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President-Elect Trump’s selection of philanthropist and long-time school choice advocate Betsy DeVos for Secretary of Education has the public education establishment and its allies in panic mode. American Federation of Teachers President Randi Weingarten tweeted “Trump has chosen the most ideological, anti-public ed nominee since the creation of the Dept of Education.” Over at Slate, Dana Goldstein frets that “Trump could gut public education“—even though federal dollars account for less than 10 percent of district school funding nationwide. The New York Times has also run series of hand-wringing pieces about what the Trump administration has in store for our nation’s education system.

At the center of the panic over Trump’s nomination of DeVos is their support for school choice. Although light on details, Trump has pledged to devote $20 billion to a federal voucher program. As is so often the case, the most vocal opponents of federal school choice are right for the wrong reasons. Not only does the federal government lack constitutional jurisdiction (outside of Washington, D.C., military installations, and tribal lands), but a federal voucher program poses a danger to school choice efforts nationwide because a less-friendly future administration could attach regulations that undermine choice policies. Such regulations are always a threat to the effectiveness of school choice policies, but when a particular state adopts harmful regulations, the negative effects are localized. Louisiana’s folly does not affect Florida. Not so with a national voucher program. Moreover, harmful regulations are easier to fight at the state level than at the federal level, where the exercise of “pen and phone” executive authority is increasingly (and unfortunately) the norm.

Many of Trump’s critics have not addressed very real federalism concerns, but have instead used the DeVos appointment to attack school choice generally, particularly its more free-market forms.

In a New York Times blog, Kevin Carey of the left-wing New America Foundation writes:

Ms. Devos [sic] will also be hamstrung by the fact that her deregulated school choice philosophy has not been considered a resounding success. In her home state, Detroit’s laissez-faire choice policies have led to a wild west of cutthroat competition and poor academic results. While there is substantial academic literature on school vouchers and while debates continue between opposing camps of researchers, it’s safe to say that vouchers have not produced the kind of large improvements in academic achievement that market-oriented reformers originally promised.

In a Times op-ed, Tulane Professor Douglas Harris echoed these critiques, claiming that “even charter advocates acknowledge” that Detroit’s charter school system—which DeVos supposedly “devised […] to run like the Wild West”—is “the biggest school reform disaster in the country.”

Consider this: Detroit is one of many cities in the country that participates in an objective and rigorous test of student academic skills, called the National Assessment of Educational Progress [NAEP]. The other cities participating in the urban version of this test, including Baltimore, Cleveland and Memphis, are widely considered to be among the lowest-performing school districts in the country.

Detroit is not only the lowest in this group of lowest-performing districts on the math and reading scores, it is the lowest by far. One well-regarded study found that Detroit’s charter schools performed at about the same dismal level as its traditional public schools. The situation is so bad that national philanthropists interested in school reform refuse to work in Detroit. As someone who has studied the city’s schools and used to work there, I am saddened by all this.

Likewise, Harvard Professor Paul Reville decried that “in places like Michigan and Arizona where the approach to opening up choice has been a Wild West version of an unregulated free market, the results have been highly disappointing, giving school choice a bad name.”

Charter schools in Michigan and Arizona may be subject to fewer government regulations than in other states, but it’s absurd to describe the sectors as “laissez-faire” or “an unregulated free market.” For example, charter school regulations in both states, as elsewhere, limit the ability of charter schools to set their own mission (e.g., they must be secular), mandate that they administer the state standardized test, forbid them from setting their own admissions standards, forbid them from charging tuition, limit who can teach in the schools, limit the growth of the number of schools, and so on.

“Laissez-faire” indeed!

And although Michigan’s results are far from stellar, they’re also not the “disaster” that Harris depicts. Indeed, Harris links to the 2013 CREDO report, which found that, on average, Detroit’s charter schools outperformed the district schools that their students would otherwise have attended. Indeed, nearly half of Detroit’s charter schools outperformed the city’s traditional district schools in reading and math scores, while only one percent of charter schools performed worse in reading and only seven percent performed worse in math.

Source: CREDO’s 2013 report on charter schools (page 44).

CREDO’s 2015 report even called Detroit’s charter sector “a model to other communities.” I’d say that’s overstating it. Nevertheless, while Detroit’s district schools are so bad that it’s not a very high bar, Detroit does show how even a significantly regulated system of school choice can outperform the government’s system of district schools. Using the CREDO study to knock Detroit’s charter sector is, to borrow a phrase from Harris, “a triumph of ideology over evidence.” 

