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The Republicans in the House of Representatives, led by Ways & Means Chairman Kevin Brady and Speaker Paul Ryan, have proposed a “Better Way” tax plan that has many very desirable features.

And there are many other provisions that would reduce penalties on work, saving, investment, and entrepreneurship. No, it’s not quite a flat tax, which is the gold standard of tax reform, but it is a very pro-growth initiative worthy of praise.

That being said, there is a feature of the plan that merits closer inspection. The plan would radically change the structure of business taxation by imposing a 20 percent tax on all imports and providing a special exemption for all export-related income. This approach, known as “border adjustability,” is part of the plan to create a “destination-based cash flow tax” (DBCFT).

When I spoke about the Better Way plan at the Heritage Foundation last month (my portion of the panel starts about 1:11:00 if you want to skip ahead), I highlighted the good features of the plan in the first few minutes of my brief remarks, but raised my concerns about the DBCFT in my final few minutes.

Tax Reform in the Next Congress

Allow me to elaborate on those comments with five specific worries about the proposal.

Concern #1: Is the DBCFT protectionist?

It certainly sounds protectionist. Here’s how the Financial Times described the plan.

The border tax adjustment would work by denying US companies their current ability to deduct import costs from their taxable income, meaning companies selling imported products would effectively be taxed on the full value of the sale rather than just the profit. Export revenues, meanwhile, would be excluded from company tax bases, giving net exporters the equivalent of a subsidy that would make them big beneficiaries of the change.

Charles Lane of the Washington Post explains how it works.

…the DBCFT would impose a flat 20 percent tax only on earnings from sales of output consumed within the United States… It gets complicated, but the upshot is that the cost of imported supplies would no longer be deductible from taxable income, while all revenue from exports would be. This would be a huge incentive to import less and export more, significant change indeed for an economy deeply dependent on global supply chains.

That certainly sounds protectionist as well. A tax on imports and a special exemption for exports.

But proponents say there’s no protectionism because the tax is neutral if the benchmark is where products are consumed rather than where income is earned. Moreover, they claim exchange rates will adjust to offset the impact of the tax changes. Here’s how Lane explains the issue.

…the greenback would have to rise 25 percent to offset what would be a new 20 percent tax on imported inputs — propelling the U.S. currency to its highest level on record. The international consequences of that are unforeseeable, but unlikely to be totally benign for everyone. Bear in mind that many other countries — China comes to mind — can and will manipulate exchange rates to protect their own short-term interests.

For what it’s worth, I accept the argument that the dollar will rise in value, thus blunting the protectionist impact of border adjustability. It would remain to be seen, though, how quickly or how completely the value of the dollar would change.

Concern #2: Is the DBCFT compliant with WTO obligations?

The United States is part of the World Trade Organization (WTO) and we have ratified various agreements designed to liberalize world trade. This is great for the global economy, but it might not be good news for the Better Way plan because WTO rules only allow border adjustability for indirect taxes like a credit-invoice value-added tax. The DBCFT, by contrast, is a version of a corporate income tax, which is a direct tax.

The column by Charles Lane explains one of the specific problems.

Trading partners could also challenge the GOP plan as a discriminatory subsidy at the World Trade Organization. That’s because it includes a deduction for wages paid by U.S.-located firms, importers and exporters alike — a break that would obviously not be available to competitors abroad.

Advocates argue that the DBCFT is a consumption-base tax, like a VAT. And since credit-invoice VATs are border adjustable, they assert their plan also should get the same treatment. But the WTO rules say that only “indirect” taxes are eligible for border adjustability. The New York Times reports that the WTO therefore would almost surely reject the plan.

Michael Graetz, a tax expert at the Columbia Law School, said he doubted that argument would prevail in Geneva. “W.T.O. lawyers do not take the view that things that look the same economically are acceptable,” Mr. Graetz said.

A story in the Wall Street Journal considers the potential for an adverse ruling from the World Trade Organization.

Even though it’s economically similar to, and probably better than, the value-added taxes (VATs) many other countries use, it may be illegal under World Trade Organization rules. An international clash over taxes is something the world can ill afford when protectionist sentiment is already running high. …The controversy is over whether border adjustability discriminates against trade partners. …the WTO operates not according to economics but trade treaties, which generally treat tax exemptions on exports as illegal unless they are consumption taxes, such as the VAT. …the U.S. has lost similar disputes before. In 1971 it introduced a tax break for exporters that, despite several revamps, the WTO ruled illegal in 2002.

And a Washington Post editorial is similarly concerned.

Republicans are going to have to figure out how to make such a huge de facto shift in the U.S. tax treatment of imports compliant with international trade law. In its current iteration, the proposal would allow corporations to deduct the costs of wages paid within this country — a nice reward for hiring Americans and paying them well, which for complex reasons could be construed as a discriminatory subsidy under existing World Trade Organization doctrine.

Concern #3: Is the DBCFT a stepping stone to a VAT?

If the plan is adopted, it will be challenged. And if it is challenged, it presumably will be rejected by the WTO. At that point, we would be in uncharted territory.

Would that force the folks in Washington to entirely rewrite the tax system? Would they be more surgical and just repeal border adjustability? Would they ignore the WTO, which would give other nations the right to impose tariffs on American exports?

One worrisome option is that they might simply turn the DBCFT into a subtraction-method value-added tax (VAT) by tweaking the law so that employers no longer could deduct  expenses for labor compensation. This change would be seen as more likely to get approval from the WTO since credit-invoice VATs are border adjustable.

This possibility is already being discussed. The Wall Street Journal story about the WTO issue points out that there is a relatively simple way of making the DBCFT fit within America’s trade obligations, and that’s to turn it into a value-added tax.

One way to avoid such a confrontation would be to revise the cash flow tax to make it a de facto VAT.

The Economist shares this assessment.

…unless America switches to a full-fledged VAT, border adjustability may also be judged to breach World Trade Organisation rules.

Steve Forbes is blunt about this possibility.

One tax initiative that should be strangled before it sees the light of day is to give a tax rebate to exporters and to impose taxes on imports. …It’s a bad idea. Why do we want to make American consumers pay more for products while subsidizing foreign buyers? It also could put us on the slippery slope to our own VAT.

And that’s not a slope we want to be on. Unless the income tax is fully repealed (sadly not an option), a VAT would be a recipe for turning America into a European-style welfare state.

Concern #4: Does the DBCFT undermine tax competition and give politicians more ability to increase tax burdens?

Alan Auerbach, an academic from California who previously was an adviser for John Kerry and also worked at the Joint Committee on Taxation when Democrats controlled Capitol Hill, is the main advocate of a DBCFT (the New York Times wrote that he is the “principal intellectual champion” of the idea).

He wrote a paper several years ago for the Center for American Progress, a hard-left group closely associated with Hillary Clinton. Auerbach explicitly argued that this new tax scheme is good because politicians no longer would feel any pressure to lower tax rates. The very first subtitle of his paper even refers to “ending the race to the bottom.”

This…alternative treatment of international transactions that would relieve the international pressure to reduce rates while attracting foreign business activity to the United States. It addresses concerns about the effect of rising international competition for multinational business operations on the sustainability of the current corporate tax system. With rising international capital flows, multinational corporations, and cross-border investment, countries’ tax rates and tax structures are of increasing importance. Indeed, part of the explanation for declining corporate tax rates abroad is competition among countries for business activity. …my proposed reforms…builds on the [Obama] Administration’s approach…and alleviates the pressure to reduce the corporate tax rate.

This is very troubling. Tax competition is a very valuable liberalizing force in the world economy. It partially offsets the public choice pressures on politicians to over-tax and over-spend. If governments no longer had to worry that taxable activity could escape across national borders, they would boost tax rates and engage in more class warfare.

Also, it’s worth noting that the so-called Marketplace Fairness Act, which is designed to undermine tax competition and create a sales tax cartel among American states, uses the same “destination-based” model as the DBCFT.

Concern #5: Does the DBCFT create needless conflict and division among supporters of tax reform?

As I pointed out in my remarks at the Heritage Foundation, there’s normally near-unanimous support from the business community for pro-growth tax reforms.

That’s not the case with the DBCFT.

The Washington Examiner reports on the divisions in the business community.

Major retailers are skeptical of the House Republican plan to revamp the tax code, fearing that the GOP call to border-adjust corporate taxes could harm them even if they win a significant cut to their tax rate. As a result, retailers, oil refiners and other industries that import goods to sell in the U.S. could provide a major obstacle to the Republican effort to reform taxes. …The effect of the border adjustment, retailers fear, would be that the goods they import to sell to consumers would face a 20 percent mark-up, one that would force retailers like Walmart, the Home Depot and Sears…to raise prices and lose customers.

A story from CNBC highlights why retailers are so concerned.

…retailers are nervous. Very nervous. …About 95 percent of clothing and shoes sold in the U.S. are manufactured overseas, which means imports make up a vast majority of many U.S. retailers’ merchandise. …If the GOP plan were adopted as it’s currently laid out, Gap pays 20 percent corporate tax on the $5 profit from the sweater, or $1. Plus, 20 percent tax on the $80 cost it paid for that sweater from the overseas supplier, or $16. That means the tax goes from $1.75 to $17 for that sweater, more than three times the profit on that sweater. Talk about a hit to margins. …Retailers certainly aren’t taking a lot of comfort in the economic theory of dollar appreciation. …the tax reform plan will dilute specialty retailers’ earnings by an average of 132 percent. …Athletic manufacturers could take a 40 percent earnings hit… Gap, Carter’s , Urban Outfitters , Fossil and Under Armour are most at risk under the plan.

And here’s another article from the Washington Examiner that explains why folks in the energy industry are concerned.

…the border adjustment would raise costs for refiners that import oil. In turn, that could raise prices for consumers. The border adjustment would amount to a $10-a-barrel tax on imported crude oil, raising costs for drivers buying gasoline by up to 25 cents a gallon, the energy analyst group PIRA Energy Group warned this week. The report warned of a “potential huge impact across the petroleum industry,” even while noting that the tax reform plan faces many obstacles to passage.

Concern #6: What happens when other nations adopt their versions of a DBCFT?

Advocates of the DBCFT plausibly argue that if the WTO somehow approves their plan, then other nations will almost certainly copy the new American system.

That will be a significant blow to tax competition, which would be very bad news for the global economy.

But is also has negative implications for the fight to protect America from a VAT. The main selling point for advocates of the DBCFT is that we need a border-adjustable tax to offset the supposed advantage that other nations have because of border-adjustable VATs (both Paul Krugman and I agree that this is nonsense, but it still manages to be persuasive for some people).

So what happens when other nations turn their corporate income taxes into DBCFTs, which presumably will happen? We’re than back where we started and misguided people will say we need our own VAT to balance out the VATs in other nations.

