0.02%

Nigeria

4,900

1.87%

Norway

234

0.09%

Oman

0

0.00%

Pakistan

3,177

1.21%

Palau

0

0.00%

Panama

430

0.16%

Papua New Guinea

3

0.00%

Paraguay

147

0.06%

Peru

4,017

1.53%

Philippines

45,468

17.34%

Poland

1,368

0.52%

Portugal

176

0.07%

Qatar

3

0.00%

Romania

1,880

0.72%

Russia

8,231

3.14%

Rwanda

63

0.02%

Saint Kitts and   Nevis

12

0.00%

Saint Lucia

50

0.02%

Saint Vincent and   the Grenadines

42

0.02%

Samoa

9

0.00%

San Marino

0

0.00%

Sao Tome and   Principe

0

0.00%

Saudi Arabia

110

0.04%

Senegal

278

0.11%

Serbia and   Montenegro

56

0.02%

Seychelles

0

0.00%

Sierra Leone

567

0.22%

Singapore

263

0.10%

Slovakia

196

0.07%

Slovenia

27

0.01%

Solomon Islands

0

0.00%

Somalia

162

0.06%

South Africa

677

0.26%

Spain

616

0.23%

Sri Lanka

171

0.07%

Sudan

146

0.06%

Suriname

11

0.00%

Swaziland

0

0.00%

Sweden

539

0.21%

Switzerland

223

0.09%

Syria

1,237

0.47%

Taiwan

907

0.35%

Tajikistan

39

0.01%

Tanzania

143

0.05%

Thailand

7,142

2.72%

Togo

152

0.06%

Tonga

64

0.02%

Trinidad and Tobago

383

0.15%

Tunisia

142

0.05%

Turkey

843

0.32%

Turkmenistan

31

0.01%

Tuvalu

0

0.00%

Uganda

292

0.11%

Ukraine

6,940

2.65%

United Arab   Emirates

15

0.01%

United   Kingdom

7,898

3.01%

Uruguay

128

0.05%

Uzbekistan

502

0.19%

Vanuatu

0

0.00%

Venezuela

998

0.38%

Vietnam

14,565

5.56%

Yemen

76

0.03%

Zambia

57

0.02%

Zimbabwe

66

0.03%

Unknown/Other

5,661

2.16%

Source: Yearbook of Immigration Statistics, Supplemental Table 1

The presidential campaign is just a few months old but it already feels like years. Luckily, according to the calendar less than a year remains.

The preposterous and outrageous promises of presidential candidates should remind us that politics is a truly awful way to make decisions. Tell people who don’t know much about public affairs to select one ambitious, ignorant, self-serving narcissist to run the government, and thus micro-manage Americans’ lives. What could possibly go right?

By its very nature politics is democratic only in process, not substance. That is, everyone (well, most everyone anyway) gets to cast a ballot for candidates. But in most races only one person is elected, almost immediately disenfranchising half or even more of the population (in a multi-candidate race).

Moreover, citizens must choose between complicated packages of beliefs that may not represent them. For instance, a typical libertarian wants a small government that protects markets and civil liberties at home and promotes peace abroad. But Republicans and Democrats virtually never hold to all of those positions.

Then there are bureaucratic incentives. As public choice economists pointed out, government agencies have interests. The governing process often is the antithesis of the democratic process.

Worse, substantive outcomes also are winner-take-all. A law or regulation might be a compromise between different factions, but it imposes one policy and is mandatory. You don’t get to choose whether to obey, what to do, or how to do so.

Of course, some decisions can have only one outcome. That’s why politics is an unfortunate necessity. But most life decisions need not be imposed through a winner-take-all process.

However, as government has expanded, it has turned ever more issues into mandatory exercises. Employment, education, health care, housing, transportation, and more increasingly have been taken over by government. Whenever the state moves in, private choices move out. Democracy becomes ever less democratic.

Consider health care. There are few more personal issues that require an individualized response. Yet Washington now is deciding on most everyone’s health care plans. Don’t like the options available. Tough.

Indeed, government control, highlighted by the fact that almost half of all health care spending comes from the state, is edging ever closer to vesting politicians with the decision over who lives and dies. Medicaid and Medicare already are effectively moving many of those decisions into the public realm. Obamacare takes health care another step in the direction of coercive monopoly.

Ironically, while the left long argued on behalf of what it called “economic democracy”—letting people vote on politicians who then will run the economy—markets provide real economic democracy. Even if we are part of a small minority, someone somewhere is likely to cater to our tastes, whether involving cereal, toothpaste, furniture, clothes, vehicle, luggage, or much more.

So too, as I wrote for the Freeman, “it could be with health care. Prepay medical treatment in the form of ‘insurance,’ choose catastrophic coverage only for expensive crises, or self-insure. Decide on an unrestricted fee-for-service policy or a health maintenance organization. Sacrifice everything for a few more months of life or spend more freely before and plan on letting go without extraordinary care. There’s no one right decision. So there shouldn’t be one government policy.”

Moreover, accountability in the marketplace is continuous. Once elected, a president has four years to mess up before voters have a chance to pass judgment on his or her performance. In contrast, if you are dissatisfied with your brand of soap or cereal, car mechanic or chiropractor, university or trade school, you can change tomorrow. What could be more democratic than that?

Long ago Prussia’s famous Iron Chancellor Otto von Bismarck opined that no one should want to see his sausages or laws being made. How true. We should worry more about what decisions the president gets to make than who becomes president after next year’s election.

Of all the plausible scenarios for Venezuela’s parliamentary elections yesterday, the actual outcome is the most positive and, to me, the least expected.

Past midnight last night in Caracas, and more than five hours after polling stations closed, the head of the government-controlled National Electoral Council announced that the opposition Democratic Unity Movement (MUD) had won 99 seats in the National Assembly against 46 of the government’s United Socialist Party of Venezuela (PSUV). The other 22 seats supposedly remain too close to call. Within minutes, president Nicolás Maduro went on air to admit defeat, while blaming an “economic war” for the results.

This is not the outcome most expected six hours earlier, when the National Electoral Council (CNE) illegally ruled that polling stations were going to stay open one more hour, while the state-controlled TV unabashedly called people to vote for the PSUV and there were reports of hordes of government supporters being driven to polling stations. More worryingly, once polls were supposedly closed, and despite having an electronic voting system that should produce results within minutes, the electoral authorities went mute for five hours.

It seemed like déjà vu all over again. In April 2013 something similar happened during the presidential election between Nicolás Maduro and opposition candidate Henrique Capriles. The MUD was privately confident that it had won the election, but hours later the CNE announced that Maduro won by 1.5 percentage points. A recent Congressional testimony by Russ Dallen, editor-in-chief of the Latin American Herald Tribune, explained in detail how fraud was committed that night. Was it all happening again?

