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In today’s Cato Online Forum essay, Per Altenberg from the Swedish Board of Trade makes an interesting political economy argument and a compelling practical case for why the Transatlantic Trade and Investment Partnership will be a tough slog. Altenberg argues that the old model for trade negotiations, premised as it is on mercantilist reciprocity, which leverages the interests of exporters against import-competing industries to secure domestic support for liberalization, is no longer functional in a world where trade is dominated by intermediate goods trade along global value chains. Today, openness to trade is seen as essential, and trade negotiations cover matters that probe deeply into domestic regulatory space. To sum up, Per writes:

Traditional 20th-century reciprocity in market access negotiations will thus not be an effective mechanism in the context of 21st-century deep integration negotiations such as TTIP. Instead, deep integration issues require new approaches to trade negotiations.

Per’s essay elaborates on those approaches.  Read it.  Provide feedback.  And please register for Cato’s TTIP conference on October 12. 

Is capitalism a coercive system that creates poverty, as a recent article in the Washington Post argued, or is it a system of voluntary exchange that has led to the greatest reduction in poverty the world has ever seen?

According to the article, “capitalism is a coercive economic system that creates persistent patterns of economic deprivation,” and should be altered through the introduction of a universal basic income. While a guaranteed income is an interesting policy proposal with pros and cons, the article’s claims that capitalism is coercive and creates economic deprivation are both unfounded.

First, let us consider whether capitalism is “coercive.” The author writes,

The only way to break the coercion at the core of the employment relationship is to give people the genuine ability to say no to their employers. And the only way to make that feasible is to guarantee that [they] have some way to support themselves whether they work or not.

Of course, people already possess the genuine ability to say no to their employers. In the United States alone, around 2 million people voluntarily leave their jobs every month—and that’s despite a lackluster economy. Employees in a capitalist system choose to engage in a relationship of mutually beneficial exchange. Employers recognize this and companies compete to become more attractive as workplaces. According to Gallup, the majority of Americans are satisfied with most aspects of their workplace—particularly with their job security, the flexibility of their schedules, and with their immediate supervisors.

Second, let us examine the article’s claim that capitalism creates economic deprivation. According to the author, capitalism harms both workers and those who cannot work. If that is so, can the author, or anyone else for that matter, point to a time in history when the vulnerable were better off? In many ways, today’s poor live better than the kings of yesteryear.

Over the last few decades, infant and child mortality have been drastically reduced, lifespans are at an all-time high, fewer people are undernourished, educational attainment is growing, gender inequality is decreasing, and access to technology is expanding.

Free enterprise and innovation have done more to uplift humanity from a state of universal poverty than any international aid program or welfare scheme. Capitalism, far from being a cause of poverty, is the reason that there is enough wealth today to even contemplate a proposal like a universal basic income.

The longest running show on Broadway is The Phantom of the Opera at 27 years. The longest running show on television is Meet the Press at 68 years. The longest running show of waste in Washington is cost overruns on Pentagon weapon systems. That show has been ongoing for more than 220 years.

As one of the first major procurements under the Constitution, the federal government bought six Navy frigates in 1794. The ships were projected to cost $688,889, but a myriad of problems pushed the ultimate cost up 70 percent to $1,176,721. Nicole Kaeding and I mention that project and many recent ones in our new study “Federal Government Cost Overruns.”

The Washington Post reports today on yet another troubled defense program:

As the Gerald R. Ford-class aircraft carrier enters the annals of troubled acquisition programs—billions over budget, years behind schedule—it follows a familiar script, becoming yet another example of how the Pentagon struggles with buying major weapons systems.

The Navy’s program has become “one of the most spectacular acquisition debacles in recent memory. And that is saying something,” McCain (R-Ariz.) said during a Senate hearing on the troubled program Thursday.

The program is now $6 billion over budget, according to a review by McCain’s staff. And while the lead ship is expected to be delivered next year, the second ship in the fleet is five years behind schedule and won’t be ready until 2024.

Like many other programs, the Ford-class carriers suffered from unrealistic cost estimates and overly optimistic timelines. And key Pentagon officials pushed the program forward even though key technologies hadn’t been fully tested, developed or designed, officials testified.

The problem with Pentagon procurement is not just that federal officials deceive taxpayers about the costs of projects, but also that many cancelled projects—which never should have been started—end up throwing billions of dollars down the drain.

A story yesterday in the Washington Post put a staggering number on that aspect of waste:

The Pentagon spent $46 billion on at least a dozen programs, including a new fleet of presidential helicopters, between 2001 and 2011 that never became operational, according to an analysis by the Center for Strategic and Budgetary Assessments.

The Post reports that there are serious efforts to reform procurement currently moving forward. After 220 years of waste, military purchasing is long overdue for an overhaul.

As economists have understood for more than half a century, government agencies charged with regulating industries are often subject to regulatory capture. Rather than protect consumers from bad actors in the industries they were created to oversee, regulators too often develop cozy relationships with industry leaders and work at their behest to advance their interests. In Free to Choose, Milton and Rose Friedman detailed a particularly egregious example: the Interstate Commerce Commission (ICC).

Established in 1887, the ICC’s mission was to regulate the powerful railroad industry, which critics accused of engaging in cartel-like price fixing and market sharing. Instead, the railroad industry took almost immediate control of the ICC. The ICC’s first commissioner, Thomas Cooley, was a lawyer who had long represented the railroads and, as the Friedmans explained, many of the agency’s the bureaucrats “were drawn from the railroad industry, their day-to-day business tended to be with railroad people, and their chief hope of a lucrative future was with railroads.” 