The bottom line is that a DBCFT is not the answer to America’s wretched business tax system. There are simply too many risks associated with this proposal. I’ll elaborate tomorrow in Part II and also explain some good ways of pursuing tax reform without a DBCFT.

Former Reagan administration deputy U.S. trade representative and longtime trade-remedies attorney, Robert Lighthizer, is President-elect Trump’s choice for United States Trade Representative. Considered in conjunction with the appointments of Peter Navarro to head the newly-created National Trade Council at the White House (my take) and Wilbur Ross at the Commerce Department (my take), Lighthizer’s selection seems to confirm fears that U.S. trade policy is descending into darkness.  At the very least, it is reasonable to assume that for the foreseeable future trade policy will be overwhelmingly enforcement-oriented, while trade agreements and other forms of liberalization will be relegated to the doghouse.

For many years, Lighthizer has represented U.S. steel companies, America’s most trade-litigious industry, filing dozens of antidumping and countervailing duty petitions to keep foreign steel out of the United States. Some of the cases in which he was involved were brought before WTO dispute settlement, where the panels and Appellate Body ruled that the United States was administering its antidumping law in ways that violated U.S. commitments under the WTO Antidumping Agreement.

Perhaps, as a result of those experiences, Lighthizer has been a strident critic of the WTO’s dispute settlement body, which he accuses of overreach and usurpation of U.S. sovereignty. (Here is a debate from 10 years ago between Lighthizer and me on the merits of the WTO.) The fact is that there may be somewhat of a pro-complainant “bias” at the WTO because governments don’t bring cases to dispute settlement unless they are reasonably certain of victory.  There is a selection bias.  When the United States is the complainant, it wins most of the issues in most of the cases.  When the United States is the defendant, it loses most of the issues in most of the cases. It just so happens that the United States has had to defend its indefensible antidumping regime many times at the WTO, and in most cases it has lost.  Antidumping litigation is Lighthizer’s bread and butter.

Lighthizer has advocated for the formal establishment of a committee composed of retired federal judges to review WTO dispute panel and Appellate Body findings that are adverse to the U.S. government’s position. While that is not, in and of itself, necessarily provocative, the ultimate purpose of such a committee would be to collect evidence that the WTO has an anti-American bias, which might be used to advocate WTO withdrawal. The Uruguay Round Agreements Act, which was passed by the U.S. Congress in 1994, contains a provision that effectively requires Congress to vote every five years on whether the United States should remain a member of the WTO.

From Lighthizer’s view, this process would send a signal to the WTO and its members that if the United States doesn’t get its way, it might bolt the system.  And that would give the United States some extra leverage, which might deter the filing of formal complaints and add a corrupting political dimension to dispute settlement determinations. Or, perhaps worse, Lighthizer could use his perch at USTR to lobby Congress to vote for WTO withdrawal.

Lighthizer fancies himself a conservative, although he is more aptly characterized as an economic nationalist with deep disdain for free trade.  He has argued that true conservatives throughout American history have been suspicious of free trade and favored protectionism.  He proudly notes that Ronald Reagan – often pegged as a free trader – imposed all sorts of protectionist measures against imported cars, motorcycles, steel, textiles, and sugar.  And all of these measures were “successful,” he claims.

Despite conclusions reached after the appointments of Ross and Navarro, USTR’s role in formulating trade policy won’t be diminished, but dramatically altered. Enforcement will be the mantra and, I suspect, much of the enforcement effort will be directed at China, Mexico, and developing countries alleged to be the destinations for massive amounts of U.S. outsourcing.  But the targets may change when the Trump administration comes to realize that most U.S. outward investment goes, not to China or Mexico, but to Europe. Actually, the EU is likely to come under greater scrutiny because Trump and the GOP Congress want to overhaul the tax code, and some of the changes being considered may run afoul of U.S. WTO obligations, possibly prompting complaints from Brussels. Having added leverage to suppress formal EU complaints about border tax adjustments seems like it would dovetail neatly with Trump’s approach.

Whether and how long the imbalance between enforcement and liberalization persists will be determined, in part, by how provocative and unilateral U.S. enforcement efforts become. Raising import barriers will have an immediate and deleterious impact on the U.S. economy, especially on manufacturers who rely heavily on imported intermediate goods and capital equipment. Raising those barriers unilaterally – or in circumvention of WTO rules – would likely spark retaliation, which would reduce export revenues and exacerbate the economic damage. 

My best guess remains that Trump doesn’t want to kill the economy, will eventually recognize the folly of this approach, and will reverse course before too long.  But, buckle up.  It’s going to be a bumpy ride.

Harvard economist George Borjas recently published an important paper on how the unexpected surge of 125,000 Cubans (henceforth Marielitos) to Miami in 1980 lowered the wages of native-born male Miamians with less than a high-school degree. Because at least 60 percent of the Marielitos were high school dropouts, Borjas found that the negative wage effects were concentrated on Miamians with the same level of education.  

There are excellent criticisms of Borjas’ paper that show his results hinge on the control cities he chose, his exclusion of women, the age group of the workers, whether Hispanics are included, whether high-school-or-less or no-high-school-at-all are included, and whether datasets with the larger samples are used. For the sake of argument, supposing that Borjas made the correct methodological choices on every single point above, the Mariel Boatlift still raised the wages for low-skilled U.S. workers collectively due to wage complementarities. That’s because native-born Miamians with only a high school degree (no associate degree, no education after high school) experienced significant wage increases immediately after Mariel relative to workers with the same levels of education in the control groups, or placebos, of other cities. Borjas’ supporters ignore this finding but he does not. 

In his Mariel paper, Borjas reports the wage of high school dropouts relative to high school graduates in Figure 3(C) and the wage of Miami high school graduates across an all cities permutation in Figure 4(B), but he doesn’t have a dramatic graph like this that shows what happened to the relative wages of high school graduates after Mariel. 

Another working paper by Borjas and Monras on the wage effects of refugees also found that “the rate of wage growth for high school graduates, a group whose size was only increased modestly by the Marielitos, is noticeably higher in Miami than outside Miami.”  They go on to write that, “the predominantly low-skill Marielitos … raised the wage of workers with a high school education, and this effect is both numerically and statistically significant. The cross-wage elasticity is about +0.7 [compared to -0.9 for high school dropouts].”  They do not find any employment effects for high school dropouts but they did uncover positive and statistically significant employment gains for those with a high school degree. Furthermore, Figure 7.5 on page 148 of Borjas’ new book We Wanted Workers hints at a wage increase for high school graduates immediately after Mariel.              

My intern Cole Blondin and I followed Borjas’ methods to create graphs for the wages of high school graduates before and after the Boatlift. We used the March Current Population survey (March CPS) and combined the May Current Population Survey and the May Outgoing Rotation Group (May CPS-ORG) datasets. The only differences are that we present the figures in dollars rather than logs, we did not use three-year averages to smooth the data, and we did not recreate the synthetic control. One final note, the wage effect of the Marielitos must be compared to placebos because there was only one Miami in 1980 and we can’t actually observe what would have happened to that city had the Marielitos not arrived. We used the same sets of placebo cities as Borjas.

Even under Borjas’ assumptions, native-born male Miamians with a high school degree or less saw a ­net-wage increase after the Mariel Boatlift.    

March CPS 

Just as Borjas reported, there is a significant drop in the wages for male native-born Miamians with less than a high school degree who were 25 to 59 years old after 1980 relative to workers with the same characteristics in the placebos (Figure 1).  By contrast, the wages for Miamians with only a high school degree also increased after the Mariel Boatlift (Figure 2). The wage changes in both figures are statistically significant relative to the placebos. Miamians with just a high school degree are complementary to high school dropouts. Figure 3 shows the wages for high school dropouts and high school graduates in Miami.       

Figure 1

High School Dropouts, March CPS

 

Figure 2

High School Only Graduates, March CPS

 

Figure 3

High School Dropout and High School Only Graduate Wages 1977-2002, March CPS

 

Relative wages for high school dropouts reached their nadir in 1985 and 1986 while the wages for workers with only a high school degree reached their peak in 1984. A mere 19 percent of Miami workers in the March CPS sample had less than a high school degree but 36 percent had only a high school degree which means that more low-skilled American workers experienced a wage gain than a wage decline after Mariel.  

We compare the pre- and post-Mariel Miami wages, weighted by the relative size of the native educational cohorts in the March CPS, to produce a rough estimate of Mariel’s net impact on native wages.  For instance, if there are 10 high school dropouts who each lose $1 and 20 high school only graduates who each gained $0.60, then the net wages earned by Americans increased by $2 [(20*$0.60)-(10*$1)]. In such a scenario, total wages rise for Americans who are high school dropouts and high school graduates. 

We compared the post-Mariel period of 1981 to 1986 to the pre-Mariel period of 1976-1979. The total wage gain for high school graduates outweighs the total losses for high school dropouts in the “All Cities” placebo (the placebo that produced Borjas’ stunning graph). The Card and Low-Skill placebos also returned slightly net wage losses while the employment placebo returned a deeply negative result (Table 1).  The average for all the placebos from the March CPS data was -5.85.       

Table 1

Net Wage Effects, March CPS

          March CPS Differences in Differences Changes (1976-1979, 1981-1986)   Card Cities Employment Cities Low-Skill Cities All Cities No HS, Wage Changes Times Pop

-9.7804

-21.2793

-10.0078

-9.41663

HS Only, Wage Changes Times Pop

5.471363

4.892769

6.571003

10.13576

Net effect

-4.30904

-16.3865

-3.4368

0.71913

May CPS-ORG

Professor Borjas also used the May CPS-ORG data to test whether Mariel lowered the wages of similarly-skilled Miamians. The May CPS-ORG dataset returned a much smaller wage decrease for high school dropouts in Borjas’ paper. This is important by itself because the May CPS-ORG dataset is superior for two widely-reported reasons: First, the May CPS-ORG contains fewer errors because it asks respondents about their wages last week rather than last year (which is the case for the March CPS). Second, it has a larger sample size than the CPS in every year from 1979 onward.  

Regardless, we confirmed Professor Borjas’ findings that the wages of male high school dropouts in the relevant age range fell after the Mariel Boatlift, although they fell less than in the March CPS data (Figure 4). We also found that the wages for high school graduates in the May CPS-ORG dataset increased relative to the placebo cities after the Mariel Boatlift (Figure 5).

Figure 4

High School Dropouts, May CPS-ORG

 

Figure 5

High School Only Graduates, May CPS-ORG

 

The wage gains for high school graduates outweigh the losses of male high school dropouts in Miami for each placebo group—using the March CPS weight of the population by education (Table 2). The Card Cities, Low-Skill Cities, and All Cities placebos all returned very positive results.  The Employment Cities placebo was the only one that returned a slightly negative result. The average net gain for high school graduates and dropouts across the placebos is a positive +17.43. 