Privately the MUD said it won 113 seats, which would give it a two-thirds majority with the power to name new directors to the CNE and propose constitutional reforms to be approved via referendum. It could even call for a recall referendum on Nicolás Maduro. A 101-seat majority would empower the opposition to sack government ministers. So the 14-seat difference between what the CNE announced and what the MUD said it won is far from meaningless. It’s critical to determine what’s ahead for Venezuela.

Can we say this is the beginning of the end of chavismo? I would paraphrase Winston Churchill and call it instead the end of the beginning of that political movement that came to power nearly 17 years ago. It won’t be an expedient transition from autocracy to democracy, and the government can still inflict serious setbacks. We are entering uncharted waters in the relationship between chavismo and the opposition. Will Nicolás Maduro discover his inner Montesquieu and start working constructively with an opposition-controlled National Assembly? I doubt it. Will he look to undermine the powers of the Legislative? That’s more likely if precedent is any indication.

Today is a great day for democrats in Venezuela and around the world. But there is a lot of work ahead to rebuild Venezuela’s shattered democratic institutions. 

The Wall Street Journal put out an article with some excellent visual representations of the world’s changing demographics. (Please remember that you can also explore population growth, fertility rates, and the changing age make-up of the population using HumanProgress.org’s interactive maps and charts).

The WSJ notes,

In 1798 Thomas Malthus, a British essayist, argued that humanity would reproduce faster than food production could rise, leading to destitution and starvation. He was wrong. The Western world’s population grew rapidly over the 19th and 20th centuries, with a dip in 1918-19 because of World War I and the Spanish flu pandemic. But rising agricultural productivity proved more than capable of feeding the extra mouths.

Humanity found ways to produce more food per unit of land through innovations like synthetic fertilizers and increasingly advanced genetic modification techniques. As production increased, prices fell, calorie consumption increased, and undernourishment fell even as the world’s population grew.

Malthus’ mistake was to ignore human beings’ ability to innovate their way out of problems. But, as Julian Simon found in The Ultimate Resource, people are excellent problem-solvers. A challenge (feeding a growing population), led to technological innovation (the Green Revolution and GMOs) and that led to a solution (higher agricultural productivity and falling food prices).

As Human Progress advisory board member Matt Ridley notes in The Rational Optimist and The Evolution of Everything, technological innovation depends on the exchange of ideas. The more people there are (and the freer and more timely their exchange of ideas), the better.

The WSJ article recognizes problems associated with declining working-age populations—especially when it comes to unsustainable social security commitments those countries have made to their elderly. The WSJ also notes that government programs to incentivize having more children do not seem to work very well, and are not a viable solution.

One of the ways in which nations could increase their growth rates is to attract immigrants from other countries where their talents may be wasted. To learn more about the economics of immigration and the contentious issues surrounding the debate, including the effects of immigration on the native-born population’s wages and culture, consider registering for Cato’s forum in January on the subject.

On this day 150 years ago, the Thirteenth Amendment to the Constitution was ratified, thus officially ending chattel slavery in the United States. America’s original sin—its birth in freedom based on human slavery—was no longer sanctioned by American law.

To get to this historical moment, the United States wrestled with its heinous contradiction in its homes, cotton fields, courtrooms, public streets, legislatures, Bleeding Kansas and, ultimately, the many battlefields of the Civil War. The racism that supported slavery was so ingrained in our national character and economy that it cost the United States hundreds of thousands of lives.

Of course, America’s racial wounds were not healed with Abolition. The Fourteenth and Fifteenth Amendments went further to ensure racial equality (for men) before the law—on paper, anyway. Years of Jim Crow and state-tolerated white terrorism after the end of Reconstruction showed America’s laws and purported ideals could still be subverted by the enduring legacy of racism throughout the country.

Today, black Americans are far freer than ever, but still face unequal treatment by law enforcement. Certain police practices are almost exclusively deployed in black neighborhoods—the neighborhoods themselves remnants of de jure segregation—reifying not-yet-equal status for too many black Americans. And the aggressive application of our criminal laws has led to mass incarceration, which disproportionally imprisons African Americans across the country.

Nevertheless, the ratification of the Thirteenth Amendment should be celebrated as a hard-fought victory for human freedom. It was the first of the three Civil War Amendments that recognized that individuals have unalienable rights against the federal and state governments.  

In today’s political arena, there is a lot of talk a lot about “liberty” and “freedom” regarding taxes, regulations, and other infringements on personal rights. Many of those are important public policy debates that have a genuine impact on human flourishing.  But it is important to remember what liberty and slavery have meant throughout American history. The Thirteenth Amendment stands as a testament to the arduous struggle this country fought with itself about what it truly means to be free.

Yesterday, for the first time in 95 years, the New York Times published an op-ed on the front page, position A1, above the fold. The subject of that op-ed: “End the Gun Epidemic in America.” The piece is filled with tired arguments and moralistic fervor, and it even includes the most vacuous of all public policy arguments: We gotta do something.

The title itself is odd. By focusing on guns themselves as an “epidemic” rather than on the ever-decreasing rate of gun violence, the Times seems to confirm that its editorial staff has a problem with gun ownership per se, regardless of its effects on public safety. The placement of the piece on the front page also suggests that the Times prefers moralizing to simple fact-checking. 

But it is even worse than that. At a time when the Times could have placed a meaningful and trailblazing op-ed on the front page, perhaps calling for an end to the drug war and the thousands of gun deaths associated with it, they instead chose to advocate for an impossible public policy goal that will have little to no effect on the problem at hand.

The piece was clearly animated by the recent spate of disturbing mass shootings. First of all, because it apparently needs to be said again and again, focusing on mass shootings when discussing firearms policy is deeply problematic. Not only do victims of mass shootings constitute one percent or fewer of gun deaths (depending on how “mass shooting” is defined), but the perpetrators of mass shootings are the hardest to affect with public policy changes.

This is an incredibly important point to remember for those who are interested in mature and serious public policy solutions rather than vociferous caterwauling. Mass shooters are not marginal perpetrators of gun violence. They are committed to their cause, and will work hard to overcome obstacles in their path.

Both sides of the gun control debate often ignore questions on the margins to focus on non-marginal actors. For the gun rights crowd, they often postulate the “over-motivated criminal,” that is, the person who will stop at nothing to get the weapons he wants and, therefore, will not be affected by background checks, waiting periods, etc. Conversely, the gun control crowd often focuses on the “under-motivated criminal,” a lackadaisical maniac who would have committed a crime but was thwarted by forms and other paper barriers.  