Rather than protect the consumers from the railroads, the ICC primarily protected the railroads. The ICC raised prices on consumers, shielded the railroads from state and local regulations, and even protected the railroads from outside competition. In the 1920s, the nascent trucking industry was emerging as the railroads’ most serious competitors. Like Uber against the taxi cartel, the lower-cost trucking industry benefited from the artificially high prices of the railroad cartel. And also like the taxi cartel, rather than seek deregulation, the railroad cartel turned to their friends in government to put the brakes on their “unregulated” competition. The bureaucrats all-too-happily complied. In 1933, the Motor Carrier Act gave the ICC authority over the trucking industry, which it used to limit the number of trucks that could operate on the roads and otherwise constrain the trucking industry. Fortunately, the railroad industry was significantly deregulated in the early 1980s and the ICC was abolished in 1995.

Milton Friedman - Do-Gooders And Special Interest

If regulatory capture is a common problem among the regulators of private industries, it can be even more acute when one government agency is overseeing other agencies. Bureaucrats at the various state departments of education tend to identify with the district schools they oversee and seek to protect them from outside competition. Lawmakers who support greater educational choice should keep this in mind when crafting choice policies. It is unwise to give an agency the power to regulate the primary competition to its core constituency.

Examples of state education agencies trying to undermine school choice initiatives abound. In Wisconsin, home to the nation’s first school voucher program, the Department of Public Instruction is currently subjecting private schools accepting vouchers to intrusive audits:

“I’ve been a CPA for 25 years and I’ve never seen anything like DPI’s approach to the audits of choice schools,” Noel Williams told Wisconsin Watchdog.

Williams, managing partner of Williams CPA in Milwaukee, has worked as an auditor for MPCP schools for 10 years. […]

“Although the law does allow DPI to follow-up with the auditor to clarify things that weren’t clear, in my opinion, DPI has grossly abused that power. Every one of the audit firms I’m acquainted with has gotten countless phone calls and emails on every audit report, requesting copies of data, clarification as to how they arrived at a conclusion.”

“It seems DPI’s intent has been to make it difficult and unpleasant to work with choice schools,” Williams said.

Indeed, the Wisconsin Institute for Law & Liberty and EAG News issued a report in 2013 detailing the Wisconsin DPI’s history of abuses against choice schools, including the use of audits to “harass and intimidate” them, withholding funding intended for private schools, forcing applicants to jump through hoops and provide lots of information and documentation not required by law, and more.

This summer, the Mississippi Department of Education initially limited the application period for the state’s new education savings account program to just 10 days in a move choice supporters called “unworkable” and “inconsistent with the law” which not only imposed no such application window, but actually stated that applications must be accepted on a rolling basis. The department eventually relented due to public outcry, but it’s unlikely to be the last of the DOE’s shenanigans.

Meanwhile, the New Hampshire Department of Education is trying to eliminate the town tuitioning program created by the village of Croydon (population 764). The village is too small to maintain its own school system so after 4th grade, it contracts with neighboring towns to provide schooling. In 2007, as its contract neared expiration, the village school board decided to pay for students to attend the district or private school of their family’s choice, similar to arrangements in nearby Vermont and Maine. However, the state DOE demanded that they cease and desist last fall. The town’s attorney, former NH supreme court justice Charles Douglas, argues that the state’s attempt to terminate the program is on shaky legal grounds. After nearly a year of negotiations, the state issued an ultimatum: terminate the program or the state will withhold its funding. The village is now trying to crowdfund a legal defense fund.

There are exceptions to the rule. The Florida Department of Education has a strong track record of supporting the state’s school choice programs. However, that could change as the political pendulum swings, as Indiana has demonstrated. And even where the top official at a state education agency support educational choice, there is no guarantee that the bureaucrats who preceded him or her will share that view or competently manage choice programs. Under John Huppenthal, Arizona’s DOE was ostensibly pro-school choice yet the agency repeatedly botched implementation of the state’s education savings account program.

Where some regulation or state program implementation is necessary, wise lawmakers have invested that authority in the state department of revenue, where the green-eyeshade bureaucrats are less likely to have an axe to grind against school choice than the state education establishment. Several states have already taken this approach, particularly for scholarship tax credit laws. Likewise, Nevada’s new education savings account is administered by the State Treasurer.

In “Fiddler on the Roof,” someone asks the town’s rabbi if there is a proper blessing for the tsar. “Of course!” replies the rabbi, “May G-d bless and keep the tsar… far away from us!” Educational choice policies should be similarly blessed.

Remember George Carlin’s hilarious skit about plastics? Here is the transcript:

“The planet … is a self-correcting system. The air and the water will recover, the earth will be renewed. And if it’s true that plastic is not degradable, well, the planet will simply incorporate plastic into a new paradigm: the earth plus plastic. The earth doesn’t share our prejudice toward plastic. Plastic came out of the earth. The earth probably sees plastic as just another one of its children. Could be the only reason the earth allowed us to be spawned from it in the first place. It wanted plastic for itself. Didn’t know how to make it. Needed us. Could be the answer to our age-old egocentric philosophical question, ‘Why are we here?’”

Not so fast! According to a new study published in Environmental Science and Technology by co-authors Professor Jun Yang and Yu Yang of Beihang University, and Stanford University engineer Wei-Min Wu, plastic is biodegradable.

“Plastic, long considered nonbiodegradable and one of the biggest contributors to global pollution, might have met its match: the small, brownish, squirmy mealworm. Researchers have learned that the mealworm can live on a diet of Styrofoam and other types of plastic. Inside the mealworm’s gut are microorganisms that are able to biodegrade polyethylene, a common form of plastic.”

Good news for the planet and for humanity.

Most of the controversy over government surveillance programs in the last few years has focused on fears of what the NSA or FBI might do with the personal data they’ve collected on Americans guilty of no crime. But what if you’ve applied for a federal job? Surely that information would not be misused or improperly accessed, particularly since it is protected by the Privacy Act?