Table 2

Net Wage Effects, May CPS-ORG

May CPS-ORG Differences in Differences Changes (1976-1979, 1981-1986)   Card Cities Employment Cities Low-Skill Cities All Cities No HS, Wage Changes Times Pop

-2.20452

-8.33419

-1.67613

-1.91032

HS Only, Wage Changes Times Pop

28.30903

7.618387

25.00548

22.89419

Net effect

26.10452

-0.71581

23.32935

20.98387

To further check our results, we also weighted the wage changes by the May CPS-ORG survey’s estimate of Miami’s education level. The May CPS-ORG survey found that the share of Miami’s native population without a high school education is higher and the percentage with only a high school degree is lower than in the March CPS. Using the May CPS-ORG education weights returns a reduced net positive wage impact for the Card, Low-Skill, and All Cities groups while the Employment Cities group is more negative. Using the May CPS-ORG education estimates, the average is still a positive +10.09.    

Evaluating the Complementary Effects from the March CPS and May CPS-ORG

We ran Borjas’ four different sets of placebo cities on two educational groups of male workers in two different datasets—the March CPS and the May CPS-ORG. There were eight final estimates of the net effects, four in the March CPS and four in the May CPS-ORG.  Four of the eight showed a positive net-wage impact – three in the May CPS-ORG and one in the March CPS.  Four of the eight also showed a negative net-wage impact—three in the March CPS and one in the May CPS-ORG. For each placebo, the positive net-wage gains in the May CPS-ORG results were far larger than the estimated loss in either the May CPS-ORG or the March CPS.

Conclusion

The Mariel Boatlift provides a wonderful natural experiment to test how a sudden, exogenous surge of immigrants affects wages. Professor Borjas’ examination of how Marielitos substituted for native-born Miamians with the same level of education is an important component of that story. However, most have ignored the important complementary effects of the Marielitos on the wages of workers with only a high school degree. A full understanding of Professor Borjas’ contributions to this subject requires acknowledging these complementary effects. To borrow the language used by Professor Borjas, the Marielitos’ redistributed wages from dropouts to workers with only a high school degree with a net positive effect on all low-skill workers.  

On Monday, House Republicans will vote on a possible addition to the House Rules proposed by Rep. Kevin Cramer (R-ND) and endorsed by Rep. Pete Sessions (R-TX), Chair of the House Rules Committee. The proposed “Tenth Amendment Rule” could incentivize states to propose useful, limited-government constitutional amendments without any fear of a “runaway convention” (not that such fears are justified, just prevalent and therefore worth a response). It could be the most important House rule change in a generation.

The proposed rule states in its entirety:

It shall not be in order to consider a bill, joint resolution, amendment, or conference report referring to the States for ratification under Article V of the Constitution of the United States any amendment to the Constitution which is proposed by a convention called by Congress pursuant to such Article unless the amendment is within the permitted scope of the convention, as authorized under each of the applications of the States calling for the convention or, if the resolution or other legislation enacted by Congress to call for the convention identified specific resolutions adopted by States to call for the convention, the amendment is within the permitted scope authorized by such resolutions.

In other words, the House cannot refer back to the states for ratification any constitutional amendment that wasn’t duly proposed by the states in the first place. No amendment convention would be able to go beyond its charge; states could limit such a convention to an up-or-down vote on a specific amendment. 

This proposed rule has been named after the Tenth Amendment because that provision reserves most power to the states and to the people – which suggests that the states and the people have the power to limit the scope of any Article V convention. James Madison indicated that states had that power when he wrote in Federalist 43: “It [the Constitution] equally enables the general and the State governments to originate the amendment of errors, as they may be pointed out by the experience on one side, or on the other.”

Since 1994, when the American people supposedly triggered a tectonic shift by ending 60 years of Democratic control of the House, efforts to restore the federal government to its limited, constitutional roots have either failed to win 60 votes in the Senate, been countermanded by the big-government aspects of the Bush administration, or been eviscerated by subsequent Democratic majorities. But in 2017, proponents of limited government have a new advantage: the legislatures of 33 states have Republican majorities looking to push back on Washington.

A coalition of congressional and state leaders could potentially persuade Congress to propose permanent constitutional limits on federal power and debt. There has never been a constitutional amendment enacted after a proposal by the states and then an Article V convention – because Congress has seen the writing on the wall and jumped ahead of any such actions by proposing its own amendment. Similarly now, if states, emboldened by the new House rule, start making calls for amendment conventions, Congress would almost certainly propose the very amendments the states want – and, again, refer only them for ratification.

What sorts of amendments are worthy of consideration? I wrote about one idea at the start of the new Congress four years ago, and no constitutional reform has become more evidently necessary than the rebalancing of federal power by requiring that Congress approve major new federal regulations. The House has already twice voted to do just that in the form of the REINS (Regulations from the Executive in Need of Scrutiny) Act. But a statute like the REINS Act could be challenged in court or repealed by a future Congress. A constitutional amendment would be permanent.

More than 900 state legislators, 6 governors (including Vice President-elect Mike Pence), a unanimous Republican National Committee, and resolutions passed by 19 state legislative chambers have already urged Congress to propose such an amendment – called the Regulation Freedom Amendment – and polls show 2-1 voter support for it.

Empowered by the 10th Amendment Rule, House Republicans could mobilize state allies to persuade Congress to move this sort of thing along, among other opportunities for lasting reform. It will be interesting to see how House Republicans react to this opportunity.

The legal minimum wage will increase in 20 states today. The Wall Street Journal news story on that fact starts out accurately enough:

Minimum wages will increase in 20 states at the start of the year, a shift that will lift pay for millions of individuals and shed light on a long-running debate about whether mandated pay increases at the bottom do more harm or good for workers.

But it quickly segues into the same error that afflicts most such stories:

In California, the minimum goes up 50 cents, to $10.50 an hour, boosting pay for 1.7 million individuals.

Wages are also going up in many Republican-led states, where politicians have traditionally been skeptical of the benefits of minimum-wage increases.

In Arizona, one out of every nine workers is slated to receive a wage increase….So will tens of thousands of workers in Arkansas, Michigan and Ohio….

In all, about 4.4 million low-wage workers across the country are slated to receive a raise because they earn less than the new minimum in their respective states.

Every one of those sentences assumes facts not in evidence. What these new laws do is ensure that no worker can be paid less than a statutory minimum. They cannot ensure that every worker with a minimum-wage job will still have one if his employer required to pay more. They won’t prevent employers from replacing labor with technology, such as these McDonald’s order-taking kiosks. 

The Journal isn’t alone, of course. Here’s the Associated Press lead:

It will be a happy New Year indeed for millions of the lowest-paid U.S. workers. 

And CBS:

Millions will ring in the new year – with a raise. The minimum wage is going up in 20 states and Washington, D.C. as well.

And a Washington Post headline:

There’s some really good news for low-wage workers this weekend

What all these chipper stories fail to take into account is the possibility that some low-wage workers will lose their jobs because their work just isn’t worth the new minimum wage or the employer can’t be profitable with higher costs. There’s abundant evidence that higher minimum wage laws reduce employment, especially among young and minority workers. If only Journal reporter Eric Morath had read this op-ed headline in the Journal a year ago:

The Evidence Is Piling Up That Higher Minimum Wages Kill Jobs

Economist David Neumark, perhaps the leading student of the effects of minimum wage laws, wrote:

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired. 

Among the many studies supporting this conclusion is one completed earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years” and that “industries that tend to have a higher concentration of low-wage jobs show more deleterious effects on job growth from higher minimum wages.”

The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

I hope these stories will prove accurate, that millions of low-wage workers will get higher wages and that the new minimum wage rates will not reduce the growth in jobs that Americans need. But I’d have to shut my eyes to economic theory and empirical evidence to believe that. In fact, you’d pretty much have to be an economics denier to believe that a mandated increase in the supply of labor won’t reduce the demand for labor.

 

Once again, the editors at the New York Times have allowed their bias against school choice to get in the way of reporting facts.

On Friday, the NYT ran a blog by Professor Susan Dynarski with the incredibly misleading headline (which, in fairness, she likely didn’t write): “Free Market for Education? Economists Generally Don’t Buy It.

Based on that description, you might think that a survey of economists found that most economists think a market in education wouldn’t work, or at least that there were more economists who thought it wouldn’t work than thought it would. Well, not quite. Dynarski writes:

But economists are far less optimistic about what an unfettered market can achieve in education. Only a third of economists on the Chicago panel agreed that students would be better off if they all had access to vouchers to use at any private (or public) school of their choice.

Follow the link to the 2011 IGM survey and you’ll find that 36% of surveyed economists agreed that school choice programs would be beneficial–but only 19% disagreed and 37% expressed uncertainty.

Scott Alexander of the Slate Star Codex blog writes:

A more accurate way to summarize this graph is “About twice as many economists believe a voucher system would improve education as believe that it wouldn’t.”

By leaving it at “only a third of economists support vouchers”, the article implies that there is an economic consensus against the policy. Heck, it more than implies it – its title is “Free Market For Education: Economists Generally Don’t Buy It”. But its own source suggests that, of economists who have an opinion, a large majority are pro-voucher. […]

I think this is really poor journalistic practice and implies the opinion of the nation’s economists to be the opposite of what it really is. I hope the Times prints a correction.

Actually, it’s even worse than that. Oddly, Dynarski did not include the results from the more recent 2012 IGM survey, in which the level of support for school choice was higher (44%) and opposition was lower (5%), a nearly 9:1 ratio of support to opposition. When weighted for confidence, 54% thought school choice was beneficial only 6% disagreed.

We should give Professor Dynarski the benefit of the doubt and assume that she didn’t know about the more recent results (though they pop right up on Google and the IGM search feature), but the NYT deserves no such benefit for its continuing pattern of misleading readers about the evidence for school choice.

Former colleague and flourishing restaurateur Justin Logan and I have an essay in the current edition of Strategic Studies Quarterly: Why Washington Doesn’t Debate Grand Strategy. For now, you can read it for free.

Our argument is that defense policy analysis here is mostly in the grips of what we call an operational mindset, which accepts the existing policy goals and evaluates the means of achieving them—building a better mousetrap rather than asking whether a mousetrap is worth building. In the essay, we describe both the demand for and supply of analysis about grand strategy, which means a theory about how states create security for themselves.

We argue that there’s little demand for such analysis in Washington because of a near consensus in the foreign policy establishment in favor of the grand strategy of primacy, which is sometimes called “liberal hegemony” or even “deep engagement.” We discuss the limits and cause of that consensus. It comes, we argue, mostly from the historical growth of U.S. wealth and military power. We reject two alternatives sources, democratic preferences and inherent intellectual superiority, by noting that neither the public nor academics are nearly as fond of primacy as foreign policy thinkers in Washington.