And since Harris mentioned the NAEP, let’s see how Arizona’s “Wild West” charter sector performs. As education analyst Matthew Ladner has detailed, Arizona’s charter sector not only outperformed the state average for gains between the 2011 4th-grade and 2015 8th-grade NAEP tests for math and language arts, but they beat the statewide average gains for every single state. The Arizona charter sector’s gains between the 2009 and 2015 NAEP science tests were at least double the statewide average gains everywhere else.

Source: Matthew Ladner.

A word of caution is in order. These comparisons don’t account for differences in demographics among states nor changes in demographics over time. The raw NAEP results cannot tell us whether a particular policy caused any improvement or decline in the scores. Moreover, as Ladner notes, it’s possible to have significant gains while simultaneously doing poorly overall. The bowler whose average score improves from a 25 to a 50 might earn the “Most Improved” trophy while still being the worst bowler in the league. That said, after controlling for demographics, Arizona’s math and language arts scores are above average (13th nationwide). Although we don’t have adjusted scores for Arizona’s charter sector, they are likely even better. Moreover, even using raw scores, Arizona charter students perform about as well as Massachusetts students on the 2015 8th grade NAEP science test. For that matter, Arizona’s charter schools topped the list for college attendance among Arizona’s 2015 graduates.

If Harris believes that supposed lack of regulation in Detroit’s charter sector (at least as compared to charter school regulations in other states) accounts for their poor performance on the NAEP, how does he explain the Arizona results?

Indeed, even without heavy top-down oversight, Arizona manages to close down poorly performing charter schools fairly quickly through a rather innovative method called “parental choice.” The average closed charter operated for only four years and had an average of only 62 students enrolled in their final year. As Ladner explains, parents put most of those charters out of business before the regulatory apparatus got around to it:

Arizona parents seem extremely adept at putting down charter schools with extreme prejudice. Arizona parents detonate far more schools on the launching pad compared to the number we see bumbling ineffectively through the term of their charter to be shut by authorities (or to give up the ghost in year 14 in an ambiguous fashion). Both of these things happen, but the former happens with much greater regularity than the latter. Having a vibrant system of open enrollment, charter schools and some private school choice means that Arizona parents can take the view that life is too short have your child enrolled in an ineffective institution.

The critics’ read of the evidence on voucher programs also leaves much to be desired. Harris points only to research on statewide voucher programs in Louisiana and Ohio that found negative impacts, but he ignores the near-consensus of more than a dozen random-assignment studies that found modest positive impacts on student performance on tests as well as on high school graduation and college matriculation. Outside of Louisiana’s heavily regulated voucher program, none were found to produce a negative impact and only one found no discernible impact. (The Ohio study was not random-assignment and its comparison group may have been severely compromised by the study’s design.) Moreover, nearly every study on the impact of private school choice policies on district school performance found a positive impact, including in Louisiana and Ohio. The one exception was Washington, D.C., where the voucher funds come from a separate source and therefore a decrease in district school enrollment does not affect their funding.

On the whole thus far, private school choice programs have been an improvement over the status quo. Nevertheless, Carey is only half right when he writes that “vouchers have not produced the kind of large improvements in academic achievement that market-oriented reformers originally promised” because no state has yet adopted the sort of large-scale, lightly regulated, universal voucher system that market-oriented reformers like Milton Friedman called for. Instead, most voucher programs are limited in scale and eligibility and subject to numerous regulations. They’re designed, essentially, to fill empty seats rather than to revolutionize the way education is delivered. Small-scale choice programs should be expected to deliver positive but small-scale results, and that is what the research has found.

Advocates of large-scale private school choice programs should be careful not to over-promise, but critics of market-oriented educational choice policies should also be careful not to cherry pick or to make claims that the research literature does not support. Outside heavily regulated environments, private school choice policies have a consistently positive track record. What we should be able to agree about is that the positive track record of state-level school choice policies does not imply that Congress should enact a federal voucher program.

Donald Trump has called the North American Free Trade Agreement the “worst trade deal ever negotiated.” If he were speaking on behalf of Canadian exporters or American consumers of softwood lumber, his point would have some validity. For more than 20 years, NAFTA has failed to deliver free trade in lumber. Instead, a system of managed trade has persisted at the behest of rent-seeking U.S. producers, egged on by Washington lawyers and lobbyists who know a gravy train when they see one.