That’s probably what now-Congressman Jason Chaffetz (R-UT) thought when he applied for a job with the Secret Service in 2003. But as the chairman of the powerful House Committee on Oversight and Government Reform Committee, Chaffetz earned the hatred of many in the Secret Service for his investigations into the agency’s many recent blunders and scandals. Thanks to a Department of Homeland Security Inspector General investigation into the leak of Chaffetz’ 2003 Secret Service application, we now have an idea of how extensive the leak of his personal information was throughout the agency. As the IG noted:

We were unable to determine with certainty how many of those individuals in turn disclosed this information to others who did not have a need to know, who may have then told others. However, the disclosure was widespread, and recipients of the information likely numbered in the hundreds. Those agents we interviewed acknowledged freely sharing it with others in the Secret Service, often contemporaneously with accessing the information. One agent reported that by the end of the second day, he was sent on a protection assignment in New York City for the visit of the President of Afghanistan, and many of the approximately 70 agents at the protection briefing were talking about the issue. 

With one exception, the IG also found that senior civil servants in the Secret Service did nothing to stop the propogation of Chaffetz’ personal data:

We identified 18 supervisors at the GS-15 or Senior Executive Service level who appeared to have known or should have known, prior to the publication of the fact, that Chairman Chaffetz’ MCI record was being accessed. Yet, with a single exception, we found no evidence that any of these senior Secret Service managers attempted to inform the Director or higher levels of the supervisory chain, or to stop or remediate the activity. Furthermore, we found no evidence that a manager at any level issued written guidance for employees to discontinue accessing MCI for anything but official use. 

Chaffetz’ file was accessed at 29 different Secret Service facilities. None of the federal employees who did so had a legitimate reason to look at Chaffetz’ file. Assistant Director for Training Ed Lowry emailed a colleague stating “Some information he might find embarrassing needs to get out. Just to be fair.” While the IG investigators could not link Lowry to the leak of the Chaffetz file to the media, someone within the Secret Service clearly did so.

The leak of Chairman Chaffetz’ employment application was a clear attempt to intimidate or punish him for doing his job: overseeing the conduct of a federal agency under his committee’s jurisdiction. This incident comes just a year after revelations about the hacking by CIA employees of computers used by Senate Intelligence Committee staff investigating the CIA’s torture program. To date, there have been no prosecutions in either case or any attempts by Congress to use the impeachment mechanism to remove implicated federal officials. The lack of accountability in these episodes only invites further assaults on Congress’ status as an independent, co-equal branch of government.

Today, Nicholas Kristof of the NYT wrote an op-ed entitled “The Most Important Thing, and It’s Almost a Secret.” According to Kristof, “The most important thing going on in the world today is something we almost never cover: a rapid decline in poverty, illiteracy and disease.”

Kristof makes a powerful case for the improving state of humanity and rightly bemoans the fact that the media all too often focus on war, hunger and despair. And that gives most readers the wrong impression that the world is falling apart.

But, where did all the progress that Kristof talks about come from?

The Homo sapiens has been on this earth for 200,000 years. For most of that time, we lived in ignorance, poverty and misery. What has changed? Reading the NYT, the reader is left with the impression that “good stuff,” like manna from heaven, suddenly was conjured up out of thin air.

Not so. The key to the improvements in the lives of ordinary people over the last 200 years were industrialization and trade, which generated historically unprecedented rates of growth. And the importance of growth cannot be overemphasized. There is not a single example of a country emerging from widespread poverty without sustained economic growth. As University of Oxford Professor Paul Collier writes, “Growth is not a cure-all, but lack of growth is a kill-all.”

Don’t let the headlines fool you. Explore the data for yourself.

In today’s Cato Online Forum essay, Judy Dempsey of Carnegie Europe argues that the geopolitical and security implications of TTIP are immense, and that the EU and its member states need to wake up, smell the coffee, and acknowledge reality. This is the third essay focused on the geopolitical implications of the TTIP published in conjunction with the Cato Institute conference taking place October 12.  Previous essays – to compare and contrast – were written by Phil Levy and Peter Rashish

Read them. Provide feedback.  And please register to attend the conference.

Eight years ago, I argued that San Jose’s Valley Transportation Authority was the nation’s worst managed transit agency, a title endorsed by San Jose Mercury writer Mike Rosenberg and transit expert Tom Rubin.

However, since then it appears that the Washington Metropolitan Area Transit Authority (WMATA or just Metro) has managed to capture this coveted title away from San Jose’s VTA. Here are just a few of Metro’s recent problems:

  1. Metro’s numerous service problems include a derailment in August that resulted from a flaw in the rails that Metro had detected weeks previously but failed to fix;
  2. Metro spent hundreds of millions of dollars on a new fare system that it now expects to scrap for lack of interest on the part of transit riders;
  3. One of Metro’s power transformers near the Stadium/Armory station recently caught fire and was damaged so badly that Metro expects to have most trains simply skip that station stop for the next several weeks to months;
  4. Metro’s fleet of serviceable cars has run so low that it rarely operates the eight-car trains for which the system was designed even during rush hours when all the cars are packed full;
  5. WMATA’s most recent general manager, Richard Sarles, retired last January and the agency still hasn’t found a replacement, largely due to its own ineptitude;
  6. Riders are so disgusted with the system that both bus and rail ridership declined in 2014 according to the American Public Transportation Association’s ridership report;
  7. Metro was so unsafe in 2012 that Congress gave the Federal Transit Administration extra authority to oversee its operations;
  8. That hasn’t fixed the problems, so now the National Transportation Safety Board (NTSB) wants Congress to transfer oversight to the Federal Railroad Administration, which supposedly has stricter rules.

A complete listing of Metro’s problems could fill a book (and in fact have already done so). The “solutions” implemented so far have been ludicrous. That idea that giving FTA safety oversight over WMATA would solve any problems relies on the fantasy that top-down bureaucracy works better at the federal level than the regional level. Meanwhile, NTSB’s proposal to transfer authority to the Federal Railroad Administration is more rearranging the deck chairs on a sinking ship than providing any real fix.