Turning to supply, we explain why defense analysts, including those think tanks, respond to that demand, or really its absence, by focusing on operational questions, in contrast to academics, who devote more scrutiny to strategic questions. We describe the various incentives that encourage analysts to serve power. But unlike some who see the problem similarly, we deny that the solution lies in protecting defense analysis from political interests:

A standard reaction to this notion that politics often wants science to serve rather than guide it is to propose emancipation, schemes to liberate analysis from political influence. That means keeping campuses and think tanks free of political ambition and government funds or somehow protecting “the policy process” from “self-interested individuals and groups.” But it is neither possible nor desirable to purge policy debates of self-interest. Washington’s marketplace of policy ideas is flawed—but democratic. Were it possible to purge it of self-interest, the market would be barren and silent but for the few failing merchants proudly disdainful of customers that never arrive. Think tanks totally divorced from political interests would wither or die, leaving their job to entities that respond to political demand. The solution to bad policy is better politics, meaning more productive conflict that demands new ideas, not quixotic attempts to empower Platonic guardians by quieting interested parties.

But what about Trump, you might be asking? Doesn’t he defy the foreign policy establishment in his disdain for allies, musings about nuclear proliferation, and affection or Russia, and thus generate demand for the debate we say is lacking? I plan to thoroughly answer that question in a coming essay. For now, I have two brief responses.

First, as I discussed recently in War on the Rocks, Trump will likely deviate less from establishment thinking than many expect. In fact, his appointments suggest he’ll govern like a hawkish Republican, with some tics. Time will tell, of course.

Second, the essay considers the possibility of a president that bucks the primacy consensus, though not as much as it should have, in retrospect. That’s one function of the wimpy modifiers throughout that dilute the strength of its claims. I even wanted to drop a “really” or “much” in front of “debate” in the title, as I’ve done here, but got overruled. More importantly, we note there that public opinion allows for the election of leaders that buck the consensus, and we observe its strength in the bipartisan attacks on Trump for his foreign policy heresies during the campaign. The incoming administration offers a strong test of the operational mindset, at least.

The incoming Trump administration and the Congressional majority plan a push to repeal federal spending caps in order to boost military spending. A key talking point for this push claims that the Obama administration’s anemic military spending has caused a “readiness crisis,” where the U.S. military lacks the men, weapons, and funds to do its job. On the campaign trail, or Hannity, the claim became that the Obama is “gutting the military.” The president-elect typically went further, calling the U.S. military a “disaster” and in “shambles.”

In a recent presentation, embedded below, I raised three problems with these claims. One is that military spending remains high. The recent drawdown cut military spending by more twenty percent in real terms, but it came after buildup of nearly fifty percent. It’s now around Cold War peaks, in real terms.

Second, the military is shrinking partly because of its heightened quality. Rising personnel costs reflect the heightened professionalization of American troops. Similarly, U.S. weapons systems have grown deadlier, more complex, and costlier to maintain. The net result is forces are fewer but substantially more capable than previously possible.

Here I’ll focus on the third problem with claims of a readiness crisis: the debate uses readiness only as an impetus to tout other issues. Overall, U.S. military readiness is alright, better when it comes to fighting current wars. Complaints about readiness mostly accompany requests for higher military spending. What readiness shortfalls exist could be solved without increasing the existing Pentagon budget. Those that complain the loudest about readiness, like the majority of the House Armed Services Committee, could improve it through reallocation, but they prefer to hype the crisis as a way to push for a higher total budget and stave off sacrifices

In the U.S. military, readiness generally refers to “the ability of forces to perform the missions and tasks assigned to them,” as Todd Harrison puts it. That metric depends on variables like whether units are adequately manned, the quality of training, equipment condition, and overall morale. The Pentagon tracks readiness through two internal tracking systems and classified reports to Congress.

Military leaders sometimes cite those scorecards, but they do little to support claims of a readiness crisis. Pentagon insiders and outside analysts largely agree that official readiness ratings are a poor guide for actual performance of military missions, especially in combat. Various unmeasured factors, like enemy capabilities, impact how those missions go. Questions of the military balance thus invade real readiness discussions. The vagueness and variability of readiness means that, as Brad Carson and Morgan Plummer note, debates occur without a shared definition, and the sides talk past each other.

For example, last summer, in two articles, David Petraeus and the Michael O’Hanlon attacked the idea of a readiness crisis by arguing that U.S. military forces remain well-trained and equipped for the fights they face. They note that readiness is far from perfect, especially in areas like Marine Corps aviation, but that ships and planes are mostly well-operated, and in good shape, especially compared to possible enemies. The torrent of responses chose to focus on other things: complaining that spending should be higher, worrying that preparation for future wars should be better, in some instances even acknowledging the absence of a readiness crisis before discussing various shortfalls.

Likewise, the service chiefs, whose cries about the dangers of sequestration (by which they mean budgets restrained by spending caps that Congress has annually increased and augmented with alleged war funds) inflame the “gutting the military” crowd, avoid the word “crisis” when pressed. They highlight areas of future risk or capabilities they would like, note problem areas, request more money, and mostly reject politicians’ contentions that U.S. forces are broken and weak.

To the extent that there is a readiness problem, it is partly the fault of those that most lament it: the Armed Services Committees, especially in the House, which has held numerous hearings on the topic. Its chairman, Rep. Mac Thornberry of Texas, recently blamed the Obama administration for a helicopter crash in Hawaii that killed twelve Marines. He argued that because the administration was “playing political games” and limiting operational funds needed for flight training, it bore responsibility for the crash.

It’s true that investigators believe that low readiness in terms of training and morale helped cause the crash. But Thornberry is himself guilty of using readiness as a political game. Though his committee has less say than appropriators, it could push to shift funds into the operations and maintenance accounts that fund readiness at the expense of some acquisition spending. However, acquisition is generally of greater interest to Congressmen because the money goes to their local production facilities and creates jobs in their districts. Thornberry prefers to keep the readiness issue as a lever to push for higher military spending rather than reallocate funds that help him keep his seat. Meanwhile, the administration he vilified has tended to push for operations and maintenance funding and sacrificed acquisition to get it.

A review of the debate about the readiness crisis reveals not only that there’s no real crisis, but also that’s there’s no real debate about it. The debate is actually a vehicle for other issues, like how much we ought to spend and what we ought to do to meet threats. Readiness has become a kind of synonym for a strong defense—a concept so capacious and positive that everyone uses it to mean what they want. It’s best to discard the term and recognize that military spending choices are largely about what you want to be ready for, not how ready you are for everything.

You Ought to Have a Look is a regular feature from the Center for the Study of Science. While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic. Here we post a few of the best in recent days, along with our color commentary.

As the time towards Trump’s inauguration closes, panic mounts in the climate change-agenda community as evinced by their hyperventilation about what a Trump Administration might unleash on President Obama’s Climate Action Plan. This includes ventilation about blocking access to climate data, data manipulation, investigating climate scientists, squashing dissent, selective science, end runs around Congressional intent, etc…sort of like a catalog of what they have been doing since climate change went prime time in 1988.

Many of these bloviations are completely unfounded—for example, a particular favorite of the press during recent weeks has been that “Scientists [are] Rac[ing] To Preserve Climate Change Data Before Trump Takes Office.” This is nonsense—despite the hand-wringing and (faux) concern raised by some folks. And while we, like everyone else should be, are opposed to deleting government datasets (paid for with our tax dollars), there is simply no evidence that such an action is in the works or even being contemplated.

Many of the other fears are overblown as well, but there are, in fact, some things that should bother climate campaigners (and no one else). These include efforts to retract the Clean Power Plan, to eliminate the use of the social cost of carbon as currently constituted in federal cost/benefit analyses, and acknowledgement the current generation of climate models has no utility with regard to policy.

Together these actions would go a long way to dismantling much of the overreaction inherent in Obama’s Climate Action Plan and also form a strong case for reversing the EPA’s “endangerment finding” for carbon dioxide. Should any/all of this come to pass, the climate campaigners will go bonkers, while the rest of us will be freed from burdensome regulations and have greater economic ability to address/adapt to what climate changes may come our way.

Here’s what’s afoot. First is well-designed dismantling of Obama’s Clean Power Plan, described in a letter sent to Mike Pence, Paul Ryan, and Mitch McConnell (and copied to Myron Ebell, head of Trump’s EPA transition team), by a coalition of 24 state Attorneys General. It builds upon their belief that the Clean Power Plan goes far beyond what is allowed under the Clean Air Act and that it unlawfully commands states to “fundamentally alter electricity generation in their States by shifting from existing fossil-fueled power plants to other methods of generation preferred by EPA.”

Basically, the plan that they’d like to see President Trump put into motion starts with an immediate executive order making it clear that “it is the Administration’s view that the Rule is unlawful and that EPA lacks authority to enforce it.” From there, they’d like the Trump Administration to work closely with the States on ways to withdraw the rule and with Congress to make sure that no such rule gets promulgated in the future, i.e., that any “legislation should recognize the rights of States to develop their own energy strategies, so that energy can be generated in a cost effective and environmentally responsible manner.”

This course of action sounds a lot like the strategy that David Rivkin Jr. and Cato Adjunct Scholar Andrew Grossman laid out in an op-ed published in the Wall Street Journal two weeks after Trump was elected. It will be good to see their sound advice taken to heart and put into action.

Next up are signs that federal government’s love affair with the social cost of carbon is going to come to an abrupt and welcome end. The social cost of carbon, or SCC, is the Obama Administration’s determination of the monetary cost (tallied as the modelled damages resulting from climate changes that occurs between now and the year 2300) from every new ton of carbon dioxide that is emitted by human activities. Yes, not only does this sound ludicrous, but you can come up with nearly any number you want (including negative values—which indicate a net benefit from carbon dioxide emissions) based on how you treat certain parameters—like the future discount rate, the climate sensitivity, global vs. domestic impacts, the damage functions, adaptations, etc. Currently, in 2015 dollars, the Obama Administration’s SCC is about $40/ton. Alternative calculations produce numbers that range from near zero to several hundreds of dollars—basically, anybody’s guess.

But, while you may think that this huge uncertainty would pretty much render reliance on the SCC in federal rulemaking moot—you’d be wrong. In fact, just the opposite is the case—the Obama Administration requires the inclusion of its determination of the SCC in all cost/benefits analyses for federal decision-making that may result carbon dioxide emissions (which is nearly everything).

We have been strongly pushing back against this practice for several years now through all avenues available to us, and it now seems that the Trump Administration will take much of what we have written into consideration.