Those who consider the United States a beacon of free trade in a swirling sea of protectionist scofflaws will be surprised by the sordid details of the decades-long lumber dispute between the United States and Canada. Among those details is the story of how the U.S. Commerce Department (DOC) ran roughshod over the rule of law to manufacture the leverage needed to extort from Canadian lumber mills a sum of $1 billion, which was used to line the pockets of American mills and the U.S. Forestry Service, while restricting lumber imports for nearly a decade through October 2015, at great expense to retailers, builders, and home buyers.

With that ugly history mostly expunged from the public’s memory, the U.S. lumber industry is back at the trough again, demanding its government intervene to restrict Canadian supply, following a whole 13 month period during which it was forced out of the nest to operate in an environment rife with real market conditions! In the quiet shadows of the Friday after Thanksgiving, U.S. softwood lumber producers filed new antidumping and countervailing duty petitions with the DOC and U.S. International Trade Commission (ITC), alleging that dumped and subsidized Canadian imports were causing material injury to the domestic industry.

Whether the DOC finds legitimate evidence of dumping or countervailable subsidization is actually beside the point here. The agency has proven itself quite capable of producing evidence it is willing to defend as legitimate, which is all that matters when the game plan is to use the specter of a long, drawn out procedural battle—a period during which importers have no certainty about whether they will have to pay duties or how large that bill will be—to arm-twist the Canadians back to the table to agree, once again, to limited U.S. access in exchange for suspension of the unfair trade petitions.

If the investigations go forward and injurious dumping and/or injurious subsidization are found—a likely outcome given the discretion DOC has to administer these laws—preliminary duties likely would be imposed in April 2017 and final duties imposed by the end of the year.  Depending on those duty rates (and how willing importers are to stomach the risk that their duty liability increases) imports of lumber from Canada could continue. But, the more likely outcome is that the two sides will reach a new agreement to limit Canadian access to the U.S. market, through quantitative restrictions, export taxes, or some combination of the two, before preliminary countervailing and antidumping duties are imposed. 

Unfortunately, this wouldn’t be the first time that the U.S. trade remedy laws have been used to extort settlements under which foreign producers agree to restrict their exports to the United States in exchange for the U.S. government dropping often spurious claims against them. But the lumber case provides an especially egregious example of how the United States—self-proclaimed champion of free trade—uses the threat of protectionism to strong arm even its closest trade partner.

(If you’re interested in diving deeper into this post, the full story is published here, on Forbes.)

At the risk of understatement, I’m not a fan of the Organization for Economic Cooperation and Development. Perhaps reflecting the mindset of the European governments that dominate its membership, the Paris-based international bureaucracy has morphed into a cheerleader for statist policies.

All of which was just fine from the perspective of the Obama Administration, which doubtlessly appreciated the OECD’s partisan work to promote class warfare and pimp for wasteful Keynesian spending.

What is particularly irksome to me is the way the OECD often uses dishonest methodology to advance the cause of big government:

But my disdain for the leftist political appointees who run the OECD doesn’t prevent me from acknowledging that the professional economists who work for the institution occasionally generate good statistics and analysis.

For instance, I’ve cited two examples (here and here) of OECD research showing that spending caps are the only effective fiscal rule. And I praised another OECD study that admitted the beneficial impact of tax competition. I even listed several good examples of OECD research on tax policy as part of a column that ripped the bureaucracy for some very shoddy work in favor of Obama’s redistribution agenda.

And now we have some more good research to add to that limited list. A new working paper by two economists at the OECD contains some remarkable findings about the negative impact of government spending on economic performance. If you’re pressed for time, here’s the key takeaway from their research:

Governments in the OECD spend on average about 40% of GDP on the provision of public goods, services and transfers. The sheer size of the public sector has prompted a large amount of research on the link between the size of government and economic growth. …This paper investigates empirically the effect of the size and the composition of public spending on long-term growth… The main findings that emerge from the analysis are… Larger governments are associated with lower long-term growth. Larger governments also slowdown the catch-up to the productivity frontier.

For those who want more information, the working paper is filled with useful information and analysis.

Here’s one of the charts from the study, showing how government spending is allocated in OECD nations.

The report also acknowledges that there’s a lot of preexisting research showing that government spending hinders economic growth.