Yet, just as there is someone who would decide not to buy a Subway sandwich if the price was raised 20 cents, there are marginal criminals and would-be criminals who can be affected by some restrictions on guns. The important question is: does the person who is stopped by these restrictions forego violence altogether or do they choose other methods, either via bludgeoning or stabbing weapons or by substituting another weapon such as a hunting rifle? The second question is: do restrictions on guns keep weapons out of the hands of marginal law-abiding citizens who could have used those guns to save a life or stop a crime?

Mass shooters are the quintessence of an over-motivated criminal, and in a country with over 300 million guns, there are very few (if any) realistic gun control laws that could stop mass shooters. Policy proposals that focus on identifying would-be mass shooters and protecting would-be victims of mass shooters have a much better chance of succeeding than any proposal that focuses on guns. If there were a magic button that eliminated what the Times call “weapons of war,” there would likely still be the same number of mass shootings. Many if not most “hunting rifles” have identical functionality to so-called “assault weapons,” not to mention the eternal presence of illegal markets.

Yet, the Times insists that “certain kinds of weapons, like the slightly modified combat rifles used in California, and certain kinds of ammunition, must be outlawed for civilian ownership. It is possible to define those guns in a clear and effective way and, yes, it would require Americans who own those kinds of weapons to give them up for the good of their fellow citizens.” Yes, they argue for confiscation. In other words, in order to enact a policy that would have little to no effect on gun violence, the Times advocates a confiscation scheme that would violate civil liberties and likely result in violence.

But don’t take my word for it. Last year, in what evidently was a fleeting moment of lucidity, the Times published an op-ed by Lois Beckett from ProPublica, “The Assault Weapon Myth,” that thoroughly demolished their own argument:

It turns out that big, scary military rifles don’t kill the vast majority of the 11,000 Americans murdered with guns each year. Little handguns do.

In 2012, only 322 people were murdered with any kind of rifle, F.B.I. data shows.

The continuing focus on assault weapons stems from the media’s obsessive focus on mass shootings, which disproportionately involve weapons like the AR-15, a civilian version of the military M16 rifle. This, in turn, obscures some grim truths about who is really dying from gunshots.

Annually, 5,000 to 6,000 black men are murdered with guns. Black men amount to only 6 percent of the population. Yet of the 30 Americans on average shot to death each day, half are black males.

I hesitate to co-opt the phrase “black lives matter,” but it is telling that–among those tucked away safely in their homes in middle-class neighborhoods–the poster child for gun violence is an “assault weapon”-wielding mass shooter. Most gun violence is perpetrated with handguns and largely involves our inner cities and black males. These guns are often connected to and trafficked in the illegal drug trade. Perhaps the explanation for this disconnect is simple: well-to-do liberals can more easily imagine themselves on a college campus than in a run-down and dangerous inner city neighborhood.

There are things that can be done about gun violence, but few of them involve focusing on guns. Ending the drug war would do more than any other discrete policy proposal, and focusing on alleviating poverty, fixing schools, and providing assistance to troubled youths would also go a long way. As Beckett writes, “More than 20 years of research funded by the Justice Department has found that programs to target high-risk people or places, rather than targeting certain kinds of guns, can reduce gun violence.”

Finally, as it must be constantly reiterated, we’ve done a pretty good job drastically reducing gun violence. For whatever reason (this is constantly debated), crime has dropped precipitously over the past 20 years, but over half of Americans are unaware of this fact. Gun homicides are down 49 percent since 1993, and in that same time we added approximately 100 million guns to the country’s gun stock. At the very least, those facts disrupt the simple “more guns, more crime” narrative.

Hopefully, the next time the Times decides to publish a front page editorial, they put a little more thought into it. 

Today is a great day for freedom. On this day in 1933, the 21st Amendment was ratified, thus repealing Prohibition. My former colleague Brandon Arnold wrote about it a few years ago:

Prohibition isn’t a subject that should be studied by historians alone, as this failed experiment continues to have a significant impact on our nation.

Groups like the Women’s Christian Temperance Union, a key force in the passage of Prohibition, survive to this day and continue to insist that Prohibition was a success and advocate for dry laws.

Prohibition-era state laws, many of which are still on the books today, created government-protected monopolies for alcohol distributors. These laws have survived for three-quarters of a century because of powerful, rent-seeking interest groups, despite the fact that they significantly raise costs and limit consumer options. And because of these distribution laws, it is illegal for millions of Americans to have wine shipped directly to their door.

The website RepealDay.org urges celebrations of the “return to the rich traditions of craft fermentation and distillation, the legitimacy of the American bartender as a contributor to the culinary arts, and the responsible enjoyment of alcohol as a sacred social custom.” It’s easy! You don’t have to hold a party. Just go to a bar or liquor store and have a drink.

RepealDay.org says that “No other holiday celebrates the laws that guarantee our rights.” I think that’s going too far. Constitution Day and Bill of Rights Day do exactly that. And in my view, so does Independence Day. But that’s quibbling. Today we celebrate the repeal of a bad law. A toast to that!

Cato celebrated the 75th anniversary of repeal with this policy forum featuring Michael Lerner, author of Dry Manhattan: Prohibition in New York City; Glen Whitman, author of Strange Brew: Alcohol and Government Monopoly; Asheesh Agarwal, Former Assistant Director of the Federal Trade Commission’s Office of Policy Planning; and Radley Balko, Senior Editor, Reason.