WMATA’s fundamental problem is that it isn’t truly accountable to anyone, and particularly not to the people who ride its buses and trains. It gets away with a safety record that includes 18 deaths, mostly in the last six years, and a reliability record that includes numerous shut-downs and delays because it isn’t answerable to anyone. Most people think the only fix is to reward Metro for its failures by giving it more money. But that won’t solve the problem either because it doesn’t address the underlying cause, which is lack of accountability.

The best way to influence a bureaucracy is to influence its budget. WMATA knows that the worse it manages its system, the bigger the budget it will get to fix the problems. A system dependent on user fees works just the opposite: the better the system is managed, the more fees it collects.

WMATA’s user fees cover a higher share of its costs than most transit agencies, but still well under 50 percent. Local governments fill in the gap for operating costs while Congress funds capital improvements such as the system-draining Silver Line, but no one is funding all of the system’s maintenance needs, so it is slowly grinding to a halt. The best way to solve Metro’s problems, and those of the transit industry in general, is to fund transit out of user fees, not tax dollars.

While the hypothesis that tropical cyclones will become both more frequent and more intense as planetary temperatures rise has long been debated, real-world evidence has consistently refuted it (see, for example, the many reviews of this subject posted under the heading of Hurricanes at the CO2 Science website). The latest example is the work of Girishkumar et al. (2015), who examined over five decades of tropical cyclone (TC) data from the Bay of Bengal (BoB) in the Indian Ocean. Specifically, the authors “investigated how the relationship between ENSO and TCs activity in the BoB during October–December varies on decadal time scale with respect to PDO.”

Both ENSO (El Niño Southern Oscillation) and the PDO (Pacific Decadal Oscillation) are dominant modes of climate that operate on interannual and decadal time scales, respectively, and each has been shown to impact climate locally, remotely, and globally. The warm phase of ENSO (El Niño), in particular, has been shown to elevate global temperatures up to several tenths of a degree Celsius. Such warming provides a natural laboratory for evaluating model-based projections of CO2-induced global warming, which makes the work of Girishkumar et al. all the more intriguing, as the period of their analysis (1950-2006) allowed them to study the relationship between TCs across several ENSO cycles and one full iteration of the PDO, a cold phase between 1950 and 1974 and a warm phase between 1975 and 2006.

In discussing their findings, Girishkumar et al. report there was a statistically significant difference in both the total number of TCs (maximum wind speed of 34 knot or more) and intense TCs (maximum wind speed of 64 knot or more) between El Niño and La Niña years when the PDO was in the warm phase (see figure below). More specifically, the average number of total October-December TCs forming in the BoB during the eleven colder La Niña years of the PDO warm phase was 2.62 per season, whereas during the ten warmer El Niño years it was only 1.6. Similarly, but more strikingly, the number of intense TCs forming during La Niña amounted to 1.4 per season during the PDO warm phase, whereas it was a paltry 0.1 per season in El Niño years. In contrast, during the cold phase of the PDO, the authors report “the differences in the formation of total number of TCs and intense TCs between La Niña and El Niño years are not significant.” As for why these several differences occurred, Girishkumar et al. state it is due to a significant enhancement of both low level cyclonic spin and mid-troposphere humidity that occurs during La Niña years, as opposed to El Niño years, when the PDO is in the warm phase.

October–December total and intense tropical cyclones in the BoB during El Niño and La Niña years under the warm phase of the PDO.

In conclusion, the results of Girishkumar et al.’s do not support the hypothesis that warmer global temperatures will enhance TC activity. If anything, an opposite outcome is suggested, one in which global warming will lead to fewer total numbers of TCs and fewer intense TCs. That should be good news for the millions of inhabitants living within the hurricane-prone BoB.


Girishkumar, M.S., Thanga Prakash, V.P. and Ravichandran, M. 2015. Influence of Pacific Decadal Oscillation on the relationship between ENSO and tropical cyclone activity in the Bay of Bengal during October–December. Climate Dynamics 44: 3469-3479.

This week, the Obama administration and Congress continued their public duel over whether the U.S. government is doing enough to “counter violent extremism” (CVE). The White House press release on the “Leader’s Summit to Counter ISIL and Violent Extremism” lauded the administration’s efforts to prevent the radicalization of Muslim-American youth at the hands of ISIS. A 66-page report released by the House Homeland Security Committee (HSC) condemned the administration’s actions as inadequate on multiple levels. Both documents avoided a re-airing of unpleasant truths about why ISIS has managed to grow regionally and even find a tiny number of would-be fellow travelers here.

The first unpleasant truth is that by invading Iraq in 2003, the United States helped to give new life to Salafist-oriented groups like al Qaeda. Indeed, there was no AQ element in Iraq until after the U.S. invasion. The same was true in Libya until the ill-fated U.S.-sponsored toppling of the Qaddafi regime in 2011. Neither the administration’s press release nor the HSC report acknowledged those facts.

Mindless American interventionism has been one of the greatest recruiting tools for Salafist groups like ISIS.

Indeed, every Western hostage killed by ISIS was wearing an orange-colored prison jump suit-like garment, just like the ones worn by Iraqi prisoners tortured by U.S. forces at Abu Ghraib prison or those held still at Guantanamo. Neither President Obama nor the authors of the HSC report can bring themselves to admit that our own actions in the Middle East and Southwest Asia have helped to fuel the very terrorist violence and domestic recruiting efforts both decried this week.

The second unpleasant truth dodged by the White House and the HSC is that all the mass surveillance programs initiated in the post-9/11 era have failed to detect a string of real plots or actual attacks in advance. Yet the HSC report calls for a doubling-down on federal support for state-level intelligence “fusion centers,” none of which have uncovered actual terrorist plots while targeting civil liberties groups that question their utility and the constitutionality of their operational methods. 

A third unpleasant truth avoided by the HSC and the Obama administration is that CVE is not an “equal opportunity” program aimed at all kinds of violent extremists. The federal CVE focus is squarely on Arab- and Muslim-Americans, even though right-wing American political extremists have killed almost twice as many U.S. persons in the post-9/11 era as have American Salafist-oriented terrorists.