There is a vast empirical literature investigating the relationship between the size of the government and economic growth (see Slemrod, 1995; Myles 2009; Bergh and Henrekson, 2011 for overviews). A review by Bergh and Henrekson (2011), based on papers published in peer reviewed journals after 2000, suggested a negative relationship in OECD countries. Likewise, a recent OECD study confirmed a negative relationship between the size of government and GDP growth (Fall and Fournier, 2015). …the link between the size of government and growth may vary with the income level and could be hump-shaped (Armey, 1995). A few studies have found support for the existence of a non-linear relationship between the size of government and growth (e.g. Vedder and Gallaway, 1998; Pevcin, 2004; Chen and Lee, 2005).

By the way, the reference to “hump-shaped” means that the OECD is even aware of the Rahn Curve.

The methodology in the paper is not ideal from my perspective. For all intents and purposes, the economists compare economic performance of the OECD’s big-government nations with the growth numbers from the OECD’s not-quite-as-big-government nations. But even with that limitation, the study generates some powerful results.

…the simulation assumes that in countries where the size of government is above the average level of countries in the bottom half of the sample, the government size will gradually converge to this level (36% of GDP). Similar to the spending mix reforms, this reform is phased in over 10 years. Such a reduction in the size of the government could increase long-term GDP by about 10%, with much larger effects in some countries with currently large or ineffective governments. …a reduction of the size of government has a positive, but moderate, effect on the income of the poor. The average disposable income also rises. However, the rich gain relatively more. Finally, in countries where the government is less effective (such as Italy) the growth effect dominates and a moderate reduction of the size of government would have a large growth effect, so that it would lift all boats.

And here’s a chart showing how much more growth would be possible if the countries with really-big government downsized their public sectors to the somewhat-big level.

Even with the methodology limitations I described, these results are astounding. Potential GDP gains of more than 30 percent for Greece and Italy. Gains of more than 20 percent for Slovenia, France, and Hungary. And more than 10 percent for Belgium, Czech Republic, Portugal, and Poland.

The working paper also looks at the composition of government spending. In other words, just as not all taxes are equally damaging, the same is true for spending programs.

The results from the estimation of the size of the government and the public spending mix illustrate that public spending matters for long-term growth…pension and subsidy spending [are] the two items with a significantly negative effect on growth. As each regression includes the size of government and one spending share, the estimates provide the effect of increasing this type of spending while decreasing spending on other items to keep the spending to GDP ratio unchanged… larger governments are in several specifications significantly and negatively associated with long-term growth. This is consistent with the literature… Larger governments can impede convergence (Table 8, columns 1 and 3), because they are associated with higher taxation that can discourage business investment including foreign investment and households to supply labour.

Pensions and subsidies seem to cause the most economic harm.

Reducing the share of pension spending in primary spending yields sizeable growth gains with no significant adverse effect on disposable income inequality. This reduction could be achieved by an increase in the effective retirement age or by cutting the replacement rate. …Cutting public subsidies boosts growth, as public subsidies…can distort the allocation of resources and undermine competition. …Education outcomes depend not only on education spending but also on the effectiveness of education policies, and the literature suggest the latter can be more important. Since the seminal work of Coleman (1966), a broad literature suggests that there is no clear link between education spending and education outcomes. …policies aimed at increasing education spending effectiveness can be more appropriate than an across-the-board rise of education spending. …It may be that, beyond a certain point, additional spending on investment has adverse effects, if poorly managed.

For those of you with statistical/econometric knowledge, here’s some relevant data from the study.

And you can match the numbers in Table 6 with these excerpts.

…pension spending reduces growth (Table 6, columns 2, 5, 7 and 10). Increasing the share of pension spending in primary spending by one percentage point (offset by a reduction in other spending) would decrease potential GDP by about 2%. …Public spending on subsidies also reduces growth (Table 6, columns 3, 5, 8 and 10). …increasing the share of public subsidies in primary spending by one percentage point would decrease potential GDP by about 7%.

If you’re not a stats wonk, these two charts may be more helpful and easy to understand.

What jumped out at me is how the normally sensible nation of Switzerland is very bad about subsidies. That’s a policy they obviously need to fix (along with the fact that they also have a wealth tax, which is very uncharacteristic for that country).

But I’m digressing.

Let’s return to the study. One of the interesting things about the working paper is that it notes that bad fiscal policy can be somewhat mitigated by having market-oriented policies in other areas, which is a point I always make when writing about Scandinavian nations.

…countries with a high level of public spending may also be characterised by features that partly offset the adverse growth effect of government size. …in Sweden the mix of growth-friendly structural policies…may have offset the adverse growth effect of a large government sector.