A recent article in Bloomberg explores many of the problems with the SCC and the avenues that the new Administration would have to defang the SCC. You ought to have a look.

And to this, we add an avenue that was not explored in the Bloomberg article, but which was discussed in a recent Vox article about the White House Office of Information and Regulatory Affairs (OIRA). According to Jody Freeman, a former climate advisor to President Obama:

OIRA is the location in the White House where they oversee agency rulemaking. This office oversees the methodology that agencies use to count up costs and benefits for new rules. That can be changed with the stroke of a pen. And it sounds weedy, but it’s the kind of thing that can make it harder to issue new regulations.

So for instance, right now the Obama administration currently uses a “global social cost of carbon” for its climate rules — that means if you have any rule that reduces greenhouse gases, the benefits counted for that rule include the [climate] benefits globally. You could imagine a Trump OIRA saying, “We don’t want to do that anymore. We’re not going to count the social cost of carbon as a benefit.” That changes the calculus for which rules are cost-beneficial.

This seems intriguing—we really ought to have more of a look!

And finally, the grand prize of all would be overturning the EPA’s finding that greenhouse gases “endanger both the public health and the public welfare of current and future generations.” From this “endangerment finding” stems the EPA’s imperative to regulate carbon dioxide emissions and unleashes all manner of regulations large and small. 

There are many approaches that a Trump Administration can take. They could convince Congress to act by explicitly stating that regulating carbon dioxide is not within the purview of the Clean Air Act. Alternatively, the EPA could overturn its own endangerment finding, which, according to the Supreme Court, compels the agency to regulate carbon dioxide.

The EPA has just been handed a loaded gun to accomplish just that.

It is all laid out in a forthcoming paper in the Bulletin of the American Meteorological Society that was released online in August. The paper “The art and science of climate model tuning” is written by Frederic Hourdin and 15 co-authors. It details the phenomenal amount of adjustment that has been applied to the GCMs in order to get them to simulate the 20th Century or just the present climate. 

Recently, it was summarized by Paul Voosen in Science, who said the modelers have heretofore have clammed up about all of this, fearing when it became public, “skeptics” would have a field day. Specifically, he wrote this doozey:

For years, climate scientists had been mum in public about their “secret sauce”: What happened in the models stayed in the models. The taboo reflected fears that climate contrarians would use the practice of tuning to seed doubt about models—and, by extension, the reality of human driven warming.

Yes, in fact, we will. And we should, with the caveat that carbon dioxide does cause some warming, but far, far less than what is in these models.

What comes out of the paper is that each fiddling of the models—which includes adjusting everything from the earth’s reflectivity to the mixing of heat in the ocean—gives a different answer for how much the earth will warm for doubling atmospheric carbon dioxide. 

This figure, known as the “equilibrium climate sensitivity” (ECS) is the bottom line when it comes to climate change. If it can be moved to any value depending upon the “tuning” of the model, then it is the modeler and not the physics that decides this critical number. Hourdin et al. put it rather artfully when they said, that it’s important when fiddling with the models to keep the ECS within an “anticipated acceptable range.”

What’s “acceptable” is therefore entirely subjective and, outside of ridiculous values that don’t comport with reality (such as one that would imply a greenhouse runaway), we are now regulating carbon dioxide by arbitrary caprice. That knowledge dooms EPA’s Endangerment Finding.

The Endangerment Finding is itself based upon a massive compendium, EPA’s “Technical Support Document,” which is a literature review of the causes and effects of global warming based, of course, on the GCMs. There is nothing to keep the EPA from modifying that document with this new (and universal) finding, and concluding that the technical support for an Endangerment Finding no longer exists.

Our greener friends will take that to court, to absolutely no avail. Courts do not intervene over the scientific determinations of agencies, a doctrine called “Chevron Deference” to their technical expertise. This was originally decided in the 1984 Supreme Court case Chevron, Inc. v. Natural Resources Defense Council

Georgia Tech atmospheric scientist Judy Curry wrote this about the Hourdin paper:

“If ever in your life you are to read one paper on climate modeling, this is the paper that you should read. Besides being a very important paper, it is very well written and readable by a non-specialist audience.”

We agree completely.

The Washington Post’s Jennifer Rubin has a solution for the fake news epidemic: better collaboration among think tanks. “In an era of ‘fake news,’ with a president-elect who regularly lies and partisan hacks who dispute that there are such things as ‘facts,’ think tanks seem more important than ever,” Rubin wrote.

Among her specific recommendations for improving the quality and salience of think tanks’s ouput, Rubin would like to see more efforts to dispel false rumors, and confirm the accurate ones. For example, “a joint project confirming Russian attempts to interfere with our and our allies’ elections.” 

She also suggests that “reducing think tank partisanship and involving those outside the Beltway might go a long way toward finding legislative consensus and stimulating civil debate.”

But one of her other suggestions particularly caught my eye: Civil debate and respectful disagreement.

Think tanks like to put on programs featuring a parade of essentially like-minded experts. There is much more to be gained by, say, the Cato Institute inviting professional colleagues from, say, the Council on Foreign Relations to discuss American support for democratic values in the world. If nothing else, inculcating an atmosphere of convivial debate may spread to pundits, lawmakers, activists and voters themselves. 

As it happens, Cato did host a colleague from the Council on Foreign Relations just a few weeks ago, to discuss a recent paper on North Korea. And I think that we generally do a pretty good job of assembling panels of speakers who are not all singing from the same playbook, but who instead disagree with one another, from time to time, and usually in a civil and respectful way. In short, we already collaborate quite a bit.

But I decided to test my assumptions. With the help of my able assistant James Knupp, I compiled a list of the 16 public events hosted and organized by the defense and foreign policy department in 2016. All but one included participants from institutions other than Cato, a total of 42 speakers. Of these, nearly 60 percent (25) are not primarily affiliated with a think tank, but rather work as full-time professors at a major research university. This is consistent with Rubin’s suggestion that DC think tanks reach beyond the Beltway, and it reflects Cato’s ongoing commitment to expand outreach between academia and the policy community. This effort includes our visiting fellows program, and the publication of papers by non-Cato scholars in the academy (e.g. here and here). 

Of the 17 speakers from think tanks, many major institutions were represented, including Brookings (3 times); and CNAS, CSIS, and New America (2 times, each); as well as the Atlantic Council, the German Marshall Fund, Hoover, RAND, and USIP.

And, as it happens, we’re continuing this tradition into the new year. Our first foreign policy event of 2017, on January 17th, features, among others, Kathleen Hicks from the Center for Strategic and International Studies, and will be moderated by the Post’s own Karen DeYoung. I will be thrilled if Rubin attends. If she does, she will see that we value a frank discussion of ideas, ones that do not fit within neatly partisan labels.

The open question arising from Rubin’s suggestion for greater collaboration among think tanks is whether that will actually cause people to change their minds, especially about facts that challenge preconceived notions, or that are uncomfortable. But, despite what I’ve read about cognitive shortcuts (e.g. confirmation bias), and of experts’ collective inability to influence major events (the 2016 presidential election being merely the latest case in point), I’m willing to give it a try. So I look forward to speaking at many think tanks around town in 2017, just as I’m sure we’ll continue to welcome their experts here.

By the end of the year, 2016 had accrued a list of international crises, celebrity deaths and electoral shenanigans so long that a spate of articles appeared questioning whether it was the worst year ever, while social media appeared to be primarily filled with people asking “Is 2016 over yet?” But at least in the realm of foreign policy, there’s little hope that 2017 will bring much respite.  

It would, of course, take an extraordinarily narrow view of history to argue that 2016 was really the worst year on record. That would require one to overlook 1942-3, the height of Second World War barbarity, or 1914, the year when the “war to end all wars” began. 1968 wasn’t that great, either, bringing us the assassination of Martin Luther King Jr, the crushing of the Prague Spring, Vietnam War massacres, and a plane accident involving four nuclear bombs.  Or if you want to go back further in history, it’s pretty hard to ignore 1347, the year the Black Death reached Europe.

But 2016 did present an impressive series of foreign policy and political disasters, ranging from a coup in Turkey to Russian meddling in the U.S. electoral process to terror attacks in France, Belgium, and Germany. In the ongoing Syrian civil war, Russian and Syrian government troops finally succeeded in crushing opposition in Aleppo at massive humanitarian cost. And crises that in any other year would have been front page news – like North Korean missile tests or worsening relations between Iran and Saudi Arabia – were sidelined in favor of more urgent crises.

2016 also saw a global surge in populism, with the election of bluntly anti-establishment politicians like Donald Trump and Rodrigo Duterte, and the surprising victory of pro-Brexit campaigners in the United Kingdom’s referendum on the European Union.  Indeed, one of the few positive foreign policy events of the year – Colombia’s peace deal with the FARC, ending a 50-year conflict – was almost derailed when voters rejected the deal at the ballot box.

Unfortunately, it’s not clear that 2017 will substantially improve matters. Many of this year’s crises will in fact carry over into next year: the war in Syria continues apace, Brexit negotiations are ongoing, and North Korea is likely to continue its saber rattling. Worse, some of this year’s less visible crises have the potential to deteriorate further, like the war in Yemen or Venezuela’s economic and social collapse.

More broadly, the overarching trends that defined much of the foreign policy landscape in 2016 look set to continue for the foreseeable future. Populism is likely to impact next year’s key European elections. In France, Marine Le Pen’s National Front looks likely to do well, as does Germany’s Alternative for Deutschland. In the Netherlands, anti-EU sentiment has some speculating that March’s election could precipitate a ‘Nexit’ from the EU.    

The complexity of this year’s crises – and the broader shift towards a more multipolar international system – also looks set to continue. This will create challenges for U.S. policymakers, who may have to seek cooperation with states like Russia or China on key issues at the same time as opposing them on others. And authoritarian backsliding by countries within U.S. alliances, most notably Turkey, raises key questions about what U.S. security guarantees in some areas actually achieve.

Still, as one cliché points out: “Prediction is hard, especially the future.” This pessimistic view of foreign policy in 2017 may well turn out be inaccurate. It simply seems unlikely given the growing global trends which precipitated many of this year’s big foreign policy surprises. Pretty soon, we may be asking if 2017 is over yet. 

The Washington Post has published another report on the Glenn Defense Navy scandal. For more than a decade, the head of Glenn Defense, Leonard Glenn Francis, cozied up to Navy leaders in the Pacific to win lucrative contracts for resupplying ships. He cashed in on overpriced contracts and fraudulent invoices, and he had numerous moles inside the Navy to ensure his continued enrichment.

Francis wined and dined Navy officers, providing them with gifts, prostitutes, and other favors to get their help and protection. The episode is appalling in so many ways, and it has disturbing implications: If Navy officers were so easily seduced by this Singapore con artist, are leaders in other military and intelligence services just as vulnerable to old-fashioned, low-tech bribes?

