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Foreign policy didn’t get a lot of air time in last night’s GOP debate, which often seemed to focus primarily on Donald Trump and the fact that John Kasich’s dad was a mailman. The candidates appeared worryingly ill-prepared to discuss foreign policy issues, with confused and misleading statements, incorrect facts, and a few truly bizarre comments. 

There is a lot of great news coverage - see here or here for examples - highlighting these statements, from Jim Gilmore’s call for the U.S. to create a Middle Eastern NATO, to Ted Cruz’s decision to describe the opinions of the Chairman of the Joint Chiefs, Gen. Martin Dempsey, as nonsense. At least one candidate conflated Iran with ISIS. The first debate included a baffling discussion of ‘cyberwalls,’ a never-before heard term that seemed to encompass both the Great Firewall of China and the refusal of private companies like Google to hand over data to the U.S. government.  

The bigger problem with the debate, however, was the mass oversimplification of foreign policy. Only one candidate, Carly Fiorina, acknowledged that foreign policy can be complicated, a statement immediately undermined when she noted that some issues are black and white, and promised to tear up the Iran deal on her first day in office. Unfortunately, foreign affairs is actually complex. Take the Middle East, where the United States is involved in conflicts both in opposition to, and in alignment with Iranian proxies. Or our relationship with Russia, which isn’t limited to confrontation in Ukraine, but includes cooperation on the Iranian nuclear deal and Syrian issues. Debates, with their reliance on manufactured soundbites, aren’t the best place to delve into these complexities. But no candidate on the stage gave any indication of a willingness to engage with the complicated nuances of foreign policy. 

The debate also lacked regional balance, focusing almost entirely on the Middle East, Iran deal, and ISIS. These issues aren’t unimportant, but other major topics went unaddressed. Russia got limited talk time, while China - arguably America’s most important diplomatic relationship - wasn’t even discussed. Trade issues were glossed over, except Donald Trump’s facile assertions that he’ll help America “win” at trade. America’s relationship with Latin America, our fastest growing trade partner, came up only in the context of illegal immigration. 

By failing to address other regional or topical issues, the foreign policy debate focused on the immediate future, and didn’t address long-term strategic concerns. The next president needs to think not only about the issues in today’s headlines, but about how actions taken today will impact foreign affairs in the future. Indeed, one question - which asked candidates their plan to defeat ISIS in ninety days - showed an utter lack of awareness of America’s own recent history. After two decade-long insurgencies in Iraq and Afghanistan, the time commitment required to intervene in such conflicts shouldn’t be a surprise to anyone. 

The many gaffes and omissions in last night’s GOP debate highlighted how few of the candidates are genuinely prepared to address foreign affairs issues. There are many more primary debates to come, for both the Republican and Democratic Party. Hopefully future debates will feature not only candidates who are better-prepared on foreign policy issues, but also questions which allow them to address more than just the Middle East. 

In last night’s GOP presidential debate, Sen. Marco Rubio (R-FL) said in response to a question about the Common Core national curriculum standards that, sooner or later, the Feds would de facto require their use. If you know your federal education – or just Common Core – history, that’s awfully hard to dispute.

Said Rubio: “The Department of Education, like every federal agency, will never be satisfied. They will not stop with it being a suggestion. They will turn it into a mandate. In fact, what they will begin to say to local communities is: ‘You will not get federal money unless you do things the way we want you to do it.’”

That is absolutely what has happened with federal education policy. It started in the 1960s with a compensatory funding model intended primarily to send money to low-income districts, but over time more and more requirements were attached to the dough as it became increasingly clear the funding was doing little good. Starting in the 1988 reauthorization of the Elementary and Secondary Education Act (ESEA) we saw requirements that schools show some level of improvement for low-income kids, and those demands grew in subsequent reauthorizations to the point where No Child Left Behind (NCLB) said if states wanted some of the money that came from their taxpaying citizens to begin with, they had to have state standards, tests, and make annual progress toward 100 math and reading “proficiency,” to be achieved by 2014.

Predictably, instead of setting high proficiency bars that were tough to get over, states set them low enough, it seemed, for most kids to trip over them. That largely spurred the move to get all states onto “common” standards and tests, which ultimately became the Common Core and connected assessments. True, the Common Core was created by the National Governors Association (NGA) and Council of Chief State School Officers (CCSSO), but there’s no real question that the federal government was meant to drive adoption.  The NGA and CCSSO called for it in the 2008 report Benchmarking for Success, Core supporters worked with the Obama administration to have the Core de facto required for states to compete for a slice of $4 billion in Race to the Top ducats, and Core adoption was one of only two standards options to get a waiver from NCLB. Oh, and for good measure, the federal government selected and funded the consortia writing Core-aligned tests.

If what has actually happened isn’t enough to convince you of Rubio’s wisdom, what the Obama administration has asked for should be: that annual appropriations of federal education money be tied to adoption of, and performance on, “college- and career-ready” standards, and like under waivers, states could only use either the Core, or standards a state university system certified as acceptable. And really, if the premise is that states won’t hold themselves accountable for performance – and it is – what other entity than the federal government has the power to make them?

Of course, all the political force that has kept state standards and accountability largely toothless would be directed at Washington were the feds to take full control, so the control would be educationally impotent. But effective or not, it is clear that standards-and-testing logic demands federal force.

But isn’t Washington shrinking away from control? Isn’t the national mood strongly inclined to reduce DC’s power under NCLB, as reflected in the House and Senate bills to reauthorize the ESEA?

Thanks to a massive backlash by parents against the federally strong-armed Common Core and accompanying tests, and teacher opposition to tying test scores to evaluations, the current mood is indeed hostile to federal domination. But both ESEA reauthorization bills leave open potentially sizeable back doors for federal control, and when public anger eventually subsides, the more lasting impulse for politicians will be to “do something” when schools perform poorly. And “doing something” usually means more federal control, even if the signs are that it almost certainly won’t work.

Rubio is right to worry.

Last night many Cato scholars watched and live-tweeted the Republican presidential primary debates. Missed the conversation? Read our scholars’ statements below. 

“Unfortunately, neither the Fox questioners nor the candidates spent much time discussing how to limit government or expand freedom. There was too much focus on keeping immigrants out of America. Bush and Walker seemed calm and stable, and in the long run that may be what voters want. Christie and Paul both made their points strongly, including one epic confrontation, appealing to different parts of the electorate. Somebody should just set up the two of them to debate. The candidates kept talking about the ‘weak’ U.S. military. The United States spends more on the military than China, Russia, Great Britain, France, Japan, India, Saudi Arabia, Germany, Brazil, and the next 4 countries combined.” 

David Boaz, Executive Vice President of the Cato Institute 

“This was another disappointing night for those seeking a smaller, less costly, less intrusive government. Depending on the candidate, we heard calls for more spending, more domestic spying, more intervention overseas, and more control over people’s personal lives. Big-government conservatism is back with a vengeance.” 

Michael D. Tanner, Senior Fellow 

“A number of governors touted that they had balanced their state budgets. That’s no big deal because, unlike the federal government, every state is required to balance its budget every year. Fox News gave short-shrift to economic growth issues and cutting the federal budget, which are crucial issues for voters and for the future of the nation.”

Chris Edwards, Director of Tax Policy Studies at Cato and Editor of

“The federal government will spend almost $4 trillion this year, and more next year. Overall, the candidates failed to detail plans on how to overhaul the federal  budget and limit its growth. Eighty-five percent of federal spending growth over the next decade is due to Social Security, our major medical programs, and interest on the national debt. Refusing to propose reforms ignores this reality.” 

Nicole Kaeding, Budget Analyst 

“I was disappointed, but not surprised, by the tone of both debates, especially with respect to the size of the U.S. military, which remains the most dominant in the world by a very wide margin, and by the superficial and misleading portrayal of the nuclear deal with Iran. The GOP, with the possible exception of Sen. Paul, appears not to have learned the lessons of Iraq. Sen. Graham appears to have learned the least: he repeatedly called for sending U.S. troops back into Iraq. If the GOP continues to be associated with that disastrous war, the party’s nominee, no matter who that is, simply cannot be taken seriously on foreign policy.” 

Christopher A. Preble, Vice President for Defense and Foreign Policy Studies

“Tonight’s debate was disappointing on the foreign policy front for a couple of reasons. The debate was pretty narrowly focused on the Middle East, and only the second debate even touched on other foreign policy issues. It would have been nice to see debate on some of the other big strategic issues which the U.S. will face in the next decade: the pivot to Asia, how to handle a resurgent Russia or international trade issues, for example. Even on the Middle East, most candidates were also pretty lacking in substance, talking tough, but providing few concrete policy ideas. Hopefully future debates will see more substance and less grandstanding on foreign affairs issues.”

Emma Ashford, Visiting Research Fellow 

“Fixing the country’s dysfunctional education system is crucial, but thankfully it didn’t come up much in the debate. Why? Because the federal government has no constitutional authority to govern education, and it has a very poor track record when it’s been – increasingly – involved. When education did briefly come up, that the candidates who spoke went to pains to say it should not be at all federally controlled, that was a good thing. In keeping with the Constitution, they shouldn’t have said much more than that.” 

Neal McCluskey, Director of Cato’s Center for Educational Freedom 

“’Cross-examination is the greatest legal engine ever invented for the discovery of truth,’ a great legal scholar once wrote. Fox News proved it – and generated a superior, entertaining debate – by aiming genuinely hard, personalized questions at the Republican front-runners. We know more now about which candidates are heedless of liberty and the U.S. Constitution, ill-prepared or inconsistent. Would that the press were this tough on all candidates.” 

Walter Olson, Senior Fellow 

“The candidates agreed Obamacare has to go, yet they breathed not a word about what they would put in its place to make healthcare better, more affordable, and more secure. It’s just as well: some of them have endorsed ideas that are best described as ‘Obamacare lite.’ Fortunately, there is still time for candidates to stand out by endorsing health care reforms that work.”