In other words, the moral of the story is that smaller government is good and free markets are good. Mix the two together and you have best of all worlds.

P.S. Even if the OECD published dozens of quality studies like this one, I would still argue that American taxpayers should no longer be forced to subsidize the Paris-based bureaucracy. And even if the OECD’s political types stopped pushing statist policies, I would still have the same view about ending handouts from American taxpayers. This has nothing to do with the fact that the bureaucrats once threatened to have me arrested and thrown in a Mexican jail. I simply don’t think taxpayers should fund international bureaucracies.

P.P.S. Other international bureaucracies, including the World Bank and European Central Bank, also have published good research about the negative effect of excessive government spending.

Yesterday the President-elect of the United States tweeted:

Nobody should be allowed to burn the American flag - if they do, there must be consequences - perhaps loss of citizenship or year in jail!

This view directly contradicts First Amendment doctrine established in the case of Texas v. Johnson (1989). Texas had outlawed desecration of venerated objects including the American flag. The state argued this prohibition protected a symbol of national unity and precluded breaches of the peace by those who would take offense at the flag being burned.

Gregory Johnson, a demonstrator at the 1984 Republican Convention, burned a flag as part of a protest. Johnson and his fellow protesters chanted “America, the red, white, and blue, we spit on you” while the flag burned. He was convicted of destroying the flag and sentenced to a year in jail and fined $2,000. Texas thus did exactly what the President-elect wants concerning flag burning.

A five-member majority of the Supreme Court ruled that flag burning constituted “symbolic speech” protected by the First Amendment. Indeed, Johnson burned the flag in 1984 to express a series of political views. The Court ruled that prohibiting this speech did not and was unlikely to prevent violence. As to national unity, Justice William Brennan noted an earlier statement by the Court:

If there is any fixed star in our constitutional constellation, it is that no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opinion or force citizens to confess by word or act their faith therein.

Concurring with the opinion, Justice Anthony Kennedy wrote:

Though symbols often are what we ourselves make of them, the flag is constant in expressing beliefs Americans share, beliefs in law and peace and that freedom which sustains the human spirit. The case here today forces recognition of the costs to which those beliefs commit us. It is poignant but fundamental that the flag protects those who hold it in contempt.

This tweet marks at least the second time the President-elect has repudiated settled First Amendment doctrine. He earlier criticized the broad protection for free speech enunciated in New York Times v. Sullivan (1964), a decision that complicated suing speakers for libel.

Donald Trump wishes to criminalize flag burning for giving offense to those who value what the American flag represents. Many others have called for limiting speech that offends religions or ethnic groups. In The Tyranny of Silence, Cato’s own Flemming Rose recounts that some Muslim clerics in Europe called for censorship of speech giving offense to Islam. No doubt Mr. Trump would not join their calls for protecting the faith. But he does agree with those radical clerics that giving offense should justify government limits on free speech.

I wonder if the President-elect understands why his comments disturb so many people who differ otherwise about so much. He appears to oppose basic ideals underpinning liberal democracy. He is also the President-elect.

The fog of war, coupled with the output from multiple propaganda machines, makes it difficult to determine which side has the upper hand in any conflict. In Syria, it appears from recent reportage from Aleppo that President Bashar al-Assad’s forces are getting the upper hand. But are they?

The best objective way to determine the course of a conflict is to observe black market (read: free market) exchange rates, and to translate changes in those rates via purchasing power parity into implied inflation rates. We at the Johns Hopkins–Cato Institute Troubled Currencies Project have been doing that for Syria since 2013.

The two accompanying charts—one for the Syrian pound and another for Syria’s implied annual inflation rate—plot the course of the war. It is clear that Assad and his allies are getting the upper hand. The pound has been stabilizing since June of this year and inflation has been trending downwards.

In yesterday’s Investor’s Business Daily, Club for Growth President David McIntosh and I had a short piece on the perilous implications of President-elect Trump’s threats to unilaterally withdraw the United States from our trade agreements or impose punitive and wide-ranging tariffs on imports. The economic effects of Trump’s promises have been explored at length (see, e.g., this new one on NAFTA and Texas), but most trade law experts are just now digesting the legal issues. What we’re finding is, to use the technical term, a big mess that could have unforeseen economic and constitutional implications in the Age of Trump. As we note:

For almost a century, American trade policy has been formed and implemented by a successful “gentlemen’s agreement” between Congress and the president. Congress delegated to the president some of its Article I, Section 8 powers to “regulate Commerce with foreign nations” so that the president may efficiently execute our domestic trade laws. The president negotiates and signs FTAs with foreign countries, while Congress retains the ultimate constitutional authority over international trade, for example by approving or rejecting agreements or by amending US trade laws.