Here are some highlights from the Post:

The Navy allowed the worst corruption scandal in its history to fester for several years by dismissing a flood of evidence that the rotund Asian defense contractor was cheating the service out of millions of dollars and bribing officers with booze, sex and lavish dinners, newly released ­documents show.

The Singapore-based contractor, Leonard Glenn Francis, found it especially easy to outwit the Naval Criminal Investigative Service (NCIS), the renowned law enforcement agency that has inspired one of the longest-running cop shows on television.

Starting in 2006, in response to a multitude of fraud complaints, NCIS opened 27 separate investigations into Francis’s company, Glenn Defense Marine Asia. In each of those instances, however, NCIS closed the case after failing to dig up sufficient evidence to take action against the firm, according to hundreds of pages of law enforcement records ­obtained by The Washington Post under the Freedom of Information Act.

Known as Fat Leonard for his 350-pound physique, Francis held lucrative contracts to resupply U.S. warships and submarines in ports throughout Asia. He was also legendary within the Navy for throwing hedonistic parties, often with prostitutes, to entertain sailors.

Other Navy documents obtained by The Post show that staffers at U.S. Pacific Fleet headquarters were so worried about the potential for trouble that they drafted a new ethics policy to discourage Navy personnel from accepting favors from Francis. But their effort was blocked for more than two years by admirals who were friendly with the contractor, according to officials familiar with the matter.

Despite rising signs of widespread fraud, the Navy kept awarding business to Francis’s company. In 2011, Glenn Defense won deals valued at $200 million to service U.S. vessels at ports stretching from the Russian Far East to Australia.

Besides Francis, 12 people — including an admiral and nine other Navy personnel — have pleaded guilty to federal crimes. Five other defendants still face charges.

Justice Department officials say there is no end in sight to the investigation and that 200 people have fallen under scrutiny. Among them are about 30 current or retired admirals, according to Navy ­officials.

… In exchange for paid sex with prostitutes, cash and luxury vacations, Francis’s informants fed him a near-daily diet of classified material and inside information that enabled him to keep gouging the Navy and outfox his pursuers for years, according to court records.

A prior Washington Post story on the scandal is here.

A study examining federal bureaucratic failure is here.

Since the launch of the Sovrin Foundation, Phil Windley has been blogging a lot (no, reallya lot and more, more, more, more, and more) about how self-sovereign identity works and can be used. His most interesting and accessible post for a liberty-minded identity-layperson might be “On Sovereignty,” in which he briefly lays out what it means to have a “self-sovereign” identity.

Sovereignty over your identity doesn’t mean having complete control over information about yourself, but it puts you in a peer relationship with others, including the larger organizations we deal with, such as governments. “The beauty of sovereignty,” Phil emphasizes, is the “balance of power that leads to negotiations about the nature of the relationships between various entities in the system.” I want to expand on this notion that there are power arrangements in identity systems.

In a centralized identity system, the identity provider (such as your Department of Motor Vehicles) determines whether you can assert information and what you can assert. Centralized systems also often share information about you, or facilitate such sharing, whether you want them to or not. Implementation of the REAL ID Act would essentially move these powers from state governments to the U.S. Department of Homeland Security.

A self-sovereign identity system, on the other hand, gives you power to assert information about yourself, which others may accept or reject. It also better positions you to decline to share information about yourself. Those powers are important.

“Power” is an elusive concept. We’re more familiar with talking about power in terms of political and legal arrangements, such as how the Constitution gives certain powers to the U.S. federal government or denies all U.S. governments other powers. But absent these rules, “pre-political” power is simply the ability to do something or act in a particular way, or the capacity to direct or influence the behavior of others or the course of events. Power comes down to what resources you can bring to bear in going after what you want.

To illustrate pre-political power arrangements, look at physical power in the “state of nature.” If a tall, muscular man meets a short, skinny man on a trail in a desolate forest, the arrangement of power between the two is pretty clear: the bigger man has more ability to use force, so he can take things from the smaller man, do him in, or whatever he pleases. Give the skinny man a gun, though, and the power allocation reverses. The gun’s capacity to defeat human musculature gives the small man more power to defend himself, to take from the larger man, or to do the larger man in. Physics and technology allocate power before legal rules come into play.

Pre-political power arrangements seem to strongly influence what political and legal rules can achieve. It’s taken hundreds of years to bring the power of physical force possessed by feudal lords and governments relatively under control. This is probably because it’s pretty great to have power, and pretty awful to lose it.

It follows from all this that liberty can be advanced not just by fettering governments’ powers, but by allocating power more evenly in the first place. There aren’t going to be “do-overs” about how physical arrangements allocate power, but the ways that information arrangements allocate power have yet to gel. Balanced power in identity and information systems are important to pursue now.

Instead of the large man and the small man, imagine two scenarios where a government agent meets a local resident on that same trail. It’s a post-political world, so the government agent has to live within decent rules, but there can be very different allocations of power based on information arrangements.

In the first scenario, the government agent knows nothing more than what he sees: an ordinary resident making her way up the path. Without information to justify anything else, he bids the resident good day and they pass one another.

In the second scenario, the government agent can identify the resident and pull up records about her. Instead of sharing brief courtesies, the government agent notes debts owed on some parking tickets and a tax bill in arrears. With information about where the resident and her friends live, and data about them, the agent might infer that the resident is on her way to visit people with criminal histories. Financial details in hand, the government agent finds that the quality of clothing and jewelry she wears suggests untaxed or illicit profits on her person. In these ways or countless others, identity and biography empowers the government agent to interfere with the life of the hapless local resident by questioning, detaining, or arresting her.

Think also of the power imbalance when the government can decide when to allow someone to identify him- or herself and when to deny it. In the not-too-distant future, identity systems will all be digital and electronic. This means your centralized identity provider, the DMV, will be able to shut off recognition of identities that have unpaid parking tickets, tax liabilities, or other defects in the eyes of official policy.

Many people like this power when used to deny licenses to illegal immigrants today, but the use of the power is likely to broaden. Linking the vote to a national ID, as the Carter-Baker Commission proposed some years ago, could be one direction. Conditioning access to health care, financial services, housing, and more on the showing of government-issued ID have all been raised seriously in recent years. The power held by identity providers—now mostly governments—are only going to grow.

The solution is to disperse that power—not through rules but through technical infrastructure design. Let people assert their own identities without requiring it to be done through intermediaries, governmental or otherwise. There is plenty of capacity in a distributed identity system to prove the facts that make identities reliable, even while they minimize the data that needs to be shared in doing so.

The Sovrin Foundation has a good library of documents describing how they would do this, using a public, permissioned blockchain. And for those who are just learning the importance of identity—say, through this blog post—one entry-point to the basic concepts might be my book, Identity Crisis: How Identification is Overused and Misunderstood.

Lester Packingham beat a parking ticket and celebrated on his Facebook page by proclaiming, “God is good! … Praise be to GOD, WOW! Thanks JESUS!” For this post, he was sentenced to prison—because he was a registered sex offender and a North Carolina statute bans such people from accessing a wide variety of websites. (Packingham took “indecent liberties with a minor” when he was 21, receiving a suspended sentence and probation, which he had completed.)

The law is meant to prevent communications between sex offenders and minors, but it sweeps so broadly that it conflicts with basic First Amendment principles. It doesn’t even require the state to prove that the accused had contact with (or gathered information about) a minor, or intended to do so, or accessed a website for any other illicit purpose.

After the state court of appeals overturned Packingham’s conviction—finding the criminal “access” provision unconstitutional—the North Carolina Supreme Court, over vigorous dissent, reversed and reinstated the conviction and sentence. The U.S. Supreme Court took the case and now Cato, joined by the ACLU, has filed an amicus brief supporting Packingham’s position.

The North Carolina law bans access not just to what people consider to be social-media sites, but also any sites that enable some form of connection between visitors, which would include YouTube, Wikipedia, and even the New York Times. The statute is also vague, in that it covers websites that “permit” minor children to create profiles or pages—and you can’t even find out what a website “permits” without first looking at its terms of service—itself a violation of the statute. Even if the site purports to stop minors from accessing its content, it’s impossible for someone to know whether and how that contractual provision is enforced in practice. Someone subject to this law literally can’t know what he can’t do or say; the police themselves aren’t sure!

The statute also fails constitutional scrutiny because it criminalizes speech based on the identity of the speaker. It’s well established that a state may not burden “a narrow class of disfavored speaker,” but that’s exactly what happens here. The very purpose of the First Amendment is to protect the speech of disfavored minorities—which sex offenders certainly are. Signaling out this speech for prosecution—without any allegation that it relates to conduct or motive—should earn the Tar Heel State a big “dislike” from the Supreme Court.

The Court hears argument in Packingham v. North Carolina on February 27.

William Felkner was a student at Rhode Island College, a state school, studying social work. The school’s faculty explained that as a profession “we do take sides” and are “devoted to the value of social and economic justice.” Accordingly, the professors required the students to lobby the state legislature for progressive policies.

But Felkner didn’t hold these same progressive views. When he refused to espouse the political ideology that was required, he was given failing grades and dismissed from the program. But of course the First Amendment has long been understood to prohibit the government from compelling an individual to espouse a political opinion with which he or she disagrees. Despite this, the lower state court actually upheld the school’s action, finding that no constitutional rights had been violated.

Cato has now joined the Foundation for Individual Rights in Education and the National Association of Scholars on an amicus brief to the Rhode Island Supreme Court, arguing that constitutional rights don’t stop at the schoolhouse door. The foundational case in this area was one in which the U.S. Supreme Court held the requirement to salute the flag in public schools was unconstitutional.

While the lower court here had held there was no evidence that Felkner was required to lobby, this holding is specifically refuted by the professor’s testimony. When asked, “So, in other words, the school was going to tell them which position they had to lobby on?”, he answered, “Yes.” The trial court also improperly focused on precedent at the primary and secondary school level rather than a post-secondary institution like Rhode Island College.

This precedent was about in-classroom speech—that teachers can maintain decorum in the classroom and require certain recitations as a means of instruction—but the trial court misapplied it to a requirement to lobby publicly in a context in which the student would be presumed to be speaking for himself. The trial court also misapplied precedent about speech which implicitly bore the approval of the school. While a school can properly restrict children’s speech that the public might reasonably perceive to be the school’s speech, it can’t require students to profess a certain political ideology—and there’s even less leeway if the students are adults.

In Felkner v. Rhode Island College, the Rhode Island Supreme Court should protect the First Amendment rights of students from being compelled to advocate policies with which they disagree as a condition of maintaining their standing at the school and progressing towards a degree.