  And last year panelists at a Cato Forum discussed modern prohibitions—from the Drug War to blue laws; tobacco regulation to transfats—drawing connections with their earlier antecedent.
John Kasich seems most interested in winning the contest for Most Sanctimonious. He isn’t even likely to win the Ohio primary, let alone capture the GOP presidential nomination.   There was a time when Kasich looked like a serious contender. But he has gone out of his way to offend everyone, especially those who believe in shrinking government.   Perhaps Kasich’s strangest electoral ploy has been to present himself as God’s candidate. Two years ago he decided to expand Medicaid eligibility in his state. How to best provide health care for those with lesser incomes is a tough issue.   But Kasich didn’t stop at trying to make a practical case for his proposal. Instead, he trashed opponents as “hard-hearted or cold-hearted.”   After pushing the line that Medicaid expansion was the only alternative to leaving the poor “out in the street,” he declared that God, or at least heaven’s gatekeeper, St. Peter, was for it. He told a state legislator: “Now, when you die and get to the, get to the, uh, to the meeting with St. Peter, he’s probably not gonna ask you much about what you did about keeping government small, but he’s going to ask you what you did for the poor. Better have a good answer.”   Kasich doubled down a year later when challenged personally over his plan for Medicaid expansion: “when I get to the pearly gates, I’m going to have an answer for what I’ve done for the poor.”   This year he went on Meet the Press where he declared: “As a big fan of that handbook that the Lord’s handed us, the Old and New Testament, there’s a lot in there … about our need to take care of the widowed, the poor, the disadvantaged.”   During his presidential campaign he offered to buy Bibles for his critics: “There’s a book. It’s got a new part and an old part. They put it together. It’s a remarkable book. If you don’t have one, I’ll buy you one. And it talks about how we treat the poor.”   Instead of giving away Bibles he might spend more time reading his own. Paul wrote the Corinthian church: “I am not commanding you, but I want to test the sincerity of your love.” (2 Corinthians 8:9)   Indeed, when the Macedonian churches gave, it reflected the grace of God, not government: “Out of the most severe trial, their overflowing joy and their extreme poverty welled up in rich generosity.” (2 Corinthians 8:2)   Worse, though, is the fact that Kasich apparently has not lived up to his own rhetoric by helping personally. In the moving vision of the separation of the sheep and the goats Christ’s (not St. Peter’s!) statement is “whatever you did for one of the least of these brothers of mine, you did for me.” Jesus did not say whatever you voted to take from your neighbors for the hungry, thirsty, lonely, naked, sick, and imprisoned you did for me. Indeed, what made the famed Samaritan good was personally helping the person in front of him, not voting in the next election for a politician promising to create a government agency.   Kasich has not released his recent tax returns. However, we have that for 2008, which he provided during the 2010 gubernatorial campaign.   On an income of nearly $1.4 million he donated $27,326, not even two percent. Yet Paul urged “just as you excel in everything … see that you also excel in this grace of giving.” (2 Corinthians 8:7) Kasich may be a good Catholic, but he appears to have missed his priest’s homilies on charity.   Kasich isn’t likely to be the GOP presidential nominee. But he still might attract interest as a vice presidential nominee.   As I wrote for the American Spectator online: “His prickly determination to be the most obnoxious candidate should give pause. Along with his claim to be doing God’s work. Whether cynical or delusional, it’s an argument that should disqualify him from sitting in the Oval Office.”

Tuesday at noon, John Schuessler will be at Cato to discuss his new book, Deceit on the Road to War: Presidents, Politics, and American Democracy. Its subject is U.S. leaders’ manipulation of public opinion to win support for wars, particularly World War II, Vietnam and Iraq. With help from Elizabeth Saunders and Trevor Thrall, we’ll discuss whether the United States is especially prone to this kind of deceit, why that might be, and deceit’s dangers.

If that sounds overly theoretical, consider the 2011 war in Libya. If you believed the Obama administration then, bombing Libyan troops would be geopolitical magic. The cost would be tiny: no U.S. ground forces, minimal risk to pilots, expenses amounting to federal pocket change. That minor effort would produce bountiful returns: democratic transition in Libya once the rebels took power, stronger U.S. alliances, prevention of refugee flows that would destabilize neighboring states, a cowing of dictators that would invigorate the Arab Spring, accelerating the region’s transformation to liberalism, and hundreds of thousands of lives spared from Gaddafi, who had promised to crush innocents like “cockroaches,” “showing “no mercy and pity.”

Those claims all relied on combinations of dubious logic, wishful thinking, and the case of the last, deceit. Gaffafi’s bloody threats explicitly excluded non-combatants. His forces committed war crimes but did not engage in mass slaughter of civilians in areas they captured. As critics predicted, the war’s chaotic results undermined its purported benefits. None of its rationales seem right in hindsight.

An unfortunate conclusion here is that, as with the Iraq War, democracy’s free marketplace of ideas is mythical or at least overrated. That theory says that democracy, by forcing debate, prevents leaders from launching reckless wars. Divided power and a free press mean that vigorous debate should expose faulty arguments and block the foolish policies they promote. Anticipating resistance and evaluation, leaders avoid making bad or dishonest arguments in the first place.

In Libya, the president offered just about every half plausible argument for war. Debate stayed anemic and largely unofficial. War advocates, especially powerful ones, basically ignored the few pundits and academics criticizing their arguments. Congress paid little attention, even once it took up the Benghazi attack. There was neither a congressional authorization nor an appropriation vote. The Pentagon transferred already-appropriated funds to cover the bill. In the few relevant hearings, Congressional consideration of the issues raised above was limited, at best.

Debate did not improve as Libya unraveled. It simply grew quieter. The war backers who attacked critics and hailed the “model intervention” when the rebels took power mostly went silent. A few repeat old talking points or labor to revitalize them. Mostly they shifted their attention. A bipartisan chorus, probably including our next president, makes similarly fatuous claims in pressing for more aid for Syrian rebels.

That lack of correction contrasts with the war in Iraq, which produced some policy reassessment, especially about U.S. capability to succeed in occupational warfare. Iraq’s far higher human and fiscal costs probably explain the difference. Because Libya seemed and stayed cheap for Americans, the public could stay rationally ignorant. Congress then had little reason to interfere. There was no reckoning. It’s not that the overstated arguments for war clearly worked, manipulating the public. Low costs prevented interrogation of the arguments.

Libya isn’t special because our leaders oversold the case for war. All U.S. wars share that quality. Libya instead exemplifies trends conducive to unchecked overselling of war. Wealth and power permit the United States to make war with great discretion in many places. The same factors limit dangers at home, making wars’ stakes more remote. Remote stakes mean that hawks eager to win support for war struggle to make them seem more important to domestic safety. They exaggerate more. Remote stakes also encourage leaders to hold down costs. Dead Americans seem likely to increase public attention, debate, and opposition. A gap widens between the nation’s limited willingness to pay for wars and the overwrought reasons we claim to fight them.

Relative power then produces lots of wars waged with limited risk and dysfunctional democratic debate. That is the current situation. Lately, we are hawkish in the number of places we make war—especially with airpower, including drones—but dovish in our willingness to take bloody risks in those wars. An unthreatened public pays little attention as an interventionist elite repeats arguments for war that bear little scrutiny. As long as costs stay low, scrutiny is an academic concern of little practical relevance for policymakers.

Every Republican wants to be Ronald Reagan reincarnated. At least that’s what GOP candidates say. But the 40th president probably wouldn’t feel comfortable running today.

First, he’d have a good laugh at the fear-mongering. For instance, New Jersey Gov. Chris Christie declared: “I don’t believe that I have ever lived in a time in my life when the world was a more dangerous and scary place.”

Reagan lived through World War II, the Korean War, the Vietnam War, and the Cold War. He likely would explain that never in its history has America been as secure from serious threats.