The taxpayer-funded CVE program is little more than a rhetorically dressed up race-and-religion-profiling counterterrorism campaign. That it is failing should surprise none of us.

Two grassroots groups opposed to existing U.S. government surveillance policies yesterday launched a new platform aimed at the legislative branch:

A project of Restore The Fourth and Fight for the Future, the website rates House and Senate members on the basis of their votes on surveillance-related legislation since 2012. Those who have voted against continuation of the PATRIOT Act or sponsored legislation to repeal it are deemed to be part of “Team Internet”; those who have championed a continuation of the status quo on surveillance are dubbed “Team Surveillance.” 

Restore The Fourth’s press release provides further details:

The scoreboard builds off a similar tool released last year by a coalition of privacy advocates, adding data from the current Congress, including the PATRIOT Act renewal fight, the USA FREEDOM Act of 2015 and other relevant legislation. 

“We wanted to develop something simple and easy that would allow users to quickly see which politicians oppose mass surveillance, and who’s working to expand the surveillance state” says Alex Marthews, national chair of Restore The Fourth.

At the moment, it is unclear whether those behind will expand the project to include ratings on presidential candidates. Thus far, government surveillance has not been a top-tier issue in any of the presidential debates and is rarely mentioned by the candidates on the campaign trail.

Cato Institute adjunct scholar Eugene Gholz has been awarded the 2015 Fiona McGillivray award for his paper, “Assessing the ‘Threat’ of International Tension to the U.S. Economy.” Chosen by the Political Economy section of the American Political Science Association, the award is given for the best paper in Political Economy presented at the previous year’s APSA Annual Meeting.

In the paper, which is featured in A Dangerous World? Threat Perception and U.S. National Security, a book that I co-edited with John Mueller, Gholz concludes that the conventional wisdom regarding the economic threat international tension poses to neutral states is “often exaggerated.”

President Obama (like other political leaders before him) is wrong about the economic consequences of foreign tension for the United States, as are most of the academics involved in grand strategy debates.

The bottom line is that it is rarely, if ever, worth spending American resources to prevent foreign instability in the hope of protecting American prosperity, even assuming that such spending effectively tamps down tension.

Gholz, an associate professor at the LBJ School of Public Affairs at the University of Texas at Austin, argues that neutral states can sometimes actually benefit economically from foreign tension and even war:

governments in wartime transfer resources from normal production into the war effort, which means that the belligerents’ domestic economy produces less of value for nonmilitary consumers, fewer capital goods to prepare for future domestic production, and fewer export products.

The result is a near-term gap between demand for goods and services and domestic supply—a gap that is typically filled by imports from international markets.

Not every foreign country is well positioned to take advantage of the mobilization-induced consumption binge, but, on net, because belligerent (or scared) economies increase their overall consumption, neutral countries enjoy an economic benefit.

The paper is not a brief for a U.S. policy of instigating foreign conflict, of course: we all recoil from the horrors of war, and any economic benefit that the United States might gain from foreign tension would be relatively small. But the current U.S. strategy’s emphasis on military activism and forward presence is built on the assumption that scaling back U.S. military commitments would hurt the American economy, and that assumption is not justified. There is no reason for the United States to pay direct costs – the costs of our forward military strategy – for a phantom economic benefit.

When presenting the award to Gholz, Professor Lloyd Gruber from the London School of Economics and Political Science, chair of the award committee, lauded the “well-argued, punchy, and provocative” paper:

Using historical examples and reasoning by analogy—the paper likens the effects of the consumption booms that accompany war-fighting to the effects of the peacetime demand shock that would occur if millions of Chinese consumers were to decide to purchase new automobiles at the same time—Gholz makes a compelling case. …His paper is a consumption boom for the reader.

The book in which Gholz’s paper appears can be found here.

In today’s Cato Online Forum essay, the AFL-CIO’s Celeste Drake asserts that labor unions are not opposed to trade per se, but to neo-liberal trade deals that only benefit corporate entities. Drake argues that the Transatlantic Trade and Investment Partnership offers a good opportunity to change the nature of trade agreements to include progressive, standard-raising provisions that promote inclusive growth and shared prosperity. She concludes:

No one believes that righting the course of globalization and trade will be quick or easy.  But if the process is to begin, the TTIP, with informed, active and engaged civil society on both sides of the Atlantic, seems an opportune place to make a stand to change the rules: not to stop trade, but to use it as a tool to achieve a global economy that works for all.

Celeste’s essay is offered in conjunction with a Cato Institute conference on the TTIP taking place October 12.  Read it. Provide feedback.  And please register to attend the conference.

Last week, I wrote about a man who spent 6 months of his life and $1,500 to make a sandwich entirely from scratch, without the benefits of market exchange. The story illustrates how exchange and trade enrich our lives.

After making his incredibly costly sandwich, the same man embarked on an even costlier endeavor: making a suit from scratch. He picked cotton from a field, spun the cotton into thread, wove the thread into cloth, sheared wool from a sheep, harvested hemp, raised silkworms for their silk, killed a deer and tanned its hide to make leather. This process cost him 10 months of work and $4,000.

At the end of the video documenting how he made the “suit,” he stands in a bizarre-looking outfit with pants that end at his knees and says with regret, “OK, even with all that work, I might have run a little short on material.” Even after 10 months of intense labor, he was unable to come close to matching the quality and price of a product that he could procure through the free market. 

Thanks to market exchange and the division of labor, obtaining new clothes is simple and increasingly affordable. For example, increasing cotton yields have lowered the price of a staple fabric material.

The real price of a suit, measured in the number of hours it takes an average worker to earn enough to buy one, has declined: a two-piece wool suit cost the average American 12.4 fewer hours of work in 2012 than it did in 1956. (Check out Professor Don Boudreaux’s analysis for further details).