Donald Trump’s election ushers in a new challenge for homeland security and counterterrorism both at home and abroad. Trump owns, has a stake in, or has lent his name to scores of properties all over the United States and the world. A terrorist could decide to target a Trump Tower in Stuttgart, a Trump hotel in South Korea, or a Trump golf resort in Dubai. A terrorist might even decide to target the famous carousel in Central Park, which Trump also owns. The attraction to the terrorist is obvious: Trump’s hotels, resorts, and condominiums are vulnerable “soft targets,” without any of the serious security measures surrounding American embassies or other government buildings. Even better, most of these targets have the president’s name on them in huge letters. Clearly the symbolic damage of such an attack would be immense.

What is not clear, however, is just how great a threat this exposure represents and how the United States should deal with it.

A quick look at the list of Trump’s properties reveals that several of them are located in countries with significant serious civil unrest and instability. Trump Tower in Istanbul, for example, probably seemed like a pretty safe bet five or ten years ago as Turkey was working towards membership of the European Union. But today, thanks to spillover from the Syrian civil war, the failed military coup, and the recent assassination of the Russian ambassador to Turkey, the neighborhood seems much less secure than it used to.

Trump properties in Muslim-majority nations may present the greatest risk of attack, given Trump’s hardline rhetoric towards the Islamic State and towards Muslims and Islam more generally. Trump Tower Manila, for example, sits within easy striking distance of Abu Sayyaf, a Philippine Islamist group that has pledged allegiance to the Islamic State and has a history of bombing attacks. Trump also owns high-visibility properties in Azerbaijan, the United Arab Emirates, and India, all of which house one or more jihadist groups. Even Trump Tower in Seoul might not be safe: ISIS has recently labeled South Korea an enemy of the caliphate, attempting to incite attacks on U.S. installations in South Korea. In all of these locales, Trump Towers might prove to be an irresistible target.

Trump’s properties clearly present a new kind of Achilles heel for the United States, but what exactly should be done about the potential threat? One position might be to argue that the United States should do nothing. After all, the United States government bears no legal responsibility for providing security at these private establishments. But practically speaking it seems obvious that a major terrorist attack on one of Trump’s towers would have political and security implications that go well beyond the legal question. Attacks on American embassies from Tehran to Benghazi, for example, have always provoked anger and support for retaliation among U.S. citizens. Aware of the symbolism of an attack on a Trump Tower, Americans would likely feel similarly, putting pressure on the U.S. government to respond.

Perhaps one of the most critical aspects to consider along these lines is the reaction of the president himself. How would Trump respond if Trump Tower in Istanbul went up in smoke, killing hundreds of people? From everything we have seen since he began his presidential campaign, it seems likely that Trump would take such an act extremely personally. And given his hawkish rhetoric about dealing with terrorism, it is possible that Trump would respond emotionally, using his executive authority to take extreme measures beyond those dictated by a cool calculation of costs and benefits. Unfortunately, not only might such a response be dangerous and counterproductive for the United States, it might also play right into the hands of terrorists seeking to provoke just such an overreaction.

A second possibility is for Trump to divest from his private holdings and to begin to take the necessary steps to rename his associated properties. This would have the benefit of dramatically reducing the symbolic value of the properties as targets while simultaneously reducing the potential emotional impact on Trump himself. An attack on a hotel that “used” to bear Trump’s name is less likely to offend his ego and to provoke him to an overreaction.

If Trump is unwilling to do this, then he must come up with an alternative plan to ensure that his privately-owned properties and those bearing his name do not expose him to potential blackmail or provocation once he becomes president. Unfortunately, Trump’s reluctance to divest from his businesses, or even to acknowledge the potential for conflicts of interest, strongly suggests that he will not come up with such a plan, or even admit that such a plan is necessary. If so, Trump will be choosing to leave the United States vulnerable on a new front in the battle against terrorism.

The laudable goal of increasing accountability in law enforcement could lead to increased surveillance. Perhaps nothing illustrates this danger better than the merger of body camera and facial recognition technology, something some body camera manufactures have already achieved. Strict policies on facial recognition being used on body camera data are not in place at any of the major police departments that either are or soon will be equipping officers with the cameras. This is especially concerning at a time when body cameras are very popular with the American public. But, with restrictions in place, it is possible to increase police accountability while protecting privacy.

The risks of using facial recognition technology with body cameras was recently outlined by Constitution Project privacy fellow Jake Laperruque at Cato’s recent surveillance conference. You can watch his presentation here.

Laperruque rightly points out some of the most concerning issues associated with facial recognition and body cameras. Police body cameras with facial recognition could be prone to misuse. While this technology could be used to identify violent suspects it’s worth considering that it may also be used to identify those who have outstanding warrants for petty crimes.

There is also the possibility of police using the fusion of body camera and facial recognition technology in order to track people. As Laperruque correctly highlights, mobile police with body cameras could allow for surveillance far more intrusive than the stationary CCTV cameras that are ubiquitous in many cities.

Some may argue that if you’ve done nothing wrong then you have nothing to hide. But, as Laperruque reminds us, even those taking part in First Amendment protected activities, such as taking part in a protest or attending a mosque, could be identified via body camera, thereby prompting some kind of chilling effect.

Pew found that a similar chilling effect affected some Americans who changed their online habits in the wake of the Edward Snowden revelations. One survey respondent said, “I don’t search some things that I might have before,” and another remarked, “I used to be more open to discussing my private life online with my select friends. Now I don’t know who might be listening.” It’s reasonable to think that similar sentiments will accompany the proliferation of facial recognition-equipped police body cameras on display at protests and religious gatherings.

These concerns shouldn’t prompt lawmakers to ban facial recognition software being used on body cameras. Good policies can allow for police to use facial recognition software during emergencies. As Laperruque points out, exigent circumstance exceptions to the Fourth Amendment already exist and can be applied to police using facial recognition technology to analyze body camera footage. 

Laperruque suggests limiting facial recognition to investigations into serious offenses and requiring judicial authorization before police use facial recognition to track or identify someone. This will prevent police officers from indiscriminately scouring body camera footage with facial recognition technology in order to build profiles of citizens engaged in legal activity. 

When considering body cameras we should keep in mind that they can be used as platforms for surveillance technologies. As criminal justice reformers continue to call for the deployment of police body cameras they should remember that body cameras without appropriate policies in place could be used as tools for surveillance rather than increased accountability. Fortunately, as Laperruque shows, policies can be implemented to mitigate this risk. 

Imagine that your company’s board chairman, against the wishes of the board of directors and in contravention of the corporate charter, hires an interim CEO. Despite that illegal action, the interim CEO disciplines you in some manner. Would that discipline be any more legitimate if, two years later, the board finally agrees to hire the CEO, who then retroactively approved his own previous actions?

This is what’s happened at the highest levels of government. When Congress created the Consumer Financial Protection Bureau as part of the larger Dodd-Frank financial reform, it specified that the director was to be appointed by the president “by and with the advice and consent of the Senate.” This placed what’s called an Appointments Clause limitation on the director’s position.

Nearly five years ago, President Obama named Richard Cordray the CFPB director—after Elizabeth Warren’s expected appointment met significant political resistance—during what the president erroneously believed was a Senate recess. (You’ll recall that the Supreme Court unanimously invalidated the National Labor Relations Board appointments Obama made at the same time.) Cordray was only confirmed as the director, in a larger compromise with the Senate, nearly two years later.

In the interim, the CFPB filed an enforcement action against Chance Gordon regarding his provision of mortgage-relief services, and Cordray later ratified it. Gordon challenged the enforcement action as emanating from an unconstitutional authority, but the lower courts ruled against him, finding that the post hoc ratification resolved any Appointments Clause deficiencies. Now Gordon has petitioned the Supreme Court for review.

Cato has filed an amicus brief in support of Gordon, urging the Court to take up the case. Congress created the CFPB with the advice-and-consent requirement for a reason: the agency has vast power with virtually no accountability mechanisms, such that the Appointments Clause provision is one of the few meaningful checks on its activities. Furthermore, Congress did not authorize the CFPB to bring enforcement actions without a duly appointed, Senate-confirmed director.

Advice and consent is “more than a matter of etiquette or protocol,” the Supreme Court held in Edmond v. United States (1997), it’s a structural safeguard intended to curb executive power. Also, when Dodd-Frank first gave the CFPB its sweeping authority to define unfair, deceptive, or abusive acts or practices, it specified that these enforcement powers could not be exercised before a director had been validly appointed. Cordray’s later ratification of his own actions can’t cure the original unconstitutional sin of an unsanctioned prosecution. Only Congress could authorize the CFPB’s use of its awesome powers without first having a fully confirmed boss in place—which Congress purposely did not do.

Allowing Cordray to ratify the agency’s otherwise illegal past conduct would prejudice Gordon’s rights, and those of many other similarly situated individuals and companies. The lower courts have effectively allowed the CFPB—an agency that already possesses massive enforcement powers—to circumvent the Appointments Clause (in violation of Article II) while, at the same time, seizing the ultimate authority over the legal effect of judicial orders (in violation of Article III).

As James Madison observed in Federalist 47, “The accumulation of all powers legislative, executive and judiciary in the same hands . . . may justly be pronounced the very definition of tyranny.” The Supreme Court should take up Gordon v. CFPB to prevent this sort of dangerous accumulation of power from happening in the future.

In January 2015, Randy Metcalf was involved in a bar-fight in Dubuque, Iowa, where he seriously hurt a man. Was he prosecuted for assault under state law? No. Because Metcalf allegedly shouted racial slurs during the fight, federal prosecutors indicted him for one count of violating the Hate Crimes Prevention Act of 2009 (HCPA): causing bodily injury “because of the actual or perceived race, color, religion, or national origin of any person.”

The HCPA was enacted under Section 2 of the Thirteenth Amendment, which authorizes Congress to enforce the Constitution’s ban on slavery—an authority the Supreme Court has extended to eliminating the “badges and incidents” of slavery. Before his trial—and ultimate conviction—Metcalf challenged the constitutionality of the HCPA, arguing that racially motivated violence does not fall within congressional authority.

The district court upheld the HCPA, however, deferring to Congress’s power to “rationally determine” what the badges and incidents of slavery are. Metcalf appealed his case to the U.S. Court of Appeals for the Eighth Circuit, where Cato has now filed an amicus brief that mirrors two previous ones we filed on the same issue in unrelated cases. We argue that the use of hate-crime laws to sweep intra-state criminal activity—here an allegedly racially motivated bar fight—into federal court has nothing to do with stamping out slavery, and therefore does not fall within Congress’s enumerated powers. 

Not only are federal hate-crime laws constitutionally unsound, but, as George Zimmerman’s trial highlighted, they invite people dissatisfied with a state-court outcome to demand that the government retry unpopular defendants. That implicates one of our most fundamental liberties: protection from being prosecuted twice for the same act. Indeed, this protection from being placed in “double jeopardy” is explicitly enshrined in the text of the Fifth Amendment: “nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb.”