Michael F. Cannon, Director of Health Policy Studies 

“Despite rapidly growing and bipartisan support for criminal justice reform, criminal justice issues received very little attention in this first week of debates and forums. If the GOP truly wants to expand its reach into younger and more diverse communities, the candidates must tackle important issues like drug prohibition, police misconduct, and overcriminalization. The limited government message rings hollow when it turns a blind eye to the criminal justice system, especially in light of so many high-profile cases of government misconduct.”

Adam Bates, Policy Analyst with Cato’s Project on Criminal Justice

“We heard multiple candidates endorse a return to torture, call for massive increases in defense spending that would rival the biggest budgets of the Cold War, and attack people who didn’t look or sound or think like them. Except for one candidate. Ohio Governor John Kasich seemed to be the only adult on stage. His answers were generally rational and coherent, whether that will matter in GOP primaries remains to be seen.” 

Patrick G. Eddington, Policy Analyst in Homeland Security and Civil Liberties

For half a century now, the “rules versus discretion” debate in monetary economics has focused on the so-called “time inconsistency” problem.  The problem is that, although a discretionary central bank might promise not to allow the inflation rate to rise above zero (or some other ideal value), the fact that an inflation “surprise” can boost employment and output in the short run will tempt it to break its promise.  Realizing this, market participants will anticipate higher inflation.  The long-run result is a higher inflation rate with no improvement in either employment or output.  By limiting the central bankers’ options, a monetary rule solves the time inconsistency problem.

An earlier rules-versus-discretion debate had taken place in the 1920s and 1930s.1  The later one, which was inspired by the stagflation of the 1970s, differed in that it was influenced by the New Classical revolution that was taking place around the same time.  Consequently, the later critics of monetary discretion, including Finn Kydland and Edward Prescott,  Guillermo Calvo, Benn McCallum, Robert Barro and David Gordon, and John Taylor,2 differed from their predecessors by building their arguments on the premise that central bankers were both well (if not quite perfectly) informed and well intentioned.  Discretion, according to them, leads to less than ideal outcomes not because central bankers are ignorant or misguided, but because of misaligned incentives.

Naturally, champions of discretionary monetary policy also regarded monetary policy makers as well-meaning and well-informed experts.  Their counterargument was simply that such experts could in principle out-perform any rule.  Well-trained monetary technocrats might, after all, resist the short-run temptation to take advantage of established inflation expectations by creating inflation surprises.

But just how likely is it that technocrats will behave well in practice?  Even such a technocratically-inclined proponent of discretion as Joseph Stiglitz recognizes that the “decisions made by the central bank are not just technical decisions; they involve trades-offs, judgments.. .”3  Will such “judgments” typically be wise ones?  Although the sub-discipline didn’t even exist when the rules-versus-discretion debate was revived in the 1970s, let alone when it was first aired in the 1920s, the findings of behavioral economists are the natural place to turn to for answers to this question.  At least some of those answers seem to decidedly favor the rules side of the rules-versus-discretion debate.

As Nobel winning economist and psychologist Daniel Kahneman has observed, experts suffer from all sorts of biases that result in bad decisions and outcomes.  Building upon the work of Paul Meehl,4 Kahneman argues that expert decisions can be inferior to simple algorithms (like a Taylor Rule) because experts “try to be clever, think outside the box, and consider complex combinations of features in making their predictions.”5

In the studies reviewed (and sometimes conducted by) Kahneman, experts are always looking for that one additional data point that suggests a different course of action.  Fed officials have behaved that way lately in repeatedly insisting that their decisions will be “data-dependent,” without actually saying what data they have in mind or how its components will be weighted.  Kahneman also notes that experts are often inconsistent, giving different answers to the same (or similar) question.  Here, too, Fed experts conform to the theory, thereby making it difficult if not impossible for market participants to grasp the direction of monetary policy.  Kahneman reaches  the “surprising” conclusion that “to maximize predictive accuracy, final decisions should be left to formulas, especially in low-validity environments.”6  With respect to monetary policy, that  conclusion would seem to favor a policy rule over discretion.

In research conducted with psychologist Gary Klein, Kahneman has also investigated the conditions that are or are not favorable to discretionary decision making.  Previous scholars had  found that firefighters often have surprisingly good intuition about such things as when the floor of a burning building is about to collapse.7  Kahneman and Klein find, however, that such expert skills must be built up over time.  Novice firefighters do not possess them in the way that veterans do.

Interestingly, Fed officials often liken themselves to “firefighters.”  If the analogy is a good one, and Kaheman and Klein are also correct, then having long (14 year) terms for Fed governors is a good idea.  Unfortunately, Fed governors seldom serve more than a modest fraction of their maximum terms.  As major economic crises and downturns happen only so often — every 13 years in case of U.S. crises, according to Reinhart and Rogoff8 — relatively few Fed governors ever experience more than one crisis, and most are unlikely to witness more than two cyclical turning points.  For a Fed staffed by such novices, the case for rules is especially strong.  Indeed, because monetary policy operates with “long and variable lags,” as Milton Friedman famously put it, even seasoned Fed governors cannot be counted on to employ discretion responsibly.

To summarize these implications of behavioral economics, experts can be expected to employ their discretion advantageously when 1) they operate in a regular, predictable environment, and 2) there is an opportunity for learning via repeated practice.  Neither of these conditions characterize monetary policy.  Behavioral economics has sometimes been presented as an avenue to justify government intervention to correct the failings of ordinary people.  But the same literature reminds us that even the most expert policymakers also suffer from a variety of biases.  Just as default rules may be useful in minimizing consumer errors, monetary rules can serve to minimize errors of monetary policy.


[1] For an overview of earlier debates see Robert Hetzel, “The Rules versus Discretion Debate Over Monetary Policy in the 1920s.” Federal Reserve Bank of Richmond Economic Review ( November 1985), p. 1-12 and George Tavlas, “In Old Chicago: Simons, Friedman and the Development of Monetary-Policy Rules.” Journal of Money, Credit and Banking 47(1) (January 2015), p. 99-121.

[2] Finn E. Kydland and Edward C. Prescott, “Rules rather than discretion:  The inconsistency of optimal plans,” Journal of Political Economy, 85(3) (June 1977), p. 473-490; Guillermo A. Calvo, “On the Time Consistency of Optimal Policy in a Monetary Economy,” Econometrica 46(6) (November 1978), p. 1411-1428; Bennett T. McCallum, “Monetarist Rules in the Light of Recent Experience,” American Economic Review 74(2) (May 1984), p. 388-91; Robert J. Barro and David B. Gordon, “Rules, Discretion, and Reputation in a Model of Monetary Policy,” Journal of Monetary Economics 12(1) (July 1983), p. 101-121; Robert J. Barro and David B. Gordon, “A Positive Theory of Monetary Policy in a Natural-Rate Model,” Journal of Political Economy 91(4) (August 1983), p. 589-610; and John B. Taylor, “What Would Nominal GNP Targeting Do to the Business Cycle?” Carnegie-Rochester Conference Series on Public Policy 22 (9) (January 1995), p. 61-84.

[3] Joseph Stiglitz. “Central Banking in a Democratic Society,” De Economist 146(2) (July 1998), p. 199-226.

[4] Paul E. Meehl, Clinical vs. Statistical Prediction: A Theoretical Analysis and a Review of the Evidence (University of Minnesota, 1954).

[5] Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus, and Giroux, 2011). Especially chapters 21 and 22.

The Republicans took the stage in their first presidential debate Thursday night. Of the 16 major candidates, eight have gubernatorial experience. I have written a number of times recently about the fiscal records of the candidates with gubernatorial experience. Their records are instructive. A governor who promises to cut federal spending is more believable if he held spending in check when he was governor.

As my blog post earlier in the week detailed, there are a number of ways to measure how and why state spending changes. Gubernatorial policies play a large role in influencing state general fund spending. Other factors, such as the state’s budget process, legislative policies, and federal mandates, can contribute to changes in spending, but as a state’s Chief Executive, governors have impact.

Using data from the National Association of State Budget Officers, I wanted to see just how much each governor increased spending on an annual basis. Analyzing the data on an annual basis allows us to control for the length of governor tenure. George Pataki was governor of New York for twelve years, while Scott Walker has been governor of Wisconsin for only four years. Comparing Pataki’s increase of 39 percent to Walker’s increase of 16 percent is unfair to Pataki.

The graph below shows the average annual increase in spending during each candidate’s time as governor. Jeb Bush has the highest spending with a 6.08 percent average annual increase. John Kasich is second. He increased spending by 4.95 percent. Rick Perry finishes third with an average annual increase of 4.01 percent. Bobby Jindal shows the most fiscal restraint. He cut spending by 1.76 percent a year on average.

But this comparison is somewhat biased because population grows at different rates in the states. As a state’s population grows, the demand for government services, such as schools and police protection, may increase by a related amount..

The graph below presents annual average spending growth on a per capita basis. The spending increases of Jeb Bush and Rick Perry now look much smaller. Jeb Bush’s increases are still above the average, but Rick Perry falls below it. Part of the reason that spending increased quickly under Bush and Perry is that their state populations were growing quickly. John Kasich’s increases, on the other hand, are an outlier. He increased spending faster on a per capita basis. This further confirms Kasich’s lack of fiscal restraint. Bobby Jindal actually cut spending on a per capita basis by an average of 2.41 percent a year.

During the debate, these presidential candidates tried to highlight their records as governor. Many factors impact state spending growth, but gubernatorial policies directly impact the amount a state spends. Comparing spending growth figures to peers allows us to determine which candidates are frugal and which are spendthrifts.

Occupational licensing needlessly regulates scores of workers in the United States. Indeed, despite years of criticisms from economists, the percentage of workers required to hold a license has risen substantially in recent years. The Cato Institute has been talking about the problem for years. But some of our readers might be surprised to see the latest critics: A recent White House report critiquing and evaluating  licensing requirements, Occupational Licensing: A Framework for Policymakers. We’re particularly pleased that the report cited both an essay in Cato’s monthly online magazine, Cato Unbound, and one of the entries in Cato’s online forum, “Reviving Economic Growth,” which will soon be published as an ebook.  