Reagan almost certainly would see Russia as a challenge more than a threat like the Soviet Union. He would appreciate how far America’s Asian and European allies have come over the last quarter century, which gives them the wherewithal to act in their own defense.

Second, Reagan likely would be skeptical of the GOP mantra of more military spending as an answer to invisible, unnamed threats. Reagan sought more Pentagon dollars because he feared America was behind the Soviet Union, an aggressive global antagonist. Today the U.S. is far ahead of everyone, accounting for 40 or more percent of the entire globe’s military outlays, and allied with most of the world’s industrialized states.”

Third, Reagan would insist on negotiating with adversarial regimes, especially that in Tehran. He did so with the worst of the Soviet leaders. Shortly after taking office Reagan advocated “meaningful and constructive dialogue.”

In fact, one reason Reagan pushed a military build-up was to allow America to negotiate from a position of strength. Which Washington certainly can do now. Not only does the U.S. enjoy overwhelming military advantages compared to Iran. So do Israel and Saudi Arabia.

Moreover, the ultimate anti-communist understood the importance of people. He dropped the label “evil empire” for the U.S.S.R. once Mikhail Gorbachev took control. A similar personality shift occurred in Iran when Hassan Rouhani succeeded Mahmoud Ahmadinejad. Reagan almost certainly would have explored the willingness of Tehran to make a deal.

Fourth, Reagan was horrified by the prospect of war. That is what animated his commitment to missile defense. In contrast, most of the Republican presidential candidates seem to believe that breathing threats and proclaiming toughness are essential elements of manhood.

Once elected he seldom used the military. Reagan preferred to rely on proxies when possible, as in Afghanistan and Nicaragua. Twice he employed the armed services in narrow operations—to retaliate for a Libyan terrorist attack on Americans in Berlin and overthrow a brutal Communist junta in Grenada, where U.S. medical students were potentially at risk.

He also intervened in the Lebanese civil war, which turned American personnel into targets. He soon recognized that he had made a great mistake and withdrew U.S. forces. The neoconservatives were horrified that Reagan didn’t double down to occupy and transform the country.

Fifth, he probably would have few delusions about past policies. Having backed the Mujahedeen against the Soviet Union, he almost certainly would not have devoted American lives and money to nation-building in Afghanistan. Reagan would have recognized that Iraq had turned into a disaster.

And while he would not have been impressed by the competence of President Barack Obama’s foreign policy team—who could be?—Reagan would realize that it was Dubya who really squandered the Reagan legacy. Nuance highlighted Reagan’s policies but is largely lacking in the current “bomb ‘em, invade ‘em, occupy ‘em” GOP crowd.

As I wrote for National Interest online: “If Ronald Reagan was running today, his competitors would be denouncing him as a wimpy appeaser, a naïf enthused with negotiation, a president far too reluctant to use the military. Bloggers, columnists, talk radio hosts, and Fox News would be piling on. Come the first primaries he’d likely end up as political road kill.”

There is much that we can learn from Ronald Reagan today. But those candidates who most claim to represent Reagan’s legacy are least like him.

Why does NATO exist? Certainly not to defend America. After all, the North Atlantic alliance’s latest policy move is to invite Montenegro to join.

Montenegro‘s military employs 2,080—1500 in the army, 350 in the navy, and 230 in the air force. Wow!

NATO Secretary General Jens Stoltenberg opined that “Montenegro has come a long way on its path to join the Euro-Atlantic family.” Extending the invitation was “a historic decision. It would signal our continued commitment to the Western Balkans,” he added.

Montenegro is a nice country. But what does it have to do with American security?

What was once an alliance expected to defend wrecked and impoverished Western Europeans nations from mass murderer Joseph Stalin and his Red Army has turned into the geopolitical equivalent of a Gentleman’s Club. Everyone wants to be a member simply because it’s the thing to do. So Podgorica is being invited to enter the “North Atlantic” Treaty Organization.” v:shapes=”Picture_x0020_3”>

It’s hard to blame Montenegro’s government and people for wanting to join. But what is in the deal for America? The U.S. collects allies like most people accumulate Facebook friends.

America nominally is a superpower, but Washington officials crave attention and affection from other states. So presidents and legislators continually write guarantees on the money and lives of the American people for foreign countries, even when, like Montenegro, they are utterly irrelevant to U.S. security.

At least Montenegro doesn’t matter. Expansion to the Baltic States turns out to have been a huge mistake, bringing in helpless nations which the rest of Europe has no interest in defending, countries of no geopolitical importance to America but involved in bitter disputes with Russia. If anything bad happens, America will be expected to confront, with minimal support from its European “allies,” nuclear-armed Russia over a controversy of far greater interest in Moscow than Washington.

Bringing in Georgia and Ukraine would be far worse. Both countries are unlucky and exist in bad neighborhoods viewed as critical security concerns by Moscow.

Neither matters much for American security. Moscow’s role may not be fair or just, but not everything is worth going to war over.

Particularly strange are proposals to treat Georgia and Ukraine like formal allies even if they aren’t. Commentators have advocated flying air patrols and introducing troops in Ukraine. During the short-lived Russo-Georgia war the Bush administration reportedly considered bombing the tunnels through which Russia was moving its forces. 

After getting through the entire Cold War without a shooting war with Moscow, why would Washington take action which essentially would force Russia to strike back militarily? NATO originally was created to act as a firebreak to war. Current policy threatens to turn it into a transmission belt of war.

American disengagement would not leave Europe defenseless. Withdrawing would simply change who does the defending. 

Robert Scales, retired commandant of the Army War College, complained that “At 30,000, there are fewer American soldiers protecting Western Europe” than cops in New York City. Actually, he should ask, why are there even 30,000 U.S. soldiers protecting Western Europe?

As I point out in Forbes online: “After all, 70 years have passed since World War II. The European Union has a larger GDP and population than America, and dramatically larger than Russia. Isn’t it time for Washington’s rich friends and allies to defend themselves? Or will Americans have to wait another 70 years before their government stops subsidizing Europe’s generous welfare states?”

Montenegro. A nice place to visit. It doesn’t threaten anyone. It isn’t threatened by anyone. And it doesn’t matter to America.

Why is it being brought into NATO?

It’s time for a serious debate in Washington about turning alliances into welfare for the well-to-do overseas. The Europeans. The South Koreans. The Japanese. The Saudis.

It truly is time for a change.

 

At the risk of belaboring the obvious, I feel compelled to begin this second installment of my response to Ben Bernanke’s memoirs with an observation — a platitude, if you like — concerning the proper role of emergency central-bank lending in a generally free economy.