As a result of this compromise, the United States has entered into 14 Free Trade Agreements with 20 different countries and imposed targeted unilateral trade relief measures — all without significant conflict between Congress and the President.

The question now is whether Mr. Trump, as president, could and should single-handedly implement his trade agenda on Jan. 20, 2017 without any congressional action.

The IBD op-ed scratches the surface of these legal issues, but below are more details on just a few of the many ambiguities lurking in U.S. trade law—ambiguities that, if not properly clarified, could be exploited by a protectionist U.S. president against the original intent of the Congress that delegated their constitutional authority over trade policy under the (incorrect!) assumption that the president would always be the U.S. government’s biggest proponent of free trade.

NAFTA

Under U.S. Law, FTAs are negotiated and signed by the president, but have limited legal force in the United States until they are converted into implementing legislation (which would amend current law), passed by Congress, and then signed into law by the president. In the case of NAFTA, this meant that President Clinton signed the deal, but it was Congress who ultimately approved and implemented it through the North American Free Trade Agreement Implementation Act, which President Clinton subsequently signed into law.

Such a process indicates that a similar one would be needed to terminate NAFTA, but the law is far from clear in this regard. The President’s constitutional authority over foreign affairs (under Article II) and “termination and withdrawal authority” under the Trade Act of 1974 would very likely give him the authority to withdraw, without congressional approval, from NAFTA under Article 2205 of the Agreement. At that time, Canada and Mexico would immediately be free to withdraw any and all trade concessions (e.g., preferential tariff treatment) made under NAFTA with respect to the United States.

Withdrawal, however, might not automatically terminate the Implementation Act, thus leaving U.S. duties and other NAFTA commitments in place while Canada and Mexico do as they please. The only certain way to terminate the Act would be through Congressional passage of another piece of legislation, but the President could claim that the Act self-terminates after withdrawal under Section 109(b) of the Act (“During any period in which a country ceases to be a NAFTA country, sections 101 through 106 shall cease to have effect with respect to such country”). The Act and its supporting documents do not clarify this provision, and there is no post-WWII precedent relating to U.S. termination of an FTA. Thus, the President could theoretically instruct Customs and other agencies to raise US trade barriers to non-NAFTA levels on his view that the Implementing Act has terminated, while Congress claims he has no such authority.

Similar ambiguity exists in the NAFTA Implementation Act with respect to raising “additional duties” on NAFTA imports via presidential proclamation when the President determines that they are “necessary or appropriate to maintain the general level of reciprocal and mutually advantageous concessions with respect to Canada or Mexico.” None of this is defined or explained in the Act or elsewhere and, again, there is no historical precedent.

Making things even more complicated, the Trade Act of 1974 and the 1988 Trade Promotion Authority (“fast track”) law governing NAFTA negotiations and implementation each contain their own, unclear provisions on the President’s unilateral authority to raise duties on trade agreement partners via presidential proclamation.

The relationship between all of these overlapping, ambiguous laws is a complex matter of statutory interpretation—certainly not something a President should simply pursue without congressional input, especially given what’s at stake here.

Other U.S. Trade Agreements

Similar provisions in other U.S. FTAs and implementing Acts—particularly those in the US–Korea FTA (Article 24.5 of the Agreement and Section 107(c) of the implementing law) and other bilateral FTAs—raise similar, perhaps even more pressing problems. Even the WTO Agreements and the Uruguay Round Agreements Act (URAA) implementing them in the United States, while expressly foreclosing unilateral termination of the URAA by the President (thank heavens), raise other concerns about new executive branch protectionism without congressional consent.

Tariffs and Other Unilateral Protectionism

Finally, various U.S. laws permit the President to unilaterally impose duties for reasons not thoroughly explained in law, regulation or practice. These ambiguities exist for much the same reasons as those in our trade agreement laws: the President has constitutional power over foreign affairs and the execution of U.S. law, and is traditionally the most trusted person in the U.S. government not to use these protectionist tools to reward discrete domestic constituents. For example, President-elect Trump has threatened to impose tariffs under Section 232 of the Trade Expansion Act of 1962, which only permits them when a certain product is “being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.” However, neither Section 232 nor the relevant regulations define the term “national security.” Past agency practice would argue against using Section 232 in ways envisioned by Candidate Trump, but this is hardly reassuring when President Trump appoints the head of the agency. Trump might therefore try to block imports under Section 232 in ways never envisioned by Congress or past Presidents.