The White House report, which was prepared by the Department of the Treasury Office of Economic Policy, the Council of Economic Advisers, and the Department of Labor, documented the massive growth of licensing in the last few decades. Over a quarter of U.S. workers now need licenses to do their jobs, and the percent of workers who need state-issued licenses has increased five-fold since the 1950s. The report concluded that this can harm employment opportunities and inflate costs for consumers. It also disproportionately affects certain populations, including immigrants and anyone with a criminal history.

The report cited Mercatus Center scholars Tyler Cowen and Alex Tabarrok, who argued against the effectiveness of licensing in “The End of Asymmetric Information” for Cato Unbound. “Yelp, Angie’s List, and Amazon Reviews all make it easy for past buyers to report their observations on seller quality and for future buyers to observe a seller’s accumulated reputation,they wrote. Thus, they said, one of licensing’s supposed benefits, helping consumers identify quality work, is becoming obsolete.

A few pages later, the Framework for Policymakers cited Cato’s growth forum, where Dean Baker of the Center for Economic Policy Research made the case for freer trade for both pharmaceutical drugs and foreign-born physicians, who face high licensing barriers in the United States. Baker argued that lowering these barriers would improve access to services for middle- and low-income consumers.

Throughout the Framework, the authors also extensively referenced the work of Morris M. Kleiner, one of the premier critics of occupational licensing, whose work has been published in Cato’s Regulation magazine, and the work of the Institute for Justice.

The White House report nicely dovetails with a new study from Brink Lindsey, Cato’s vice president for research, which identifies occupational licensing reform as one of a few key issues with the potential to unite Americans across the political spectrum—whether progressive, conservative, or libertarian. While the White House report is by no means a coup, it may be a sign that critics of occupational licensing are finally gaining traction.  

I am not surprised that Bernie Sanders is opposed to open borders.  There is a long tradition of socialists, labor unions, and Marxists opposing open borders in the United States.  Many left-wing intellectuals oppose liberalized immigration, let alone open borders, because it will destroy political support for redistribution and state control of the economy – and they might be right

However, I was surprised by the poor arguments made by Richard Eskrow in defense of Sanders.  On how immigrants affect Americans, there is little difference between the expressed opinions of Senator Sanders and Senator Sessions (see here for a rebuttal I wrote to Senator Sessions, some of the following is borrowed from it).  Senator Sanders, at least, wants to legalize the unauthorized immigrants who are here and probably doesn’t want to seriously limit future immigration.

Below I will block quote Eskrow’s arguments and respond to each one.

“Like many libertarian ideas, ‘open borders’ is bold, has superficial intellectual appeal – and is incapable of withstanding thoughtful scrutiny. It would benefit the wealthy few at the expense of the many, here and abroad.”

One of the main criticisms of immigration by restrictionists is that poor immigrants gain far more than Americans do.  Harvard professor George Borjas’ famous paper on the wage effects of immigration found that Americans benefitted very slightly from it while almost all of the gains go toward the immigrants themselves.  Even excluding the economic benefits to the immigrants themselves, poor Americans just aren’t hurt by having more people here.  Borjas did find that immigrants decrease the wages of lower skilled Americans relative to higher skilled American, but his work is the most negative in the economics literature and should be taken with several big grains of salt.  In that paper, he holds the supply of capital as fixed – an assumption that may be fine for an academic publication but it is not useful for making an argument against immigration in the real world.  The stock of capital is dynamic and increases with the population. Ignoring that important effect would make any increase in population decrease wages.  It should further be noted that Borjas, like other economists, admits that immigration does help Americans more than it harms them, but with some distributional consequences.

Borjas’ research methods applied to different periods of time yields less negative results.  This recent paper borrows Borjas’ methods but includes the wage data up through 2010 instead of stopping at 2000.  It finds wage effects so small that they are statistically insignificant. That is an important rebuttal to Borjas’ findings and the serious claims that immigrant labor-market competition lowers the wages of native workers.

With the exception of the Borjas study, most of the modern research finds very small or positive wage effects from immigration through three different economic mechanisms.  The first is called the wage effect, which is that many immigrants are not substitutes for natives and so cannot displace them in the labor market.  Instead, the differences between immigrant and native workers are so fast that they are mostly complementary. 

The second is called scale effects, which is the idea that a bigger market, more workers, more consumers, and bigger firms allows for more specialization, division of labor, and greater demand.  These effects combine to push up wages.

The third effect that counteracts the fall in wages from an increase in the supply of workers relates to increases in total factor productivity from boosts in immigration.  With more immigrants, more knowledge, technology, and productive ways of organizing the economy are discovered.  The resulting increase in productivity absorbs the increase in the labor market.  For a detailed and technical summary of these and other studies, read this

These three main economic reactions prevent immigrants from lowering wages for Americans, or at least attenuate the decrease, and will not disappear if immigration was liberalized – even to the point of open borders.       

Economists Gianmarco Ottaviano and Giovanni Peri assume that capital adjusts in response to immigrant inflows, doing away with the more static assumptions in Borjas’ older work.  Ottaviano and Peri find that immigrants have a very small effect on the wages of native-born Americans without a high school degree (-0.1 percent to +0.6 percent) and an average positive effect on all native workers of about +0.6 percent.  The negative wage effects of new immigrants are concentrated on older immigrants.  Unsurprisingly, new immigrants compete with older immigrants who both share similar skills while native-born Americans benefit from a larger supply of lower-skilled workers.  Native born American workers with the least skill and experience are teenagers so we’d expect them to compete the most with immigrants – but we still see very little evidence of that

Peri and Chad Sparber elsewhere find that increases in lower-skilled immigration induce lower-skilled natives to specialize in jobs that require communication in English while the immigrants specialize in manual-labor intensive occupations.  Communication jobs pay more than manual-labor jobs. 

This complementary task specialization reduces the downward wage pressure because natives react by adapting and specializing in more highly paid occupations, not by dropping out of the job market. This effect decreases wage competition between lower-skilled natives and immigrants by around 75 percent.  Immigrants and natives sorting themselves into jobs by skill level explains how immigration can lower the wages in certain occupations but not lower the wages for native-born Americans. 

Peter Henry found that low-skilled immigrants to an area induced natives to improve their school performance so that they wouldn’t have to compete with lower skilled immigrants. In other words, immigrants push Americans up the skills ladder rather than into unemployment..

Liberal economist David Card wrote an excellent comment called “The Elusive Search for Negative Wage Impacts of Immigration” that eviscerates the fear of immigrants taking American jobs and lowering wages.  The wage ratio between high school and less than high school educated workers is very similar over time despite the large infusion of immigrant workers into the less than high school educated workers into the market. 

Furthermore, immigrants aren’t just workers but are also consumers.  Because immigrants buy things here, they increase the demand for goods and services produced by other workers which in turn boosts demand for workers.  This counteracts some or most of the supposed negative wage effects that would occur by just adding large amounts of workers and ignoring that they actually buy things.        

As for poor foreigners, it’s almost impossible to imagine how open borders could not vastly improve their quality of life.  The place premium, the higher wages an identical marginal worker can make in the United States as compared to their home countries, is enormous.  Vietnamese workers see their wages rise by 649 percent, Haitians by over 1000 percent, and Mexicans by about 253 percent.  Those gains are so dramatic because those workers are much more productive in the United States than in their home countries.  Looking at numerous estimates of how open borders would affect incomes by allowing people to move from countries where they are relatively unproductive to ones where they can be productive, economist Michael Clemens estimates a 50 to 150 percent increase in gross world product.  That estimate assumes an unrealistic and massive large scale movement of people in response to wage pressures but estimates 1/10 as large are still gigantic.  Hard to see how that won’t pull more poor people out of poverty than any other policy change.

“Bier claims that it is ‘patently untrue’ that an open borders policy ‘would make everybody in America poorer,’ and cites a study from the (Koch Brothers-funded) Cato Institute as evidence.  Unfortunately, that study based on a far lower rate of immigration than an open borders policy would produce, rendering his interpretation of it meaningless.”

Eskrow linked to two Cato publications.  The first is the Cato Journal edition where numerous professors contributed essays on the economic benefits of immigration to the United States.  UCLA Professor Raul Hinojosa-Ojeda’s paper used a Computable General Equilibrium model called GMig2 to estimate the economic impact of immigration.  That work and the rest in our series by other professors like Joshua C. Hall, Richard K. Vedder, Pia M. Orrenius, Madeline Zavodny, Giovanni Peri, and Gordon H. Hanson cannot be dismissed via ad hominem

The second Cato piece that Eskrow dismissed without reading was a rebuttal to a popular but highly flawed report written by the Center for Immigration Studies (CIS).  They claimed that all of the new jobs created in the recent past went to immigrants, a claim that I found to be untrue after reproducing their results.  Cato’s research on this issue, and that produced by dozens of academics and economists, cannot be seriously dismissed in the manner Mr. Eskrow did so.  I look forward to a serious response from Eskrow after he’s read the research.

“If that comparison seems harsh, consider this: The Southern Poverty Law Center issued a report on ‘guest worker’ programs in the United States – programs which might be considered a model for the open borders concept – and entitled it ‘Close to Slavery.’”

Eskrow’s weirdest argument is that open-borders would be bad because America’s current practically closed borders guest worker visa programs unintentionally expose migrants to poor treatment.  Guest workers, however, are the result of a heavily restricted and government managed immigration system and not a consequence of open borders.  The guest worker abuse that Eskrow described are a result of our practically closed borders immigration system, not open borders. 

Guest worker programs tie migrants to particular employers  to prevent them from competing with too many Americans for jobs.  After all, if migrants could switch jobs easily then they could come in to work for Company X in Montana but then move to work for Company Y in Illinois.  A lack of migrant mobility is the policy response of fears, expressed by Senator Sanders, that migrants take American jobs.  However, restricting migrant mobility means that they cannot quit jobs or leave bad employers who abuse them.  Guest worker visa rules designed to protect American workers unintentionally hurts migrants. 

Allowing migrants to switch jobs would virtually eliminate this problem, as I have proposed before (here and here).  The problem of migrant worker abuse exists because guest worker programs are more restrictive, designed to protect American workers, and regulated than an open borders immigration system. 