The observation is simply that emergency lending, far from being an end in itself, is but one of many possible means by which a central bank might achieve the ultimate end of avoiding general reductions in lending and spending that might otherwise result in more general business failures — that is, in a recession or depression. For so long as the overall flow of spending remains stable, it must be the case, as a matter of simple logic, that aggregate business receipts do not fall remarkably short of aggregate outlays, and that the flagging incomes of particular firms are matched by the net revenues of others.

From this banal observation two others follow. The first is that central bank emergency lending can be justified only to the extent that it succeeds in keeping overall spending stable. The second is that a central bank that allows the overall volume of spending to collapse has blown it, no matter how much emergency lending it undertakes. Indeed, to the extent that a central bank engages in emergency lending while failing to preserve aggregate spending, it may be guilty of compounding the damage attributable to the collapse of spending itself with that attributable to a misallocation of scarce resources in favor of irresponsibly-managed firms. Thanks to moral hazard, the extent of such misallocation, instead of being proportionate to the actual volume of emergency lending, is augmented by the expectation that such lending will continue to be resorted to in the future.

In a previous post, I took Ben Bernanke’s Fed to task for contributing to the moral hazard problem during the recent crisis. It did this by repeatedly violating Walter Bagehot’s “dictum” (“lend freely at a high interest rate, against good collateral”), especially by extending credit to troubled institutions on collateral that was neither “commonly pledged” nor “easily convertible.” Although Bagehot himself never spoke in such terms, it seems to me that his emergency lending principles are broadly consistent with the overarching goal of preserving overall spending while limiting risk subsidies.

I now turn to consider the bearing of the Fed’s actions on the course of spending. As I have plenty to say on the topic, I plan to divide my observations into two posts, with this one dealing with the period prior to October 2008, and the next addressing developments after that. Still, I don’t want to keep anyone in suspense, so allow me to come right out and state my conclusion: Far from seeing to it that its emergency lending and subsequent large-scale asset purchases served to preserve the flow of aggregate spending, or to revive that flow following its collapse, Bernanke’s Fed went out of its way to make sure that the programs in question did no such thing.

Note that I am choosing my words quite deliberately: the Fed did not merely fail in its efforts to revive the flow of spending. It deliberately prevented such a revival, and by so doing prolonged the Great Recession.

Of course Bernanke and other Fed officials did not see things this way. They viewed the steps they took as ones essential to maintaining control of monetary policy. But what they imagined they were doing, and what they actually did, were two very different things.

What steps? Until the AIG bailout, the Fed made a point of “sterilizing” its emergency lending. Afterwards, finding that it lacked the resources it needed to continue to sterilize its loans and asset purchases, it sought to achieve similar results by alternative means. On September 17, 2008, the Treasury, at the Fed’s request, inaugurated its “Supplementary Financing Program,” whereby it issued additional Treasury bills, the proceeds of which were deposited in a new Fed account created for the purpose. Then, on October 1st, the Board of Governors announced that it would soon begin paying interest on depository institutions’ required and excess reserve balances. The Fed took these steps, which served either to drain reserves from the banking system, or to immobilize excess reserves that remained outstanding, for one reason only, to wit: to make sure that its crisis-related lending and asset purchases did not sponsor any corresponding increase in bank lending.

You need not take my word for it. Here is Bernanke’s own explanation of the Fed’s decision to sterilize its emergency loans:

We were facing what might prove to be a critical question: Could we continue our emergency lending to financial institutions and markets, while at the same time setting short-term interest rates at levels that kept a lid on inflation? Two key elements of our policy framework — lending to ease financial conditions, and setting short-term interest rates — could come into conflict.

When the Fed makes a loan, taking securities or bank loans as collateral, the recipient of the loan deposits the funds in a commercial bank. The bank in turn adds the funds to its reserve account at the Fed. When banks hold substantial reserves, they have little need to borrow from other banks, and so [sic] the interest rate that banks charge each other for short-term loans — the federal funds rate — tends to fall (p. 236).

Bernanke’s account calls for some further elaboration. It is, of course, not lending on the federal funds market per se, but a more general increase in lending, that has the capacity to “raise the lid” on inflation. Bernanke’s concern must, in other words, have been that the Fed’s emergency lending would result, not merely in a reduced federal funds rate, but in a general loosening of credit. Such a loosening was, evidently, not what Bernanke had in mind in claiming that the Fed’s emergency lending was supposed to “ease financial conditions.”

Sterilization, Bernanke goes on to explain, involved

selling a dollar’s worth of Treasury securities from our portfolios for each dollar of our emergency lending. The sales of Treasuries drained reserves from the banking system, offsetting the increase in reserves created by our lending (p. 237).

The sterilization shows up in the chart below (reproduced from James Hamilton’s Econbrowser) as a decline in the light-gray field representing the Fed’s holdings of (mostly Treasury) securities, which served to more-or-less perfectly offset its pre-AIG emergency lending.

To understand just how misguided the Fed’s sterilized lending program was, it helps to go back to the event that marked the beginning of the crisis: BNP Paribas’ August 9, 2007 decision to suspend withdrawals from three of its subprime mortgage funds. The French bank’s announcement had banks everywhere scrambling for liquidity. Bernanke’s description of the Fed’s response to that event makes for a revealing comparison with his subsequent defense of sterilized lending:

That morning, I emailed Brian Madigan…to instruct the New York Fed to buy large quantities of Treasury securities on the open market. The cash that the sellers of the securities received from us would end up in banks, meeting the banks’ increased demand for cash. If banks had less need to borrow, the federal funds rate should move back to target and the pressure in short-term funding markets should ease. If all went well, we would withdraw the cash from the system in a day or two.

Walter Bagehot’s lender-of-last-resort concept argues that central banks should stand ready during a panic to lend as needed, which in turn would help stabilize financial institutions and markets. Later that morning, consistent with Bagehot’s advice and my instructions to Brian, the New York Fed injected $24 billion in cash into the financial system (pp. 143-4).

Although Dan Thornton is probably correct in calling the Fed’s response to the BNP Paribas event “anemic,” the point remains that at the time Bernanke understood the Fed’s responsibility as being that of avoiding a general contraction of bank lending by seeing to it that the U.S. banking system as a whole remained well-stocked with reserves, which the Fed made available by means of net open-market asset purchases. A plot of excess reserves during 2007 and the first quarters of 2008 makes the point better than words can:

Notice that the increase in banks’ excess reserves in August 2007 was due to the Fed’s having expanded the monetary base, so as to loosen credit, and not to its having rewarded banks for holding reserves, as it was to begin doing in October 2008. Although paying banks to hold reserves led to very substantial growth in banks excess reserve holdings, that policy served not to loosen credit but to tighten it.