In the 1920s, however, the Supreme Court recognized a “dual sovereignty” exception to the rule, permitting the federal government to prosecute defendants even after they had endured trial at the state level. This exception emanated from the Court’s narrow concern that weak state enforcement of prohibition laws would disrupt the federal government’s ability to bring bootleggers to justice. Once Prohibition ended, however, the dual-sovereignty exception did not. Not only did it survive, it has thrived in the face of the ever-expanding federalization of the criminal law—a body of law that has now grown so large the number of crimes it covers cannot be counted, exposing more and more people to federal criminal penalties for crimes traditionally reserved to the states to enforce through their police power.

The HCPA is a prominent example of the danger federal overcriminalization has wrought, and is indeed even more susceptible to abuse due to the highly emotional nature of the underlying offenses. Moreover, the HPCA’s coverage is so broad that almost any violent crime could be subject to double prosecution by the state and federal government—and indeed any rape could be seen as hating a particular sex.

In United States v. Metcalf, the Eighth Circuit should end this practice, find the HCPA unconstitutional, and let state authorities deal with the Randy Metcalfs of the world.

Donald Trump has said he wants to cancel President Obama’s Deferred Action for Childhood Arrivals (DACA) program and has implied he would do it on his first day in office. DACA allows young immigrants—known as Dreamers—who were brought to the U.S. illegally as children to live and work here temporarily

Trump recently softened his tone, saying he would try to “work something out” with Dreamers. But DACA probably won’t disappear overnight when Trump assumes office on January 20th in any case. Rather, it will slowly wind down as the immigrants’ temporary work permits expire. Here’s why and how that will happen.

How DACA operates

There are essentially three parts of DACA, which are detailed in a Department of Homeland Security (DHS) memorandum from Secretary Janet Napolitano. The first part is the deprioritization of removal of non-criminal unauthorized immigrants. Currently, the department relies on detailed priorities when deciding whether to remove a specific person. The DACA memo tells DHS agents to prevent Dreamers that they encounter “from being placed into removal proceedings or removed from the United States.”

The second part of DACA essentially formalizes that decision not remove them. DACA recipients apply for and are issued a Notice of Action I-797 form (below) stating that removal action against them has been “deferred” for two years. Their information is entered into a database, and if it is checked against immigration databases, they are shown as lawfully present in the United States during that time. More than 800,000 young immigrants have enrolled in DACA and received such a letter.

Figure 1: DACA Form I-797 Notice of Action

Source: Imgur

Finally, this receipt of deferred action authorizes the immigrants to request an employment authorization document (EAD) similar to the one below, which is also valid for two years. Under current law, any person in the United States—legally or illegally—can legally seek employment, but it is illegal for an employer to employ a noncitizen who is not authorized to work. Thus, an EAD is really about authorizing employers to make a hire, not about authorizing the DACA recipient to seek a job.*

What Trump can do about DACA

Trump could theoretically overturn the first part of DACA on day 1, authorizing agents to apprehend and remove DACA recipients. This is very unlikely. First of all, Congress has repeatedly enacted Homeland Security appropriations bills that instructed the president to “prioritize the identification and removal of aliens convicted of a crime by the severity of that crime.” Second, while it is possible that Trump could ignore this, he has stated that he will indeed continue to prioritize criminals (one Trump advisor has suggested that immigrants arrested for, but not yet convicted of, serious offenses would also be prioritized). Third, Trump’s vague promise to “work something out” implies at least some unwillingness to go out of his way to deport Dreamers. Fourth, Trump’s unrealistic vow to deport 2 million criminals makes it unlikely he will waste precious resources on low priority, non-criminal cases.

Trump could easily cancel the second part of DACA on day 1, telling U.S. Citizenship and Immigration Services to cease accepting applications for I-797 deferred action forms. These forms are technically valid for two years, but they clearly state that they were issued as part of DACA. Deleting DACA recipients from ICE databases that list them as “lawfully present” could be more time-consuming, but probably not technically impossible.

Figure 2: DACA-based Employment Authorization Document (EAD)

Source: WangLawOffice

Because employment authorization is dependent on a grant of deferred action, canceling part 2 of DACA would legally end part 3 as well. But in practice, the administration cannot prevent DACA recipients from working until their employment authorization document expires. As can be seen in the EAD above, nothing on the physical document indicates that it was issued under DACA, and employers are legally obligated to accept any facially valid, non-expired form of identification issued by the federal government. There is no electronic way to cancel an EAD, and discriminating against job applicants simply because they are using an EAD is illegal.*

The Obama administration has showed how difficult ending DACA quickly will be

President Obama actually tried to cancel certain DACA EADs in 2015. In 2014, two years after DACA was initially implemented, the Obama administration declared it would expand DACA to a broader group of immigrants and issue 3-year EADs. When several states sued to prevent implementation of that memo and the Deferred Action for Parents of Americans memo, a judge imposed an injunction against the expanded DACA in February 2015. The Obama administration initially misinterpreted his order and incorrectly continued to issue 3-year EADs as renewals to the initial group of DACA recipients.

The administration sent or resent 2,600 three-year EADs to DACA recipients after the judge’s order in February. Because the expiration date on the EAD prevented the administration from halting DACA recipients’ employment authorization electronically, U.S. Citizenship and Immigration Services (USCIS) had to individually recoup them. DHS sent out 2,600 letters and called each recipient to inform them that they would be replacing 3-year EADs with 2-year EADs. USCIS officials also apparently made visits to some recipients’ “listed address” to collect the 3-year EADs in person. DHS also said, “If you fail to return your card, USCIS will terminate your DACA and all employment authorizations effective July 31, 2015.” It is not clear how they planned to effectuate this termination.

Ultimately, USCIS failed to recover 22 cards, or failed to receive good cause for not receiving them. As a result, those 22 individuals were “terminated from DACA.” The agency says termination involved sending the following letter to DACA recipients:

Any DACA-based EAD you received (including your recently issued 2-year EAD) is now invalid. You must return all DACA-based EADs to USCIS immediately. Fraudulent use of your EADs could result in a referral to law enforcement. You are still required to return your invalid EADs to USCIS. As noted in your Notice of Intent to Terminate, USCIS may consider failure to return your invalid EADs a negative factor in weighing whether to grant any future requests for deferred action or any other discretionary requests.

However, this letter failed to provide a statute under which the DACA recipient could be prosecuted, and the immigration statute and two criminal statutes relating to misuse of documents or fraudulent use of documents do not appear to prohibit use of a genuine EAD issued legally to the person who is using it.* In any case, there would be no practical constraint on these DACA recipients seeking employment, since an employer that was unaware of the cancellation could continue to employ them lawfully.* Moreover, there is no indication that these 22 immigrants were in fact removed from the country.

In the end, even when offering to replace EAD cards, DHS needed to send agents to recipients’ homes, and 1 percent of recipients still failed to cooperate. It is easy to imagine how difficult it would be if there was no offer of a replacement. While the fact that home visits were made demonstrates that DHS does have the knowledge and ability to track down DACA recipients in certain cases, it is likely that as soon as any apprehensions were made, other DACA beneficiaries would move.

How DACA would naturally wind down

Even if it wanted to, the Trump administration would likely be dissuaded from ending DACA immediately by the practicalities of cancelling all 800,000 EADs alone. But it makes especially little sense to do this when a majority of the EADs will expire within a year of Trump assuming office in any case. The Obama administration has since 2014 made public quarterly breakdowns of when DACA recipients renewed their status or received their status for the first time. Figure 3 provides those figures with projections for the last three quarters, based on the typical rate of approvals for initial applications and the number of 2-year renewals during the same quarters two years prior.

Figure 3: Timeline of DACA Approvals—Initial and Renewals—April 2014 to March 2017

Source: USCIS Data Set: Form I-821D Deferred Action for Childhood Arrivals. July 2016 to March 2017 are projections based on the number of two-year renewals in those months in 2014 and 2015. January to March 2017 is projected based on the percentage of days of the current administration’s term.

This timeline of DACA approvals allows for the creation of a rough timeline of DACA EAD expirations, provided in figure 4. More than 85 percent of all DACA EADs are 2-year authorizations. Another 108,000 are 3-year authorizations that were issued in late 2014 and early 2015. Unfortunately, the 3-year EADs will expire for most receipients in December 2017 or January 2018—sooner than if they had been issued two-year renewals, which they could have renewed in December 2016 and early January 2017, allowing for an extra year of authorization. As a result, there will be a more constant stream of DACA expirations than there were DACA approvals.

Figure 4: Projected DACA Expirations by Quarter

Source: Author’s calculation based on USCIS DACA Approval Figures. See figure 3 explanation.

Approximately 314,000 DACA recipients will lose DACA EAD authorization in 2017—about 38 percent of all DACA applicants. Another roughly 467,000 will lose authorization in 2018—about 115,000 of those will happen in the first quarter of 2018, meaning that DACA will be half over by March 2018.

Figure 5: Projected DACA Expirations by Year

Source: Author’s calculation based on USCIS DACA Approval Figures.

A couple of uncertainties are present in this analysis. First, the administration allows DACA renewal applications up to 6 months in advance, and some DACA renewal approvals occurred before the initial 2-year period ended, meaning that the administration issues a determination before the new period begins in some cases. In other cases, the administration issued renewals after the 2-year period was over. Thus, it is possible that the periods of DACA authorization could continue somewhat beyond the 2-year mark of their approval (though the data is divided into 3-month chunks, so it cannot be far off). Second, for the same reason, it is possible that the current administration could issue pre-approved EADs before the end of its term. This would obviously require ramping up the already-high current pace of renewals.

Worst case and best case scenario for DACA recipients under President Trump

The worst case scenario for DACA recipients would be that the Trump administration stops accepting new DACA applications and eliminates any kind of priorities for removal, allowing agents to apprehend any unauthorized immigrant that they meet. The administration could further create panic in the immigrant community by targeting certain DACA recipients for arrest, using the address information that they provided as part of their application. At the same time, the Trump administration could potentially threaten to prosecute employers or the immigrants themselves if they use their EADs. This would create chaos for employers and workers, as no employer would know if the EAD they were reviewing was valid.

At the other extreme, the Trump administration could continue the current priorities for removal and allow current recipients of DACA to use their EADs until they expire, while not accepting new applications or renewals. This would be the least controversial and most practical decision that would also be consistent with Trump’s campaign promises.

*The contents of this article are intended to convey general information only and not to provide legal advice or opinions. No action should be taken in reliance on the information contained in this article. If the reader is in need of legal advice, they should contact a licensed attorney.

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