“Bier mocks the idea that an open borders policy means ‘doing away with the concept of the nation state.’ But his policy prescription would leave a sovereign people unable to set its own minimum wage or determine its own employment policies.”

The laws of economics limit the ability of governments to arbitrarily set price controls too, does that mean the United States is not a sovereign country?  Will we not be a “sovereign people” until we declare our independence from scarcity, gravity, mortality, psychology, and all of the other inconvenient limitations on human behavior?  I’ve never read a criticism of open borders based on the sovereignty argument that is compelling – including Eskrow’s and Sanders’.

Eskrow did not respond to Bier’s historical claim that the United States must not have been sovereign until 1882 because it had open borders prior to that time.  National sovereignty depends upon keeping out other sovereigns, not on regulating international labor markets.    

Eskrow’s defense of Senator Sanders’ comments is very weak.  There may good arguments against open borders – I analyze some of them here – but you won’t find them by listening to Senator Sanders or his defenders.        

The Taiwan issue, which has been mercifully quiescent since the election of Ma Ying-jeou as Taiwan’s president in 2008, shows increasing signs of returning as a major source of geopolitical tensions.  That point was underscored this week when Zhang Zhijun, the head of China’s Taiwan Affairs Office, the agency with primary responsibility for dealing with the self-ruled island, warned the Taiwanese that they must not return to “the evil ways of independence.”  He added that the Taiwanese people would “soon have to choose” between continuing the development of peaceful economic and political ties with the mainland that have taken place since 2008 or reigniting the animosity that existed during the administration of Democratic Progressive Party (DPP) leader Chen Shui-bian from 2000 to 20008.

That warning reflects growing worries in Beijing that the DPP is poised to return to power in next year’s elections.  Given the pervasive unpopularity of Ma and the governing Kuomintang Party (KMT) among Taiwanese voters, a DPP victory is indeed probable. That outcome has become even more likely with the entry of James Soong, chairman of the People First Party, into the presidential race.  Soong is certain to siphon votes from the already beleaguered KMT.

A DPP triumph does not necessarily mean an immediate crisis.  DPP leader Tsai Ing-wen is considerably more circumspect than Chen and less inclined to provoke Beijing.  Moreover, the surge of economic links with the mainland over the past seven years has benefited key DPP constituencies and dampened the enthusiasm for aggressively pushing the party’s official independence agenda.

Nevertheless, a DPP electoral victory will make Beijing deeply unhappy and increase cross-strait tensions.  China’s strategy toward Taiwan since Ma’s election has been to draw the island into an ever tighter economic embrace, with an underlying assumption that the growth of such ties will gradually erode support for independence and lead to a corresponding receptivity to political reunification with the mainland.  

It was always a flawed strategy.  Most Taiwanese show no enthusiasm for reunification, even as economic relations with the mainland have surged. Wide majorities prefer the status quo of de facto independence, and many would prefer formal independence, if they did not fear that Beijing would use force to prevent such an outcome.  Understandably, few Taiwanese want to merge their democratic capitalist society with a mainland ruled by a one-party dictatorship.  Indeed, given the economic and cultural differences between the two societies that have developed over more than a century, many Taiwanese would be reluctant to relinquish control of their own affairs and have their island become merely one small province of a vast country even if the mainland was fully democratic.

In short, a DPP victory would be strong evidence that Beijing’s hopes of eventually enticing Taiwan to accept reunification are illusory. Chinese officials are not likely to react well to that realization.   At a minimum, there is likely to be a drift back toward the tensions that characterized the Chen years.  With China’s growing regional military capabilities and global economic clout, the temptation may even emerge to adopt an overtly coercive policy toward the recalcitrant island.

Unfortunately, the United States would be more than an interested observer to such a development.  Under the 1979 Taiwan Relations Act, Washington is committed to regard any coercive actions that Beijing might take toward Taiwan as a “grave breach of the peace” of East Asia and respond accordingly.   Although that commitment falls short of an obligation to defend Taiwan with U.S. military forces, few observers doubt that Washington would intervene in a Taiwan Strait crisis.  Yet a decision to intervene could well lead to a disastrous war with a serious military power–and a country that is a leading U.S. economic and financial partner.  Such a clash would be catastrophic not only for both countries, but for the entire international system.

U.S. officials need to assess the situation and have a clear strategy for dealing with a resurgence of the troublesome Taiwan issue.  They especially need to ask themselves whether protecting Taiwan’s de facto independence is worth risking a crisis, and perhaps all-out war, with China.  The past seven years did not mark an end to the Taiwan problem, it was merely a beneficial lull that now seems to be coming to an end.

Politics is America’s national sport, so it’s not too surprising that political rhetoric focuses more on playing the game than on real-world policy solutions. While this might make for more entertaining television, viewing political discourse in this way can be a serious detriment to our society.

That’s why Cato scholars will be injecting insightful commentary and hard-hitting policy analysis into the national conversation throughout the 2016 campaign season, using the Twitter hashtag #Cato2016.

The coverage started with Mondays’s Voters First Forum (highlights here), and will continue today with the two national debates to be aired by Fox at 5:00 p.m. and 9:00 p.m. tonight.

Tune in and join the conversation on Twitter using #Cato2016.

In The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves, researcher James Tooley documented how low-cost private schools operated in the world’s poorest areas, from the slums of Hyderabad in India to remote mountain villages in China and shanty towns in Kenya. According to the international development crowd, these schools shouldn’t exist – after all, the governments in these areas provide schooling at no charge. Why would the poorest of the world’s poor pay for something they could get for free?   

The answer, of course, is that they know they get what they pay for. As one father in poverty-stricken Makoko, Nigeria put it:

“Going to the public school here in Nigeria, particularly in this area in Lagos State, is just… wasting the time of day… because they don’t teach them anything. The difference is clear… the children of the private school can speak very well, they know what they are doing but there in the public [schools], the children are abandoned.”   (Page 129, emphasis in the original.)

A recent article in The Economist illustrates this phenomenon:

THE Ken Ade Private School is not much to look at. Its classrooms are corrugated tin shacks scattered through the stinking streets of Makoko, Lagos’s best-known slum, two grades to a room. The windows are glassless; the light sockets without bulbs. The ceiling fans are still. But by mid-morning deafening chants rise above the mess, as teachers lead gingham-clad pupils in educational games and dance. Chalk-boards spell out the A-B-Cs for the day. A smart, two-storey government school looms over its ramshackle private neighbour. Its children sit twiddling their thumbs. The teachers have not shown up. 

What’s the difference? It mostly comes down to a matter of incentives. Asked why parents choose to pay private school tuition when the government schools are “free,” one government school principal in Ghana explained: 

It’s supervision. Proprietors are very tough. If teachers don’t show up and teach, the parents react. Private schools need to make a profit, with the profit they pay their teachers, and so they need as many students as they can get. So they are tough with their teachers and supervise them carefully. I can’t do that with my teachers. I can’t sack them. I can’t even remove them from [the payroll] if they are late or don’t turn up. Only the District Office can. And it’s very rare for a teacher to be sacked. (Page 71.)

It’s no wonder then that private schools are proliferating in the world’s poorest areas. According to The Economist, hundreds of new private schools are opening in Lagos, Nigeria, many of them charging less than $1 a week. In poor countries, official estimates show that private schools now educate more than one-fifth of all students, double the proportion a decade ago. And even that figure probably underestimates private school enrollment since a high proportion of private schools in poor countries are unregistered. As The Economist notes, “A school census in Lagos in 2010-11, for example, found four times as many private schools as in government records.”

The market is still emerging and although the private schools tend to outperform the government alternatives, that isn’t a very high bar. Parents often lack access to information about school performance from reliable sources. Schools have an incentive to exaggerate their performance, so some in the international aid community want the government to set and enforce national standards and mandate national exams. However, there is no good evidence that national standards or testing drive performance. Moreover, as The Economist observed, ”where governments are hostile to private schools, regulation is often a pretext to harass them.” 

The absence of government standards does not imply the lack of any standards. In a competitive market, schools have an interest in demonstrating to parents that they provide high-quality education. The rapidly expansion of the private sector will create opportunities for non-profit or for-profit private certifiers to separate the wheat from the chaff. Indeed, as The Economist highlights, there are low-cost ways to provide parents with the information they need:

In a joint study by the World Bank, Harvard University and Punjab’s government, parents in some villages were given report cards showing the test scores of their children and the average for schools nearby, both public and private. A year later participating villages had more children in school and their test scores in maths, English and Urdu were higher than in comparable villages where the cards were not distributed. The scheme was very cheap, and the improvement in results larger than that from some much pricier interventions, such as paying parents to send their children to school.

In a corresponding editorialThe Economist calls on the governments of poor countries to “boost” private education through school vouchers “or get out of the way.” The editorial also argues that “ideally” the governments should “regulate schools to ensure quality” and “run public exams to help parents make informed choices” but also observes that “governments that cannot run decent public schools may not be able to these things well; and doing them badly may be worse than not doing them at all.” Indeed

Rather than lobby the often-corrupt and/or incompetent Third World governments, the best thing NGOs could do to improve education would be to grant scholarships directly to the poor and provide private certification and/or expert reviews of schools. If we want to ensure that even the world’s poorest children have access to a quality education, schools should be held directly accountable to parents empowered with the means to choose a school and the information to choose wisely. 

After the purportedly all-time record high May temperature was reported at D.C.’s Reagan National Airport (the “official” Washington weather station), I noted something very funny with its temperatures. When 2015’s monthly temperatures are stated as departures from the 1981-2010 average, which is the standard reporting procedure, the departures from average at Reagan (DCA) were always warmer than those at Dulles Airport (IAD), about 25 miles to the northwest.

Note that the departures are from the average at each location. So when DCA reports a temperature of three degrees below average, that is three degrees below the average at Reagan. Similarly for the departure at Dulles. It’s compared to the average at Dulles.

So, we’re not talking about raw temperature here. Of course DCA is going to be intrinsically warmer than IAD. It’s several hundred feet lower in elevation and its being additionally heated by the bricks, buildings, and the pavement of urban Washington, as well as the waste heat from all your money changing hands. What is interesting is that the departures from normal, or “anomalies,” at DCA were all running hot compared to the departures from normal at IAD.   