In contrast to the Fed’s actions in August 2007, its subsequent turn to sterilized lending had it, not buying, but selling Treasury securities, with the aim of preventing its emergency lending from resulting in any overall increase in the supply of bank reserves. Financial conditions were thus “eased,” not generally, but for particular institutions and their creditors. For the rest, credit was actually tightened. Because it serves to redistribute credit rather than to alter its overall availability, sterilized lending is properly regarded, as Marvin Goodfriend insists, as an exercise in fiscal policy rather than one in monetary policy in the strict sense of the term. The principle beneficiaries of this fiscal policy were the creditors of the aided institutions, while the losers were those prospective borrowers who were denied credit because the Fed had directed the reserves that might have supported lending to them elsewhere.

Between December 2007 and September 2008, the Fed sold over $300 billion in Treasury securities, withdrawing a like amount of reserves from the banking system, or just enough to make up for reserves it created through its emergency lending, chiefly through its Term Auction Facility. Bank lending suffered, because available reserves, instead of being augmented to accommodate the increased demand for liquidity that normally accompanied worsening economic conditions, were instead withdrawn from relatively well-capitalized institutions while being supplied to ones that were more likely to be capital-constrained.

By mid 2008, commercial bank loans and leases had declined to one-tenth their value at the time of the BNP-Paribas scare:

The reduced lending contributed to an equally precipitous decline in overall spending, as measured by nominal GDP:

What was the FOMC thinking? It isn’t the case that it was blind to what was happening to bank lending, or to the fact that the economy was contracting. “In a particularly worrisome development,” Bernanke writes concerning the situation as of August, 2008,

our quarterly survey of bank loan officers had revealed that banks were tightening the terms of their loans, especially loans to households, very sharply. The staff maintained its view, first laid out in April, that the economy was either in or would soon enter recession (p. 238).

In fact, as the NBER subsequently determined, the Great Recession began back in December 2007. Yet even with the benefit of hindsight Bernanke insists that sterilization was called for, because it alone allowed the Fed “to make loans as needed while keeping short-term interest rates where we wanted them” (ibid.). In particular, the Fed wanted to keep the federal funds rate at 2 percent, where it had been since April.

But why 2 percent, rather than 1 percent, or (for that matter) zero percent? According to Bernanke, the Fed determined to keep its rate target unchanged owing to concerns about inflation. In early August the Fed’s economists were predicting a core CPI inflation rate of 2.5 percent (which was also the rate over the course of the proceeding year) — high enough to cause one FOMC hawk, Richard Fisher, to actually favor raising the federal funds target rate. According to Bernanke, the FOMC

could not completely dismiss inflation concerns. Oil prices had fallen to $120 per barrel from their record high of $145 in July. However, staff economists still saw inflation running at an uncomfortable 3-1/2 percent in the second half of the year. Even excluding volatile food and energy prices, the staff expected inflation to pick up around 2-1/2 percent, more than most FOMC members thought was acceptable (p. 238).

In retrospect it is all too clear that the hawks were mistaken, and that the FOMC ought to have paid less attention to inflation (and to headline inflation especially), and more attention to NGDP and other measures of total spending. Scott Sumner and other Market Monetarists have harped on this for some time, so I won’t bother to repeat their arguments.

But there’s a more fundamental point I think worth emphasizing, which is that conceiving of monetary stability as a matter of stability of total spending, or aggregate demand, or NGDP — call it whatever you like — makes nonsense of any supposed “conflict” between maintaining an appropriate monetary policy stance (“setting short-term interest rates”) and keeping the financial system liquid (“eas[ing] financial conditions”), for the connection between a sufficiently liquid financial system and a stable flow of spending is (or ought to be) obvious in a way that the connection between a sufficiently liquid financial system and, say, a stable rate of inflation, is not. Had the Fed acted to preserve overall liquidity in the financial system, instead of letting would-be borrowers go begging for the sake of bailing-out troubled firms, overall spending might never have collapsed.

Please do not misunderstand me: I am not claiming that the Great Recession was entirely due to the Fed’s failure to maintain a steady flow of overall spending during 2008. I am not pretending that by doing so it could somehow have erased all the losses and prevented all the failures connected to the subprime bust, let alone prevented the bust itself. Nor do I mean to deny that easy money contributed to the boom that led to the bust. I am saying that, whatever part the Fed played in the boom, it also deepened the bust by keeping money excessively tight throughout much of 2008. There is no economic law that says that central banks must err only on the side of loose money, or only on the side of tight money. They can, and do, err both ways.

Just as a rising tide lifts all boats, a collapse in aggregate spending depresses all markets, including the market for overnight funds. The collapse was therefore bound eventually to undermine the Fed’s 2 percent funds target, and (as the chart below suggests) would have done so even if the Fed had continued to sterilize its emergency lending. The irony of this is that, by attempting — by hook or by crook — to hold the federal funds rate at 2 percent, the FOMC, far from succeeding in keeping interest rates a safe distance from their zero lower bound, propelled them in that direction. As any fan of Knut Wicksell will tell you, this outcome was, according to that great economist, inevitable once the “natural” funds rate fell below the Fed’s target.

With its September 2008 rescue of AIG, the Fed exhausted its capacity to sterilize its emergency loans. Yet instead of giving up its goal of keeping the fed funds rate pegged at 2 percent, and allowing its emergency asset acquisitions to assist a revival of bank lending in what was by then a downward-spiraling economy, the Fed remained determined to keep a lid on credit. It found a new means for doing so in the permission Congress had given it two years earlier, for reasons quite unrelated to the crisis, to pay banks interest on their excess reserves. I plan to discuss the consequences of that fateful discovery in another post.

______________

P.S.: In a post he published yesterday, David Beckworth offers some further evidence of the Fed’s having engaged in what he calls “passive tightening.”

[Cross-posted from Alt-m.org]

The federal corruption trial of former New York Assembly Speaker Sheldon Silver (D-Manhattan) has concluded with a conviction on all counts, despite his lawyers’ interesting argument that trading favors — in this case, funneling state grant money to a doctor’s clinic in exchange for highly lucrative asbestos-claim referrals to Silver’s law firm — is just the way everyone does politics in New York. It’s a huge win for Preet Bharara, who holds Rudy Giuliani’s old job as chief federal prosecutor in Manhattan — often seen as the only jobholder capable of cleaning up New York politics, because all the relevant actors within the state government itself are too compromised one way or another.

Ward heelers and frank rogues are common enough in Northeastern politics, but Silver always presented himself as something else, the voice of conscience speaking for every kind of progressive movement in New York. He had won the National Conference of State Legislatures’ “William M. Bulger Excellence in State Leadership Award,” delightfully named after the notorious boss of Massachusetts politics. Silver had the power, but he also had the pretensions.