Critics sometimes decry increasingly affordable clothing, viewing falling prices as a sign of worker exploitation. In 1891, U.S. President Benjamin Harrison summed up this viewpoint when he said, “I pity the man who wants a coat so cheap that the man or woman who produces the cloth or shapes it into a garment will starve in the process.” However, as Johan Norberg pointed out yesterday in the U.K. Huffington Post, far from making people poorer, the garment industry has actually helped to decrease poverty. As he eloquently puts it:

Western activists rail against “sweatshops,” but among researchers and economists from left to right there is a consensus that these jobs are the stepping stones out of poverty.

Take a moment to consider what you are wearing right now, and how much work went into its creation, from the harvesting of its raw materials to the finishing touches. No one person created it—it is the fruit of a complex family tree of mutually beneficial human cooperation through the market.

The private meeting between President Obama and Russian President Vladimir Putin at the United National General Assembly session in New York apparently did not go well. The atmosphere was frosty, and both leaders also used their speeches before the UN body to take verbal shots at the other country. That outcome is most unfortunate, because Russia and the United States have important interests in common that are being damaged by ongoing bilateral tensions. In particular, both Moscow and Washington want to see ISIS decisively defeated and the overall threat of radical Islamic terrorism diminished.

Yet the Obama administration objects strongly to Russia’s growing political and military presence in Syria to support the beleaguered government of Bashar al-Assad against ISIS insurgents. Washington seems to resent any manifestation of Russian geopolitical influence outside the borders of the Russian Federation, even when it might indirectly benefit U.S. interests. Worse, U.S. leaders continue to cling to the fantasy that simultaneously seeking to defeat ISIS and Assad is a coherent policy. 

Washington’s clumsy handling of relations with Russia has brought the two countries dangerously close to a second cold war. As I discuss in a new article in Aspenia Online, both sides bear responsibility for the deterioration of the bilateral relationship, but the bulk of the blame lies at the doorstep of the United States. And trouble began long before Russia’s 2014 annexation of Crimea and support for separatists in eastern Ukraine triggered the most acute crisis.

Moscow deeply resented NATO’s decision to expand into Central and Eastern Europe, especially the addition of the Baltic republics in 2004. Russian policymakers believed, with good reason, that NATO enlargement violated pledges that the United States and its allies had made when the Kremlin acquiesced to a united Germany’s membership in NATO.

In addition to anger over NATO’s enlargement, Kremlin officials fumed that the Western powers were trampling on long-standing Russian interests in the Balkans. Russian leaders viewed NATO’s decision to prevent the partition of Bosnia, and especially the alliance’s 1999 war against Serbia to detach its restless province of Kosovo, as taking advantage of their country’s temporary economic and military weakness. The subsequent decision by the United States and its key EU allies to bypass the UN Security Council (and a certain Russian veto) to recognize an independent Kosovo in 2008 further inflamed Moscow’s anger.

Russia’s military action against Georgia on behalf of two secessionist regions later in 2008 sent a dual message to the West. One was that contrary to Washington’s insistence that the Kosovo episode was unique, the Kremlin viewed the situation in Georgia (and perhaps elsewhere) as sufficiently similar to apply the Kosovo precedent on outside military intervention. The second message was that the Western powers needed to abandon any desire for further NATO expansion, especially flirting with the notion of offering membership to Georgia and Ukraine.

Thus, the surge of tensions over the past 18 months (triggered by U.S. and European Union support for the ouster of Ukraine’s pro-Russian government) is not a sudden, unpredictable disruption. It is instead the culmination of trends that have been building for more than two decades.

Western opinion elites need to stop viewing Putin’s Russia as a reincarnation of Nazi Germany or the Soviet Union. In marked contrast to those malignantly expansionist powers, today’s Russia seems to have far more limited, largely defensive, ambitions—focused on maintaining a sphere of influence along the country’s borders. That is a far cry from the continental ambitions of Nazi Germany or the global ambitions of the Soviet Union.

Creating a more cooperative relationship requires a crucial change in U.S. policy. American officials regard the existence of spheres of influence as illegitimate in the twenty-first century international system. That hostility is unrealistic and myopic. Great powers understandably are more concerned about developments, particularly hostile developments, in their immediate neighborhoods. And contrary to recent, self-serving rhetoric, the United States is no exception.

A partnership with Moscow can help solve a number of problems in the international system, including North Korea’s worrisome nuclear program. Russia is also an important ally in the fight against radical Islamic terrorism in Syria, Iraq, and elsewhere. Conversely, if the West insists on treating Russia as an adversary, the Kremlin can create nasty difficulties in several arenas.

Putin’s Russia may not be the easiest great power to deal with, but the United States will assuredly not benefit from provoking a new cold war. Yet Washington’s current policy toward Moscow is simultaneously ineffectual and provocative. A course correction is badly needed, and President Obama missed an important opportunity to do so at his meeting with Putin in New York. 

Can it really be the case that a police officer violates the Fourth Amendment’s prohibition on using excessive force when he points a live firearm at a non-threatening individual, but not if he actually shoots and kills this person? That’s the argument being made in Stamps v. Town of Framingham, which is now before the U.S. Court of Appeals for the First Circuit.

During a military-style SWAT raid on the home of 68-year-old grandfather Eurie Stamps—to execute a drug-search warrant regarding his stepson’s alleged activities—Officer Paul Duncan pointed an assault rifle at Stamps with the safety disengaged and his finger on the trigger, even though Stamps lay on the floor with his hands up. Duncan now claims that he became immune from suit when he unintentionally fired the rifle and killed Stamps.

Under the doctrine of “qualified immunity,” government officials—including police officers—are immune from suit if their actions don’t violate a “clearly established” constitutional right. The crux of Duncan’s argument is that when his weapon discharged, he became immune from suit even if pointing an assault rifle at Stamps was an unconstitutional act by itself—because there’s no clearly established right against accidental death. This ridiculous argument was duly rejected by the lower court, because it’s both legally unsound and practically dangerous.