For example, last month was 1.7°F above the average at DCA, while Dulles was 0.7°F below its average, for a difference of +2.4°, where the expected difference should be near zero. The record hot May departure from normal was 1.5° greater at Reagan than Dulles. Adjusting the Reagan temperature down to where it should be would take it out of the record books.

I noted this to Jason Samenow, a former student of mine and a great forecaster who runs the Washington Post’s excellent Capital Weather Gang (  He agreed something was weird, and I then set out to look to see if there was some point in time where this obvious error suddenly started. I soon found it, in January, 2014.  Since then, DCA’s monthly departures from normal have averaged 2.2°F warmer than Dulles.

As I was about to write this for Cato@Liberty, Jason and his crew published their take on it–a worthwhile and informative read. In addition to what I had found, they discovered that there was a similar anomaly difference from when IAD opened up in 1962 through the early 1980s. That makes the current era look not-so-unique.

Let us all praise the Interwebs, for someone soon alerted Jason to this document: “Temperature Irregularities at Washington National Airport during the Heating Season: 1978-85.” It was published in the journal of the National Weather Association, a smaller competitor to the more widely known American Meteorological Society. One of the authors, the late William (Bill) Klein, was one of the world’s most accomplished scholars in the field of statistical meteorology.

The paper found that the instrumentation at DCA back then was drifting warmer and warmer, in addition to the expected urban warming. When it was replaced in 1985, the anomaly differences largely stopped—until 2014.

So there’s some reasonable evidence that DCA is reading way too hot, at least for monthly departures from normal. The question is, why has it taken so long to be noticed? There are 6 million people in the metro area, and, judging from the traffic on Jason’s site, an awful lot of weather nerds. Maybe people weren’t looking because they didn’t want to know. As it stood, the DCA record was providing wonderful “confirmation bias” to a city obsessed with global warming—so if the DCA temperatures are warming like crazy, that’s consistent with the belief system of the inhabitants. 

The sudden warming of the temperature anomalies at DCA compared to the Dulles anomalies could have many causes. There might have been a coding (programming) error inserted in January 2014, related to the fact that “normal” temperatures are adjusted every ten years to reflect the average for the last thirty. The new normals, for 1981-2010, were published in November, 2012, when they replaced the 1971-2000 values.

There’s also evidence, shown to me by Ian Livingston, one of Jason’s associates, of a completely unrealistic change in the raw temperature (as opposed to departures from normal) difference between DCA and IAD. That figure changes a remarkable 4°F in the last seven years. I know of no way a local record could warm that much in such a short time, compared to a nearby neighbor. 

Then there’s the number of days with a temperature of 90°F or above. Normally there are about seven more at DCA per year than at Dulles.  So far this year, the difference is 26 days. Livingston has also looked at this and it’s apparent that when this difference is unrealistically large, like it is this year, the departure from the local normal at DCA is also much larger than it is at IAD, when it should be close to zero.

It’s a mystery, OK, but apparently the can of worms that I opened, and that Jason’s crew has expanded on, has touched off a firestorm of interest amongst weather and climate nerds, both professional and amateur. Some of them are some of the smartest people I know, so I hope to have a comprehensive handle on  the cause of the onset of DC’s local (but probably not real) fever in January, 2014.

Trade ministers from the twelve nations negotiating the Trans-Pacific Partnership (TPP) met last week in Maui.  Some observers had expressed hopes that the Maui ministerial meeting would produce a final TPP agreement.  The “collapse” in Hawaii has caused some commentators to voice fears that it may not be possible to conclude TPP anytime soon.  Those fears are overblown.  My view is that the Maui meeting qualifies as quite a good start toward actually finishing the TPP. 

Bear in mind that the TPP negotiations have been going on for several years.  The United States became an active participant during President Obama’s first term.  However, until recently, U.S. negotiators have been handicapped by lack of Trade Promotion Authority (TPA, also known as “fast track”).  Other countries were understandably reluctant to try to conclude TPP without assurance that Congress would be willing to vote up or down on the agreement, rather than picking it to pieces with amendments.  So all previous negotiating sessions amounted to warm-up rounds, with the most serious discussions being held in abeyance until the United States finally was ready to engage without reservations.

Maui was the first TPP ministerial at which U.S. negotiators actually were in a position to consider closing the deal.  If all other countries had the same perspective on the issues as the Obama administration, the agreement could have been concluded.  Not surprisingly, other countries have various opinions on key topics.  The Maui talks allowed ministers to put those differences clearly on the table. Undoubtedly, negotiators now have a much better idea of the realm of possible outcomes.  They know what they will be expected to give in order to receive what they want in return.  By last Friday afternoon, it was time for ministers to leave Maui and head back to their capitals for high-level consultations.

How long might it take to wrap up the negotiations?  The Obama administration would like to hold a TPP signing ceremony in conjunction with the Nov. 18-19 meeting of the Asia-Pacific Economic Cooperation forum (APEC) in the Philippines.  The TPA statute requires the administration to inform Congress of the president’s intent to enter into a trade agreement 90 days before it is signed.  This would require the TPP agreement to be concluded in August. Japanese Economy Minister Akira Amari has suggested that TPP ministers should meet again on the sidelines of the Aug. 22-25 meeting of the Association of Southeast Asian Nations (ASEAN) in the Philippines. 

Finalizing the pact in August seems quite unlikely.  This is not only because many government officials are accustomed to taking vacations in late summer.  The more important factor is the Oct. 19 election in Canada.  Conservative Prime Minister Stephen Harper is in a very tight three-way race against New Democratic Party (NDP) Leader Tom Mulcair and Liberal Party Leader Justin Trudeau.  There is considerable doubt as to whether Harper will continue as prime minister. 

It seems improbable that other TPP countries would choose to complicate Harper’s re-election bid by pressuring him to make politically difficult concessions on Canada’s dairy and poultry support schemes during the heat of the relatively short campaign.  Pushing to wrap up the negotiation now almost certainly means obtaining less liberalization than might be achieved by waiting.  As trade ministers left Maui, they gave the impression that a deal among the 12 participating governments could be reached reasonably soon.  If a new Canadian government that is less supportive of trade liberalization takes office, the future of TPP could be very much up in the air. 

To those who think that U.S. politics are far more important than those of any other country, the thought of TPP delays relating to Canada’s election may cause a good bit of angst.  Team Obama would like Congress to vote on the TPP relatively early in 2016 before the congressional and presidential campaign season takes center stage.  Postponing final TPP negotiations until after the Canadian election would mean that the agreement wouldn’t be ready for review by the U.S. Congress until sometime next summer, at the earliest.

Those who are anxious about potential political complications relating to TPP delays should step back and take a deep breath.  All is not lost.  There are two quite reasonable scenarios under which Congress could find it feasible to pass TPP in the foreseeable future.  One would be for Congress to deal with it in the lame-duck session following the election on Nov. 8, 2016.  This was how the Uruguay Round WTO agreement was passed in 1994.  A second approach would be to hold the agreement over into 2017, which would allow a new Congress and new president to pass implementing legislation at a time when no election is looming. 

As a matter of strengthening its legacy, the Obama administration may prefer to complete the entire TPP process on its watch.  That concern should be set aside.  History correctly gives credit to President George HW Bush (41) for negotiating NAFTA and to President Clinton for getting it through Congress.  Likewise, history acknowledges the role of President George W Bush (43) in negotiating free-trade agreements with Colombia, Panama, and South Korea, as well as the role played by President Obama in moving them through Congress. 

The most important objective in wrapping up TPP should be to obtain a solid, trade-liberalizing agreement.  That objective should not be sacrificed for the sake of speed.  A somewhat patient approach will serve the nation’s trade agenda well, and President Obama will earn credit for it.

Libertarians are frequently confused with conservatives in mainstream discourse, and  proponents of “fusionism” see libertarians and conservatives as natural political allies. But, are the two philosophies really as similar as many seem to believe?

For the last several years, the Cato Institute intern coordinators have extended an invitation to the Heritage Foundation to pick among their best and brightest interns to join two of Cato’s in an annual debate on the virtues of libertarianism versus conservatism, and the differences between the two ideologies.

It should be noted that the interns who debate do so in their private capacities and don’t necessarily represent the views of either organization, but the competition to be chosen is nonetheless fierce one, with Cato interns, at least, going through multiple levels of qualification to be picked. The resulting debate is an engaging and fun conversation about the meaning of individual liberty, limited government, free market, and policy that has quickly become a popular social event of the D.C. summer season.

This year the debate, which took place on July 23rd, attracted a live audience of over 330 people (filling Cato’s main auditorium and spilling into an overflow room), while the livestream was watched by an additional 385 viewers.

The popularity of the event has been reflected online as well. In both 2013 and 2014, the hashtag for the annual intern debate (#LvCdebate) was a sidebar trend on Twitter. This year’s debate, generating 1,134 tweets overall and 1,061 tweets on the day of the debate itself, solidified that trend, locking in the number one spot early on and maintaining it throughout the event.

The debate itself went on the inspire several blog posts and articles, both before and after the actual event. Perhaps most interesting, however, are the results of a survey released today by my colleague, Emily Ekins.

The survey, which polled debate attendees, identifies important similarities and striking differences between self-identified conservative and libertarian attendees. According to the data, libertarian and conservative attendees were similar in skepticism of government economic intervention, and regulation, but were dramatically different in their stances toward immigration, LGBT inclusion, national security, privacy, foreign policy, and perceptions of racial bias in the criminal justice system.

So, are libertarianism and conservatism really that similar? Watch the debate below, read the results of the survey, and decide for yourself. Then, let us know what you think on Twitter using #LvCdebate.

The Spin Cycle is a reoccurring feature based upon just how much the latest weather or climate story, policy pronouncement, or simply poo-bah blather spins the truth. Statements are given a rating between 1-5 spin cycles, with less cycles meaning less spin. For a more in-depth description, visit the inaugural edition.