As John Podhoretz writes in the New York Post, “That Silver was (to use a Yiddish term for thief) a goniff was a universally suspected fact even back in the late 1990s.” The Assembly boss was also for many years one of the fabled “three men in a room” in Albany — the governor and senate majority leader being the others — who decide important questions in privately cut deals. It happens that another of the three men in that room — Sen. Majority Leader Dean Skelos (R-Long Island) — is in the midst of his own trial on corruption charges.

So does this mean better days ahead for New York, a terribly misgoverned state? As one who has been writing about New York politics since way back, I can’t bring myself to be too optimistic.

I got interested in Silver originally because of his distinctive role as protector of New York’s trial lawyers and their various schemes for using liability law to keep up a steady flow of redistribution through the court system. Most of these schemes raise the cost of living and doing business in New York, such as the state’s unusual rule which used to expose car-lease providers to unlimited liability for crashes in leased cars, which drove up the price of a car lease for many New York consumers by $600. The state’s unique “scaffold law,” which makes business 100% liable for many on-the-job falls even if caused primarily by others’ negligence, has been estimated to drive up the cost of the Tappan Zee Bridge reconstruction alone by hundreds of millions of dollars. For the past decade Silver has been associated with a large mass tort firm (not charged with wrongdoing in this case) which has benefited from many official programs and policies, from the liberal stance of the New York judiciary on asbestos litigation, to its role in Sept. 11 claims, to Medicaid recoupment actions.

With Silver gone, there might be movement on a few issues like this. But legal policy was only one of the many pots in which Silver kept his fingers, as Steven Malanga and Seth Barron detail in separate articles at City Journal. New York sluices huge amounts of money in its gigantic social services apparatus through non-profits, and friends of Sheldon were there to profit. Real estate development in New York is subject to famously convoluted restrictions, and huge sums are at stake in its rent control and rent stabilization system. Again and again, Silver was there to broker deals for his friends behind the scenes.

This particular wheeler-dealer may be off the scene for good, pending appeal, but it is the overreach of Empire State government that made his career possible. So long as New York pursues failed policies like rent control, it will open huge leeway for hidden favoritism. And then, sure as day, in will move the Sheldon Silver types.

This week’s Congressional passage of the 1,301-page Fixing America’s Surface Transportation (FAST) Act represents, for the most part, a five-year extension of existing highway and transit programs with several steps backwards. Once a program that was entirely self-funded out of dedicated gasoline taxes and other highway user fees, over the past two-and-one-half decades the surface transportation programs has become increasingly dependent on deficit spending. The FAST Act does nothing to mitigate this, neither raising highway fees (which include taxes on Diesel fuel, large trucks, trailers, and truck tires) nor reducing expenditures.

If anything, deficit spending will increase under the FAST Act, which will spend $305 billion ($61 billion a year) over the next five years. Highway revenues, which were $39.4 billion in F.Y. 2015, are not likely to be much more than $40 million a year over the next five years, so the new law incurs deficits of about $20 billion a year. The law includes $70 billion in “offsets”–funding sources that could otherwise be applied to reducing some other deficit–which won’t be enough to keep the program going for the entire five years.

Aside from deficit spending, the greatest mischief in federal surface transportation programs come from competitive grants. When Congress created the Interstate Highway System in 1956, all federal money was distributed to the states using formulas. But in 1991 Congress created a number of competitive grant programs, supposedly so the money would be spent where it was most needed. In fact, research by the Cato Institute and Reason Foundation showed that Congress and the administration tended to spend the money politically, either in the districts represented by the most powerful members of Congress or where the administration thought it would get the greatest political return for its party.

Fortunately, the 2012 surface transportation law turned all but two major competitive grant programs into formula funds, thus taking the politics out of most transportation funding. This upset some members of Congress because they could no longer get credit for bringing pork home to their districts. So it is not surprising that the FAST Act goes backwards, putting more money into political grants than ever before.

First, the law creates a new fund of $4.5 billion over five years for “Nationally Significant Freight and Highway Projects.” This will lead state transportation departments to go out of their way to define projects as “freight” projects so that they can eligible for the fund. Some of the projects funded will no doubt be worthwhile, but experience with other competitive grant programs suggests that many will be frivolous or focused more on giving political leaders opportunities to cut ribbons rather than spend money effectively.

Second, the law converts part of the Bus & Bus Facilities Fund into a competitive grant program. The 2012 law had converted this to a formula fund, so the FAST Act is going backwards. The $300 million per year on competitive grants will encourage cities to build massive bus terminals that do little to increase mobility.

Third, the FAST Act increases funding for the New Starts transit capital grants program from just under $2 billion per year to $2.3 billion per year. This is probably the most pernicious grant program as it has given transit agencies incentives to propose the most expensive forms of transit–light rail, subways, and commuter trains–so they can get the most federal dollars.

Fourth, a subset of New Starts money is dedicated to “small starts,” including streetcars and bus-rapid transit projects. Streetcars may be the most ridiculous form of transit as they are slow, far more expensive than buses, and with far lower capacities: a single streetcar line can only move about a fifth as many people per hour as buses on city streets. Bus-rapid transit isn’t much better if it dedicates lanes to buses, as most such lanes will end up moving only a tiny fraction of the number of people who are moved by general purpose lanes. Despite these problems, the FAST Act increases federal funding for streetcar and other small starts projects from $75 million to $100 million per project.

Finally, the FAST Act broadens the use of Transportation Infrastructure Finance and Innovation Act (TIFIA) funds to include a much wider range of activities. TIFIA is supposed to be a competitive loan program, allowing state and local governments to borrow money to find high-priority projects and repay those funds at low interest rates out of local taxes and revenues. TIFIA has funded some important projects, but it has also helped fund many transportation boondoggles such as San Juan’s Tren Urbano, a 10-mile rail line that cost $2.3 billion and that carries well under half the number of projected riders. Such boondoggles will increase under the FAST Act, which allows the use of TIFIA funds for, among other things, transit-oriented real-estate developments that have nothing to do with improving mobility.

Although the FAST Act is a five-year bill, Congress will start to run out of money to pay for it in about three years. That means that, shortly before that time, you can expect the drumbeats to begin about the phony infrastructure crisis. In fact, it is federal funding itself that is responsible for the infrastruture problems we have because earmarks, competitive grant programs, and other political distributions of funds have focused on building new, often unnecessary, projects rather than maintaining the infrastructure we have.

Unfortunately, fiscal conservatives in Congress who understand this played virtually no role in the writing of the FAST Act. Now they have five years to put together an alternative program of funding transportation without deficits and figuring out a strategy for passing that program through Congress in 2020.

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