As a legal matter, Fourth Amendment protections against being unreasonably targeted with a firearm don’t evaporate when things turn out worse than an officer intended. Moreover, accidental discharge is hardly an unforeseeable consequence of pointing a loaded semi-automatic weapon—which could’ve been turned to full-auto here—during a tense paramilitary raid. Foreseeable accidents don’t remove liability from the harming actor; if anything, unintended consequences augment the scope of the Fourth Amendment violation rather than immunizing an officer from liability for the foreseeable result of his intentional actions. 

As a practical matter, granting immunity to SWAT officers whose unreasonable behavior causes deadly accidents would be absurd and would likely lead to more deadly accidents. The case thus raises pressing issues of police militarization in society. In briefing for a militarization case with nearly identical facts, Kane v. Lewis, Cato noted that “SWAT team deployments have increased more than 1,400% since the 1980s… .  SWAT teams and tactical units were originally created to address high-risk situations, such as terrorist attacks and hostage crises. Today, however, these extreme situations account for only a small fraction of SWAT deployments; they’re used primarily to serve low-level drug-search warrants.”

Accordingly, Cato has now filed a brief in the Stamps case, joining the ACLU, NAACP, National Bar Association, and LatinoJustice PRLDEF in requesting that the First Circuit affirm the lower court’s decision and posthumously vindicate Eurie Stamps’s Fourth Amendment rights. 

Ten years ago today, Judge John Roberts took the oath of office to become the 17th Chief Justice of the United States. Although we speak of “the Roberts Court”—its 10th term now behind it, its 5th under its current composition—it’s somewhat misleading to do so since it seems to imply that the chief justice has more power than in fact he has. To be sure, he leads the Court in a number of administrative respects, including the not inconsiderable power of assigning opinion writing when he’s in the majority in a given case. But at the end of the day, his vote counts for no more than that of any other justice.

Nevertheless, that’s the custom, so with those milestones before us, it’s worth asking how the Roberts Court is doing from a classical liberal perspective—liberty through limited constitutional government—the perspective we at Cato’s Center for Constitutional Studies have advanced since our inception over a quarter of a century ago. Given Roberts’ 2012 and 2015 opinions upholding Obamacare and his ringing dissent last June in the same-sex marriage case, one is tempted to answer “not well.” Those opinions speak volumes, about which I’ll say a bit more shortly. But on balance, it’s been a fairly good record. There are exceptions, for sure, and many cases are decided on technical grounds having little to do with substantive issues. But the Roberts Court has generally been supportive, for example, of property rights, religious liberty, free speech—especially political speech in the campaign finance context—and the Second Amendment, and it has mostly stood against affirmative action, executive branch overreach, and a number of other governmental intrusions.

What then of the exceptions—in particular, of Roberts’ own opinions in the two most important cases to come before the Court since he took over its helm, 2012’s NFIB v. Sebelius, upholding Obamacare’s individual mandate and thus the Act itself, and last June’s King v. Burwell, the statutory ruling that saved the Act from collapsing from its own unartful design? And what of the chief’s impassioned dissent a day later in Obergefell v. Hodges, the landmark same-sex marriage decision? It’s worth asking what those opinions say about Roberts’ very approach to the law and to the role of the Court in securing it.

I address those questions in some detail in the Foreword to the new Cato Supreme Court Review, the title of which, “Roberts’ Rules: Deference Trumps Law,” captures what I take to be the heart of the problem. Let me simply sketch the point here.

Recall the metaphor Roberts used during his Senate confirmation hearings: “Judges are like umpires. Umpires don’t make the rules; they apply them.” All well and good as a critique of the liberal judicial activism conservatives often complain about, often rightly. But it was followed immediately by talk of judicial “modesty” and “humility”—suggesting that Roberts might err in the opposite direction, that he might be too deferential to the political branches. More important, it doesn’t tell us anything about his conception of the Constitution.

When we read those three unfortunate opinions, however, we see how it is that Roberts’ extraordinary concern to avoid overriding the political branches trumps an accurate reading of the law. In NFIB, for example, he upheld the Affordable Care Act on the ground that the individual mandate could be read simply as a tax on those who chose not to buy insurance—even though he never said what kind of a tax it was, much less whether the tax was constitutionally cognizable.

In King, he dismissed as “ambiguous” what he himself said was “the most natural reading” of the ACA’s text, which authorized tax credits only for those who purchased insurance through “an Exchange established by the State,” ruling instead that that text could also be read as authorizing subsidies for those who purchased insurance through an exchange established by the federal government, thus saving the Act a second time by allowing subsidies in the 34 states that had declined to establish exchanges.

And in his lengthy dissent in Obergefell, Roberts offered perhaps his clearest statement to date of his understanding of the Constitution and the Court’s role in checking state actions that might violate rights or deny equal protection of the laws. In a nutshell, as with so many conservatives, it was clear from the start that he hasn’t yet come to grips with the full scope of the changes the Fourteenth Amendment brought to America’s federalism, which infused in the Constitution at last the classical liberal vision of the Founders that slavery precluded their accomplishing originally. Instead, like his fellow conservatives in this case, each of whom wrote an opinion, Roberts struggled within the deeply flawed post-New Deal methodology Progressivism set in motion, offering up an analysis that was far removed from the nation’s First Principles. His vision, like Robert Bork’s before him, is of a nation in which majorities are entitled to rule in wide areas simply because they are majorities, while in some areas minorities are entitled to be free from such rule. That gets Madison’s Constitution exactly backwards. Madison stood for liberty first, as our natural right, limited majoritarian democracy second, as a means toward securing that liberty.

Here too, then, from a mistaken inversion of our moral and political order, coupled with an understandable but inordinate fear of judicial activism, Roberts was led to defer to the states that had denied same-sex couples the equal protection of the laws. Judicial “modesty” became a cover for judicial abdication. That will not change until a more accurate understanding of the Constitution itself comes into view. Again, see that Foreword for details.