The first paragraph of EPA’s 1500+ page Clean Power Plan, released on August 3, says this:

These final emission guidelines…will lead to significant carbon dioxide (CO2) emission reductions from the utility power sector that will help protect human health and the environment from the impacts of climate change.

This isn’t simply an exaggeration, a misstatement or a sophomoric rhetorical flourish.  It is simply not true.

The operative claim is that EPA’s  plan “will help protect human health and the environment from the impacts of climate change.” 

It will do no such thing.  The EPA’s own policy analysis model, called MAGICC*, tells us how much global warming will be prevented by the new plan:  0.019°C by the year 2100 (based on procedures similar to those we detailed here).  That’s the amount of temperature change a person will experience in about every second of life. It is simply impossible to detect this change in any global temperature history.

Even that is an overestimate of the actual impact of the plan.  The EPA has also published a “base case” which includes emissions reductions expected from existing state and federal regulations.  The difference between the plan and the base—i.e., the future temperature savings directly attributable it drops to 0.009°C—let’s be generous and call that 0.01°C.  

It is global warming that causes the “climate change” that we will be “protected” from.  So, if the amount of saved warming can’t be detected (the cause), there will be no detectable alteration in the trajectory of related climate change (the effect).

For that, we award the Clean Power Plan a “Heavy Duty” spin cycle award.


Heavy Duty. Government regulations or treaties claiming to save the planet from certain destruction, but which actually accomplish nothing. Can also apply to important UN climate confabs, such as Copenhagen 2009 (or, quite likely, the upcoming 2015 Paris Summit), that are predicted to result in a massive, sweeping, and world-saving new treaty, followed by self-congratulatory back-patting. Four spin cycles.

 *Model for the Assessment of Greenhouse-Gas Induced Climate Change


Over at Cato’s Police Misconduct web site, we have selected the worst case for the month of July.  It was the case involving Officer Eric Paull.

Paull worked as a sergeant for the Akron Police Department.  He also taught a course on criminal justice at the University of Akron.  One of his students was a single mom.  According to news reports, the woman (name withheld) says they started a romantic relationship.  But after a year or so, that relationship turned ugly and violent.  After he beat her up on a Thanksgiving holiday, Paull told her that he was legally “untouchable.”

She believed him–so she did not file a complaint right after the beating.  Instead, she just tried to avoid him.  But Paull stalked her and her boyfriends, using police databases to discover addresses, phone numbers, and vehicle information.  Paull would also text pictures of himself holding his gun and leave bullets on their automobiles.  There were threats to kill the woman and her boyfriend.  The woman did lodge complaints with the police and would later obtain a protective order, but the police department seemed indifferent.  Paull would not stop.

Finally, after months of harassment, Paull was charged with stalking, aggravated menacing, felonious assault, and burglary, among other charges.  His trial is expected to begin in a few weeks.

Paul Hlynsky, the police union leader, says he will try to have Paull back on the police force if he can avoid a felony conviction.

The Cato Institute and Heritage Foundation recently co-hosted a debate in which interns from both organizations debated whether conservatism or libertarianism is the better philosophy. At the conclusion of the debate, the Cato Institute conducted a survey of debate attendees finding important similarities and striking differences between millennial conservative and libertarian attendees.

Full LvCDebate Attendee Survey results found here

The survey finds that libertarian and conservative millennial attendees were similar in skepticism of government economic intervention and regulation but were dramatically different in their stances toward immigration, LGBT inclusion, national security, privacy, foreign policy and perceptions of racial bias in the criminal justice system.

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

Eighty-percent of millennial respondents self-identified as either conservative (41%) or libertarian (39%): This post will focus on these conservative and libertarian millennial attendees.

Economics Bind Conservative and Libertarian Millennial Attendees

Libertarian and conservative millennial attendees were clearly similar on questions related to government intervention in the economy. Both libertarians and conservatives overwhelmingly endorsed the idea that the free market can better solve problems than government (98% and 95% respectively), that government regulation of business too often does more harm than good (100% and 93%), and that people who work hard can get ahead (85% and 97%). Furthermore, 96-98% of both groups preferred a “smaller government” that offered fewer services and low taxes over a “larger government” that offered more services with high taxes.

While national polls find that about 6 in 10 Americans favor raising taxes on households making over $250,000 a year (including 30% of Republicans) fully 9 in 10 libertarian and conservative millennial attendees opposed such an action.

Both groups also solidly favor free trade, although a portion of conservatives were less enthusiastic about global competition. For instance, majorities of both groups agreed the country should “eliminate all barriers to trade,” but 100% of libertarians agree compared to 66% of conservatives.

Besides economic policies, however, these young attendees revealed important differences on most of the other important policy issues.

Foreign Policy Divides

While both libertarian and conservative millennial attendees favored smaller government, they split on cutting defense spending. Fully 96% of libertarians supported cutting defense spending compared with only 32% of conservative millennial attendees.

This disagreement over defense spending maps onto disparate visions about what role the U.S. military should have in the world. While 93% of libertarian millennials wanted to decrease U.S. military presence around the world, only 19% of conservatives agreed. Instead, 44% of conservative attendees thought the United States ought to increase its global military presence and 37% would keep it at present levels.

Similarly, 85% of conservative millennial elites favored sending ground troops to participate in a campaign against ISIS while 74% of libertarian millennial elites opposed this action. However, these positions were not rock solid. Fifty-one percent of conservatives said they “somewhat” supported sending ground troops and 37% of libertarians “somewhat” opposed doing so.

National Security: Is Edward Snowden a Hero or Traitor?

Both conservative and libertarian attendees tended to disapprove of government’s “collection of telephone and internet data as part of anti-terrorism efforts.” But libertarian millennials opposed much more fervently (96%) than did their conservative peers (51%). Forty-five percent of these young conservative elites favored domestic surveillance to fight terrorism compared to 2% of libertarians.

Despite shared opposition to government domestic surveillance, both groups were diametrically opposed in their evaluation of Edward Snowden, the former government contractor who leaked classified information about these programs to the media. Fully 9 in 10 libertarians said Snowden is a “patriot” while 8 in 10 conservatives said he is a “traitor.”

Conservative and libertarian attendees made the trade-off between freedom and security differently, explaining some of these results. While 80% of conservative millennials would “give up some personal freedom and privacy for the sake of national security” 76% of libertarian attendees would not.

Accord on Criminal Justice Reform; Division Over Perceived Systemic Racial Bias

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

Majorities of both groups favored eliminating mandatory minimum prison sentences for people convicted of possessing or selling drugs. However, libertarians were more in favor (87%) than conservatives (54%). In fact fully 76% of libertarians “strongly favor” eliminating this mandatory minimum compared to 22% of conservative attendees.

Majorities of both groups also agreed that local police departments using “drones, military weapons, and armored vehicles is not necessary for law enforcement purposes” but rather is going too far. Yet libertarians were far more likely than conservatives to oppose police militarization (96% to 56%).

Striking differences emerged between libertarian and conservative attendees in the perception of racial bias in the criminal justice system. Sixty-eight percent of conservatives thought minorities receive equal treatment under the law. In contrast, 85% of libertarians felt that African-Americans and other minorities do not receive equal treatment as white Americans in the criminal justice system.

Similarly 85% of libertarians felt that police in “most communities” are “more likely to use deadly force against a black person.” However conservative attendees disagreed and 64% said that “race doesn’t’ affect police use of deadly force.”

Since the conservative attendees did not perceive significant racial bias in the law enforcement, it’s not surprising that 88% said they opposed the “national protests of police treatment of Black Americans that centered around the slogan #BlackLivesMatter,” including 59% who strongly opposed.

In contrast, 58% of libertarian millennials support the #BlackLivesMatter protests; the remainder said they didn’t know enough to say (25%) or they opposed (19%).

Both Open to Easing Immigration Process, Split Over Unauthorized Immigration

Both libertarian (93%) and conservative (66%) millennial attendees supported making it “easier for people to immigrate to the United States,” although libertarians were significantly more supportive.

However, major differences emerged between conservative and libertarian elite attendees on what to do about illegal immigration. A majority (61%) of conservatives opposed a pathway to citizenship for people in the United States illegally, including 41% who wanted these individuals to leave the United States. In contrast, 74% of libertarian millennials favored a pathway to citizenship for unauthorized immigrants and only 15% said they should leave.

Additionally, 69% of conservative elite attendees supported the United States “constructing a large wall along the border with Mexico.” In stark contrast, 91% of libertarian attendees opposed building a border wall including 65% who strongly opposed doing so.

Libertarian and conservative attendees also differed in their perception of unauthorized immigrants’ propensity to commit crimes in the United States. A slim majority (53%) of conservative attendees thought unauthorized immigrants are “more likely” to commit crimes while conversely 51% of libertarians thought they are “less likely” to do so.

In sum, both libertarian and conservative millennial attendees were friendly toward legal immigrants, but only libertarians were also friendly to undocumented immigrants.

LGBT and Abortion Issues Divide

In June the Supreme Court effectively legalized same-sex marriage in the United States; however, conservative and libertarian millennial attendees disagreed about this outcome.

Fifty-nine percent of conservative attendees thought same-sex marriage ought to be illegal, while 85% of libertarian attendees thought it should be legal.

However, this difference isn’t just about legal definitions of marriage. Sixty-percent of libertarian attendees felt that “we should do more to ensure that lesbians, gays, bisexual and transgender people feel fully accepted in society,” while a nearly equal share of conservatives disagreed.

This disagreement maps onto larger differences in worldview. Ninety-six percent of libertarians agreed that “we should be more tolerant of people who choose to live according to their own moral standards” compared with 54% of conservatives.

Part of these differences might be explained by the fact that 72% of conservative attendees agreed that “religious values should play a more important role in government” while 96% of libertarian attendees disagreed.

Conservatives were more religious than libertarian attendees. A slim majority (51%) of conservative elites said they attend religious services once a week or more compared to 19% of libertarians. Instead, 31% of libertarians said they never attend.

When it comes to abortion, conservatives were fervently pro-life (93%), but libertarian attendees were divided. A slim majority of libertarians (51%) said they were pro-choice, but a sizable minority (41%) also said they were pro-life.