* * *

So could a President Trump carry out his many campaign threats without congressional input? As shown in the examples above, the law is unclear in many cases—primarily because Congress in the modern era never anticipated a president more protectionist than its House and Senate majorities. Indeed, Congress’ broad delegation of authority to the President is based on the implicit understanding that the executive branch was more insulated from discrete constituent interests and thus in the best position to advocate free trade, which provides broad and significant national benefits but smaller, concentrated costs. Now, however, things may have changed, and our laws aren’t prepared for a president who views open trade as a threat and protectionism as a weapon.

Indeed, the reality of the President-elect’s trade intentions has shined a bright light on the many ambiguities in U.S. trade law—ambiguities that confuse both the practical operation of our laws and the proper separation of powers intended by Congress therein, but were ignored (including by me!) because of the longstanding bipartisan consensus in favor of trade liberalization, congressional–executive cooperation on trade, and the implicit understanding of the president’s special role in promoting U.S. trade liberalization. With the “free trade consensus” now clearly frayed—if not completely torn apart—we should seriously reconsider Congress’ historical delegation of trade powers.

During the Bush and Obama years, Congresses controlled by the opposition party have railed against executive overreach and pushed for limits on powers delegated or assumed by the President through liberal interpretations of poorly-drafted laws. By acting now to clarify various ambiguities in current U.S. trade law, our political leaders can finally match their words with their deeds and, in the process, avoid not only economic calamities but also a potential constitutional crisis. Only time will tell if congressional Republicans are up to the task.

We released The Human Freedom Index 2016 today. It is our second annual report that presents the state of overall freedom in the world based on a broad measure of personal, civil and economic freedom. Co-published by the Cato Institute, the Fraser Institute (Canada) and the Liberales Institut (Germany), my coauthor Tanja Porcnik and I look at 79 distinct indicators in 159 countries on issues ranging from freedom of speech and association to women’s freedoms, the extent of voluntary exchange, safety and security, the rule of law and more.

Given the rise of populism, nationalism and authoritarianism in many countries around the world in recent years, we think that it is becoming increasingly important not only to appreciate the inherent value of freedom, but also to better appreciate its central role in human progress. For that reason, we think it’s worth measuring carefully.

The top 10 freest jurisdictions are below. The United States ranks 23rd. Compared to 2008—the earliest year for which we have sufficient data for a robust index—the United States has been on a decline; it ranked 16th that year. In terms of economic freedom, for which we have decades of comparable data, the United States has been on a long-term decline since the year 2000. Surely, the war on drugs, the war on terror, the expansion of the regulatory state, the rise of crony capitalism and the erosion of property rights due to the abuse of eminent domain have contributed to the U.S. fall in the rule of law and overall human freedom. The United States can unfortunately no longer claim to be the world’s bastion of liberty.

Other country rankings of interest include Chile (29), the freest country in Latin America, while Venezuela (154) is the least free in the region (we don’t measure Cuba because of a lack of reliable data). India ranks 87th, Russia 115th and China 141st. Turkey ranks 73rd, South Africa 74th, Brazil 82nd and Egypt 144th.

The level of freedom matters for prosperity and overall well-being. For example, the average income per capita of the top quartile of countries is $37,147, far above that of the least free quartile ($8,700). All dimensions of freedom matter and reinforce each other. As countries become more free and therefore more prosperous, the data suggest that they first have relatively higher levels of economic freedom compared to personal freedoms, and that once they reach a high level of freedom, they have relatively higher levels of personal freedom compared to economic freedom, but all indicators of freedom are high. Put another way, if you want to live in a country with a high level of personal freedom, you better have a relatively high level of economic freedom (see graph below).

We also find a strong correlation between human freedom and democracy, which we measure separately. Hong Kong is an outlier in this regard and, given Beijing’s increasing interference there, we are concerned about it maintaining its high level of freedom. Read a discussion on that and more in the full report.

At 6:55 this morning President-elect Donald Trump tweeted. “Nobody should be allowed to burn the American flag - if they do, there must be consequences - perhaps loss of citizenship or year in jail!” Seemingly unprovoked—we’ve hardly seen a rash of flag-burning lately—it’s one more sign that we’re likely in for a wild ride over the next four years, assuming impeachment doesn’t occur first.