Presidents Putin and Obama presented two radically different worldviews at the UN yesterday morning, but both obliquely described the other as the key cause of global unrest. Putin took aim at the United States, implying that the Arab Spring was orchestrated by the United States and that sanctions on Russia are undermining global trade, while President Obama called for a return to the rule of law, and lambasted human rights violators. These disagreements reportedly carried on into the private meeting held by both leaders last night on Syria and Ukraine. 

But the root of the disagreement on Syria isn’t differing objectives: both Russia and the United States want to see ISIS contained and degraded, and an end brought to the terrible conflict in Syria and Iraq. The difference lies in the means both sides want to use to achieve this objective. The Russians want to protect the sovereignty and power of the Assad regime, while U.S. leaders insist that Assad must go, to be replaced with a government which includes representation from the Syrian opposition.

Given this agreement on ends - if not on means - it’s in the interest of both sides to continue to discuss Syria to see if common ground can be found. And Russian involvement in Syria is not necessarily a bad thing for the United States for a couple of reasons. Firstly, Russian involvement against ISIS could actually be more effective than U.S. involvement, if only because the Russians have a reliable allied military on the ground. Secondly, violence has actually dropped in Eastern Ukraine, as Russia shifts its attention and military resources towards the Middle East.

Both sides have signaled the possibility of some diplomatic flexibility. Putin called in his speech for an anti-ISIS coalition similar to the one which defeated Nazi Germany. And in his press conference following last night’s meeting with President Obama, he said both that there was a great need for further U.S.-Russia bilateral cooperation, and that any solution in Syria must involve a political reform process (although he believes the Assad regime should be part of this process). For his part, President Obama did not call for the immediate overthrow of the Assad regime, instead calling for a ‘managed transition’ to create a more representative Syrian government.

None of this suggests that disagreements don’t exist on Syria; they are in fact numerous and challenging. Yet it is to be hoped that the United States and Russia will continue to talk about these issues. As one of my colleagues noted last week, a lack of general diplomacy with Russia is counterproductive and resolves no problems. In the case of Syria, cooperation between Russia and the United States is far more likely to yield a positive outcome than any other approach to the problem.



Russia’s push to support Assad in Syria and its agreement to share intelligence with Syria, Iran, and Iraq has evoked the predictable handwringing here in the United States. Some worry that Russian involvement will derail the U.S. fight against IS. Others worry that Russia’s engagement will weaken U.S. influence in the Middle East and further embolden Vladimir Putin in his various misadventures. Such concerns are misplaced. Even though Putin has no intention of helping the United States his maneuverings have in fact done just that. Rather than ramping up U.S. engagement to outdo the Russians, as hawks are calling for, Obama should instead take this opportunity to reassess and redirect U.S. policy.

Russian actions have improved Obama’s Middle East “strategy” in three ways.

First, Russian initiative in 2013 kept the United States from getting involved in Syria too early. As horrendous as the $500 million training initiative turned out to be, it was a drop in the bucket compared to what the United States would have spent by now had the United States engaged earlier and more aggressively. When Assad’s regime blew past Obama’s ill-advised “red line” on chemical weapons, it was Russia that came in to save the day, brokering an arrangement that led Syria to give up its chemical weapons. Had Obama instead launched a few meaningless missile strikes at the Assad regime the United States would have shouldered greater responsibility for the regime’s behavior. Both Republicans and liberal interventionists in his own party would have pushed Obama toward deeper and ultimately more costly intervention.

Second, Putin’s recent actions make clear that the United States does not have to carry the expanding burden of fighting IS alone. In the absence of any real partners on the ground and with no desire to go it alone, the United States has been reduced to half-measures in Syria. Had there ever been an identifiable group of moderate rebels then perhaps a U.S. training program would have made sense. Today, however, with IS pressing hard and moderates thin on the ground, such a strategy is clearly too little and too late. Without partners, the United States has no real ability to influence events on the ground. Airpower has many strengths, but even a much broader campaign of airstrikes could not win the day without the backing of U.S. ground troops. Russia is not the partner the United States would have chosen, of course, but the fact remains that Russia is willing and able to take the fight to IS in ways that benefit the United States.

Third, to the extent that Russian involvement replaces U.S. involvement, the United States will benefit from passing the role of “bullseye” to Russia. Fourteen years of military intervention, occupation, and aggressive counterterrorism has not produced a pro-U.S. coalition determined to combat IS but instead a widespread and deepening anti-Americanism. As the Arab Barometer reveals, robust majorities of many Arab publics believe that U.S. interference in the Middle East justifies attacks against the United States. Expanding the U.S. footprint in Syria and Iraq at this point will produce more unhappiness, more radicalism, and more anti-American violence.

Best of all, Russia has given Obama the opportunity to pivot away from the miscues, missteps, and misreads that have produced zero visible impact on IS and zero progress in resolving the mess in Syria or Iraq. Russian involvement essentially precludes increased U.S. military involvement and shifts the balance of power toward Assad. On the one hand this limits U.S. options and stymies Obama’s call for Assad to step down. At the same time, however, it also prevents Obama from doubling down on failed strategies to find and train non-existent moderates and precludes any notion of sending ground troops. This gives Obama the necessary breathing room to reconsider U.S. goals in Syria and to redirect U.S. strategy.

Some will argue that the price tag of Russian engagement is too high: Putin rising, Assad in power, U.S. influence on the wane in the Middle East. The truth, though, is that the United States has wielded unprecedented influence over the Middle East since 9/11 and has discovered that it is the price of influence that is too high. Through 2014 the United States had suffered almost 7,000 casualties and spent over $4.4 trillion on the war efforts in Afghanistan, Iraq, and Pakistan. For that unimaginable toll the United States has bought two broken nations, spurred the creation of IS, and ensured the growth of Iranian power. And as yet there is no end in sight. Vague concerns about our future ability to promote national interests in the Middle East pale in comparison to the certain costs of war. Given this, Obama’s best move today is to thank Putin and reconsider what sort of influence in the Middle East the U.S. truly needs and how to achieve it.