Free Speech and Autonomy Tends To Unify

Both conservative (76%) and libertarian (98%) millennial attendees were more supportive than Americans nationally (43%) in allowing a Muslim clergyman to “preach hatred against the United States” in a public speech.

Furthermore, conservative and libertarian attendees tended to oppose outright bans on a number of personal activities including gambling, online pornography, and using marijuana. However, the groups differed significantly in how much the government should regulate these activities. In addition, cocaine divided the attendees: 76% of conservatives wanted it banned and 93% of libertarians wanted it legalized.

What Are the Priority Issues?

The survey asked respondents to rate on a scale of 1 to 5 how concerned they were on eighteen different issues, including on economics, spending, national security, immigration, drugs, criminal justice, morality, racial issues, income inequality, the environment, etc.

The top five issues for conservatives attendees were: 1) Government spending/deficit 2) The economy 3) Terrorism 4) Size of Government 5) Jobs. The top five issues for the libertarian attendees were 1) The economy 2) Government spending/deficit 3) Size of Government 4) Regulation of Business 5) Taxes.

Statistical tests were run to determine if conservative and libertarians elites rated these issues significantly different. The following chart shows that the two groups were statistically significantly different on all the national security, criminal justice, social/cultural, and racial issues, except for drug prohibition. Both libertarians and conservatives were equally concerned about all the economic issues.

Note: This chart displays the mean level of concern across 18 different issues for both conservative and libertarian millennials who attended the Libertarianism v. Conservatism intern debate at the Cato Institute. Moving from the inner to the outer circles indicates an increasing level of concern for each respective issue. Results from statistical tests are shown which indicate if conservatives and libertarians significantly differed in their concern for the issue ** p < .01 * p < .05. Green: Economic/Govt Size related issues, Blue: Criminal Justice, Yellow: Racial Issues, Orange: National Security issues, Purple: Social and Cultural related issues.

How Do They Identify Politically?

At first glance, conservative millennial attendees appeared much more Republican than the libertarian millennial attendees, but once independents were probed, both conservatives (98%) and libertarians (70%) revealed they were part of the Republican coalition. Nevertheless, a quarter of libertarian millennial attendees said they were completely independent of either party.

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

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

Who Won the Debate Depends on Whom You Ask

Who won the debate depends on whom you ask:

  • Among libertarian millennial attendees, 96% said the libertarian team won and 4% said the conservative team won.
  • Among conservative millennial attendees, 67% said the conservative team won and 33% said the libertarian team won.
  • If you combine the libertarian and conservative attendees 64% said the libertarian team won and 36% said the conservative team won.
  • Among the remaining moderate, liberal, and progressive attendees, 8 in 10 said the libertarian team won and 2 in 10 said the conservative team won.

In sum, the 2015 intern libertarianism vs. conservatism debate goes to the libertarian team. 

Full LvCDebate Attendee Survey results found here


The Cato Institute conducted a survey of attendees at the debate hosted by the Cato Institute and Heritage Foundation in which interns at both organizations debated whether conservatism or libertarianism is a better political philosophy on July 23, 2015.

An email was sent to every person who pre-registered or walked-in to the debate at the conclusion of the event with a link to a Qualtrics survey. Emails were sent to 588 people, of these we estimated 360 were in attendance at the debate. In total, we collected 179 surveys from debate attendees, producing a response rate of 30% among all those emailed and 50% of estimated attendees. The margin of error for this attendee survey is +/- 5.2%. Of the 179 surveys, millennial attendees completed 139, including 59 self-identified millennial conservatives and 54 self-identified millennial libertarians. The margin of error for millennial conservatives is +/- 8.9% and for millennial libertarians is +/- 9.6%. The remaining survey respondents included self-identified moderates, liberals, progressives, and some over the age of 35 and thus not considered a millennial attendee.



On July 24, Rep. Robert Pittenger (R-NC, pictured at right) remarked on the radio that the consequences of the Iran deal bear comparing to the consequences of the Munich Agreement signed in 1938, except that 

The consequences of this deal make Hitler look - is a minor player in the context of the challenge to the rest of the world.

I wish I had seen this comment in time to include it in a piece I published yesterday at the Washington Examiner, highlighting the fact that Iran cannot dominate the Middle East, with or without a nuclear deal, with or without an extra $100 billion, with or without nuclear weapons. Pittenger’s remark, one would hope, was given thoughtlessly, but a lot of people who have allegedly spent a lot of time thinking about Iran have made claims that Iran is poised to dominate the Middle East, or if you prefer political science jargon, become a “regional hegemon.” As my piece argues, however,

Iran is capable of engaging in an array of provocative behaviors throughout the region, to include support for terrorism, support for nasty regimes like Bashar al-Assad’s in Syria, and meddling in other foreign civil wars like Yemen’s or Iraq’s. All of these things make Iran problematic, but do not help it dominate the region.

After discussing what regional hegemony means and demonstrating that Iran cannot attain it, I conclude that

An Iran that could keep the profits from its oil sales and that engaged in more terrorism and proxy wars throughout the Middle East would look a lot like the Iran of 2007 or 2008, before most of the sanctions were enacted. No one argued then that Iran was a regional hegemon, and for good reason. Returning Iran to this status would not make it a regional hegemon today, and policymakers ought to stop inflating the Iran threat. U.S. policymakers should not signal to Tehran that they believe Iran could dominate the region as a consequence of the deal, if for no other reason than Iranian policymakers may foolishly believe them and act out accordingly.


Far from being a regional hegemon or dominating the Middle East, Iran is a nuisance. Great powers, to say nothing of the self-styled “home of the brave,” should not convince themselves that nuisances somehow constitute peers.

Read the whole thing, if you like.

That’s right: the Federal Reserve is now in the business of enforcing the U.S. government’s drug laws, even if that means making a mockery of both state governments’ right to set their own drug policies and the Fed’s own governing statutes.

The Fed’s involvement in drug prohibition became official last month, when the Federal Reserve Bank of Kansas City informed Denver’s Fourth Corner Credit Union — a non-profit cooperative formed by Colorado’s state-licensed cannabis manufacturers — of its decision to deny its application for a master account.  Since asking any sort of depository institution to operate without such an account, and hence without access to the Fed’s payment facilities, including its check clearing, wire transfer, and ACH facilities, is like asking a commercial airline to make do with propeller-driven biplanes, and established banks don’t want the extra hassle that comes with dealing with pot growers, the Kansas City Fed’s action forces Colorado’s marijuana industry to do business on a cash-only basis, with all the extra risk and inconvenience that entails.[1]

The Fourth Corner Credit Union isn’t taking this sitting down.  On the contrary: it is suing the Federal Reserve Bank of Kansas City.  Your typical civil action isn’t exactly a page turner.  But this one reads like a chiller, largely because that’s exactly what it is.  If you like a good horror story, I suggest you read the whole thing.  But for the sake of those in a hurry, here are the Cliff Notes.   Unless otherwise indicated, the details are as alleged by the lawsuit itself.

The basic legal facts as set forth in that document are, first, that it is the essence of the so-called “dual” banking system that both state governments and the Federal government have the right to grant charters to banks and other depository institutions, and, second, that, according to the 1980 Monetary Control Act, “All Federal Reserve bank services…shall be available to nonmember depository institutions and such services shall be priced at the same schedule applicable to member banks.”

Furthermore, as if to resolve any doubts regarding whether access to the Fed’s payment services was to be granted even to depository institutions that did business with pot growers, on August 13, 2014 the Board of Governors, together with the FDIC, the Comptroller of the Currency, and the National Credit Union Authority, issued guidelines declaring that

Generally, the decision to open, close, or decline a particular account or relationship is made by a bank or credit union, without the involvement of the supervisor.  This decision may be based on the bank or credit union’s particular business objectives, its evaluation of the risks associated with offering particular products or services, and its capacity to effectively manage those risks.[2]

Now to the facts of the case, also as presented in the suit.  On November 19, 2014, The Fourth Corner Credit Union acquired an unconditional charter from the state of Colorado, having received  a conditional charter from the state some months before, pending its application for share deposit insurance.  Fourth Corner applied to the Kansas City Fed for a master account on the same day.  As it had previously applied for and received a Routing Number from the ABA, and had applied with the National Credit Union Authority (NCUA) for deposit insurance (and was exploring options for private insurance in case its NCUA request was denied), it had satisfied the only eligibility requirement for having such an account, and so had only to submit a “resolution” authorizing the Fed to open an account for it, together with an FRB “Official Authorizations List.”  Once these documents were approved, the Kansas City Fed was expected to accept and process a one-page Master Account Agreement completed by the credit union.  No other documents were necessary.

According to the Kansas City Fed itself, the suit alleges, processing a Master Account Agreement “may take 5-7 business days.”  That is, it usually takes only a week or so for an account to be established once the necessary paperwork is submitted.  But although Kansas City Fed officials quickly approved of the credit union’s paperwork, the bank refused to process its Master Account Agreement, saying that its application would be processed “upon approval by credit and risk.”  When the Fourth Corner’s lawyers asked the Kansas City Fed what the rules for such approval were, they were at first told that no such rules existed.

Months later, on January 7, 2015, Kansas City Fed president Esther George at last sent a letter to Fourth Quarter’s lawyers.  In it she observed that the Fed Bank’s Operating Circular, besides setting for the explicit requirement for opening a master account,

also states that a master account is subject to other applicable Federal Reserve regulations and policies.  These include policies related to risk posed by a financial institution and how the risk will be mitigated when determining whether and under what conditions an account may be opened.  Issuing of a master account is within the Reserve Bank’s discretion  and requires that the Reserve Bank be in a position to clearly identify the risk(s) posed by a financial institution and how that risk can be managed to the satisfaction of the Reserve Bank (my emphasis).

Given the time normally allowed to process a master account application, it is doubtful that the Kansas City Fed can have bothered to investigate the risks posed by previous applicants for such an account.  One may wonder, moreover, whether any Reserve Bank, or the Fed Board, has ever shown itself capable of  “clearly” identifying the risks posed by different financial institutions — let alone ones that have yet to open for business.  But the more important point, which the credit union’s attorneys claim they pointed out to the Kansas City Fed, was that it simply had no authority to deny their client an account, on any grounds whatsoever, given that it had already met all of the provisions of the law.

Still Fourth Corner received neither an account nor any further explanation.  In vain did Deirdra O’Gorman, its CEO, write to both Esther George and Janet Yellen to request a meeting to discuss the risks to which George had alluded.  Not only did both decline, but the Kansas City Fed replied by instructing the credit union to stop submitting documents to it, whether testifying to its safety or otherwise.  Nor did an earlier letter to Yellen and George, from Colorado Senator Michael Bennet, noting the “significant public safety concerns” raised by the  cash-only basis to which Colorado’s cannabis industry was being confined, appear to have made any difference.

And so matters stood until July 2, almost nine months after Fourth Corner had applied for its master account.  On that day the NCUA’s Office of Consumer Protection denied the credit union its application for federal share deposit insurance, while (according to the complaint) secretly and illegally sharing a copy of its confidential letter with the Kansas City Fed.[3]  Two weeks later, on July 16, 2015, the Kansas City Fed denied Fourth Corner’s request for a master account, justifying its decision in part on the grounds that the NCUA had rejected its application for federal insurance.  The decision remains the sole instance in which the Kansas City Fed has denied a master account to any applicant since the passage of the 1980 Monetary Control Act.

Although the Kansas City Fed attempted to justify its action by referring to the NCUA’s refusal to grant federal insurance to Fourth Corner, according to the credit union’s attorneys that justification had no legal merit: a state-chartered credit union is entitled to a master account “irrespective of whether it has obtained federal share deposit insurance; it only need be ‘eligible to make application to become’ federally insured.”  In fact, federal law doesn’t require that a state-chartered credit union have any insurance at all.  In any event, as I’ve noted, the Fourth Quarter Credit Union was prepared to arrange for private insurance when its master account was denied.  Currently, 129 credit unions  rely primarily if not solely on private insurance, and all have master accounts.[4]

According to Fourth Quarter’s attorneys, the Kansas City Fed had acted in concert with NCUA:

The NCUA is on record that it is against private deposit insurance because the NCUA has no authority to supervise, regulate, or examine privately insured state chartered credit unions.  Apparently, the NCUA does not trust the highly qualified state regulators with superior local knowledge to supervise state-chartered credit unions without NCUA oversight.  Thus, in order to carry out their nefarious scheme to unlawfully block TFCCU [The Fourth Corner Credit Union] from the Federal Reserve payments system, FRB-KC and the NCUA concocted an aggressively expressed denial of the federal deposit insurance application that also gratuitously impugned the reputation and work of the multitude of highly qualified professionals…  .

Here, finally, is the plaintiff’s own verdict regarding the Kansas City Fed’s actions:

FRB-KC’s denial of the TFCCU’s master account application is anti-competitive; it is detrimental to public safety; it is an abuse of monopoly power; it is a collusive practice in restraint of trade; and it is statutorily and constitutionally unlawful.

I’m an economist, not a lawyer.  Still, this seems like a fair conclusion to me.


[1]  Since February 14, 2014, when formal Federal guidelines for dealing with “Marijuana-Related Businesses” were first issued, hundreds of financial institutions in states (and the District of Columbia) where marijuana production and sales are partly or entirely legal, have been compelled to submit several thousand marijuana-related “suspicious activity” reports.  On the legal reasons for banks’ reluctance to offer accounts to marijuana related businesses, see Julie Andersen Hill,“Banks, Marijuana, and Federalism,” in the Case Western Law Review.

[2] This is the wording as it appears in the suit.  That of the original guidance, as I discovered it, has a few typographical differences.  The suit also incorrectly gives the year of this statement as 2013 rather than 2014.

At the time of Fourth Corner’s application for a master account, the Federal Reserve’s official payments system risk management policy included a passage stating that “relevant safety and soundness issues associated with [relationships between financial institutions and their customers] are more appropriately addressed through the bank supervisory process” than by policies governing access to the payments system.  This passage was, however, removed in the December 31, 2014 amended policy.

[3] According to 12 U.S.C. 1784 – “Examination of Insured Credit Unions,” the NCUA is permitted to share information about a credit union with the Fed only “for the purpose of facilitating  insured credit unions’ access to liquidity” and then only provided that the Fed offers “appropriate assurances of confidentiality” (my emphasis).  The NCUA’s conduct is the subject of a separate Fourth Corner Credit Union lawsuit.

[4] Although the NCUA has tried for years to get Congress to abolish the private insurance option, and to give it control over state-chartered credit unions, Congress has consistently refused to support its plan.

This is cross-posted from Alt-M.

Last month, the British government announced plans to spend two percent of GDP on defense through 2020, meeting the NATO mandated level. This comes after months of nudging from the Obama administration that feared “if Britain doesn’t spend 2 percent on defense, then no one in Europe will.” The reasoning is bizarre given that few nations were meeting this spending threshold to begin with. As I wrote in June:

In 2014, only Greece, Estonia, the U.S. and the U.K. spent as much as 2 percent of GDP on defense. Excepting NATO member Iceland, which is exempted from the spending mandates, the 23 other NATO members failed to spend even two cents of every dollar to defend themselves from foreign threats. And Greece only met the 2 percent threshold because their economy is falling faster than their military spending.

Perhaps things are shifting a bit among the NATO nations. Fear of Russia has prompted some members to announce increases to their defense spending. Germany, which currently spends only 1.2 percent of its GDP on defense, pledged to increase its defense budget by 6.4 percent over the next five years. Latvia and Lithuania will also increase their defense spending, reaching two percent of GDP by 2018 and 2020, respectively.

It’s comforting to hear some Europeans talking about taking their security more seriously, but whether they will follow through remains to be seen. Either way, they will remain heavily subsidized by the United States for some time. Cato’s latest infographic demonstrates just how far ahead the United States is in all measures of defense spending, and also documents how American security guarantees allow European governments to devote a far larger share of their spending to dubious domestic priorities. Put simply, U.S. taxpayers are subsidizing Europe’s bloated welfare states.

According to the most recent NATO figures, the United States spent an estimated $654 billion or 3.8 percent of its GDP, on defense (based on the NATO definition) in 2014. That amounts to $2,052 spent by every man, woman, and child in America, nearly 4 times more than the average in NATO founding states, and 7 times more than was spent in those member states that have joined NATO since the end of the Cold War. As a share of the sum total of NATO member states’ defense spending, U.S. taxpayers contributed nearly 69 percent, even though the United States accounts for only 46 percent of total economic output by NATO members. And the free-riding problem has only been getting worse. Total military spending by NATO’s European members was less in real terms in 2014 than in 1997 – and there are 12 more member states in NATO today.

In fairness, one can hardly blame the Europeans for failing to spend more on defense. And one shouldn’t expect that they will willingly change course, despite faint signs that some European members are finally getting serious about their security. After all, people are disinclined to pay for something that someone else is willing to provide for free.

The free ride could come to an end if Washington signaled that it wanted it to. Alas, U.S. officials have been sending the opposite message. The modest spending restraint imposed on the Pentagon’s budget by the bipartisan Budget Control Act of 2011 has forced the military services to make some difficult choices, but the Pentagon’s civilian masters have so far refused to prioritize roles and missions. They could start by having an adult conversation with NATO members, and declare emphatically that our allies have primary responsibility for defending themselves and their interests. And, in order to back up words with actions, Washington should stop deploying the U.S. military in ways that discourage these other countries from doing more. It is unreasonable to expect U.S. taxpayers to shoulder these burdens indefinitely.


Infographic Sources:

NATO: Public Diplomacy Division. “Financial and Economic Data Relating to NATO Defence.” Brussels, Belgium, 2015.

Central Intelligence Agency. “The World Factbook.2014” Washington, D.C., 2014.

The International Institute for Strategic Studies. The Military Balance 2015. Edited by James Hackett. London: Routledge, 2015.

In an effort to distinguish itself from competitors, poultry producer Purdue recently ran advertisements touting its “no antibiotics ever” line of chicken products. This is not just another corporate ad campaign; the story goes deeper than that, as the New York Times recently reported. At issue is the definition of what makes poultry “antibiotic free.”

Poultry companies like Purdue and its main competitors, Tyson and Foster Farms, have long used antibiotics important to humans in the raising of chickens. Many scientists have advocated a ban on routine (non-disease) use of antibiotics in the raising of food animals because of concerns that such use will hasten the evolution of antibiotic-resistant bacteria. In 2012 the Food and Drug Administration issued nonbinding regulatory guidance on using human-important antibiotics in livestock.

Companies other than Purdue continue to use animal-only antibiotics called ionophores. Even if the FDA regulatory guidance was instead a legally binding regulation, such antibiotics would not be banned because they are not “human-important,” hence Purdue’s move to use the term “no antibiotics ever” in marketing its products.

The debate over ionophores is reminiscent over the fights as to what constitutes “organic” food. The popular perception of “organic” often differs from the government’s specific definition of the term. According to Henry Miller of the Hoover Institution at Stanford University, “so long as an organic farmer abides by his organic system (production) plan–a plan that an organic certifying agent must approve before granting the farmer organic status–the unintentional presence of GMOs (or, for that matter, prohibited synthetic pesticides) in any amount does not affect the organic status of the farmer’s products or farm.” Only 5 percent of organic operators area actually tested every year.

Each time the government defines the characteristics of an acceptable product regarding its safety, organic, or antibiotic-free characteristics, some competition in the market is lost. Only those who deeply understand the intricacies of the definition can both produce compliant products and work around some of the “in spirit” rules. Ionophores are one of these workarounds. They keep chickens healthy, reduce costs, and are technically compliant with rules on human-important antibiotic use in poultry production.

Most command-and-control regulations have some anticompetitive aspects. They hinder innovation at the margins of regulatory definitions that otherwise would occur in a free market. The battle between Purdue, Tyson, and Foster Farms is an excellent case study of how competition rather than regulation can serve consumer and public health interests.