There’s a market for such views, to be sure, although most who voted for Mr. Trump probably are not in it. Liberty-loving Americans understand that there’s all the difference in the world between defending the right to burn the flag and defending the burning of the flag. It’s the difference between rights and values. Voltaire is said to have put it succinctly: “I may disagree with what you say, but I’ll defend to the death your right to say it.” (It’s probably apocryphal, but he should have said it!) Popular speech doesn’t need defending; unpopular speech does.

That principle is so basic to our political and legal order that the Framers of our Constitution embedded it in the First Amendment. And when there was a rash of flag-burning a while ago, the Supreme Court upheld the right to desecrate the flag, first in 1989 against a Texas statute, a year later against an act of Congress. Justice Antonin Scalia, lauded often by Mr. Trump, joined the majority in the first case. He wrote the opinion for the Court in the second.

But the issue does not seem to die. Republicans pressed for a constitutional amendment to ban flag desecration in 1995, shortly after they took over Congress following 40 years in the wilderness. And the proposed amendment arose again in 1999. Invariably, a misguided patriotism is behind such efforts. But as I concluded my congressional testimony opposing such an amendment in that last instance:

It is said also that the flag is special because men have fought and died for it. Let me suggest in response that men have fought and died not for the flag but for the principles it represents. People give their lives for principles, not for symbols. When we dishonor those principles, to protect their symbol, we dishonor the men who died to preserve them. That is not a business this Congress should be about. We owe it to those men, men who have made the ultimate sacrifice, to resist the pressures of the moment so that we may preserve the principles of the ages.

There doubtless will be occasions ahead when we will have to resist the pressures of the moment to preserve the principles of the ages. We must steel ourselves for that.

Cato Senior Fellow Nat Hentoff once had the opportunity to interview Fidel Castro’s henchman, Che Guevara.  As Nat relates in this video clip, Che’s gatekeeper messed up–just assuming that since Nat wrote for the Village Voice, he would be another fawning lefty journalist.  Wrong!

When Nat Hentoff Met Che Guevara

In 2003, Nat wrote: “Having interviewed Cubans who survived Castro’s gulags, I have never understood or respected the parade of American entertainers, politicians and intellectuals who travel to Cuba to be entranced by this ruthless dictator who, for me, has all the charisma of a preening thug.”

And here’s Richard Cohen in today’s Washington Post: “Fidel Castro was a killer. He came to power in a revolution and so violence was probably inescapable. But he followed it with mass executions — the guilty, the innocent, it hardly mattered. He imposed a totalitarian system on Cuba even harsher and more homicidal than the one that preceded it. He persecuted homosexuals, dissidents, critical writers and journalists. He would not tolerate a free press, and his own political party was the only one permitted. In the end, he ruined his country’s economy while at the same time exporting terrorism.”  Read the whole thing.

This makes perfect sense – in a country ruled by the Communist Party:

China plans to clamp tighter controls on Chinese companies seeking to invest overseas, intensifying efforts to slow a surge in capital fleeing offshore amid tepid growth and an uncertain economic outlook.

Of course, it would be crazy in a capitalist country ruled by a party committed to free enterprise.

As the Washington DC City Council prepares to vote on a bill that would provide workers in Washington, DC up to 11 weeks of paid family leave upon the birth of a child, a fundamental question remains unanswered: how much should government intervene in how employers compensate workers?

The federal government does so quite a bit at present. By exempting employer-provided health insurance from income taxes, our tax law is responsible for the fact that a majority of Americans get their health insurance from their employer. The exemption is also largely responsible for the fact that so many of these employers have what can only be described as overly generous health insurance plans, which can cover health care expenses both routine and exceptional.

The tax code also nudged American businesses to provide pensions as well, since the money set aside in a defined benefit plan generally isn’t taxed. When pension law created the tax breaks for employer-provided health insurance these spouted up instead.

In the heyday of unionism, labor union leaders pushed for more fringe benefits for their workers, often more fervently than they sought out wage increases. They did so in part because of the tax break—why not get a tax-free benefit for workers rather than have workers pay for the same benefit with after-tax wages, they reasoned—and partly because such benefits could be made more durable than other forms of compensation. For instance, the UAW contracts in the 1970s-1990s typically provided health insurance for laid-off workers for up to a year after they were let go, and sometimes longer.

This wasn’t necessarily a good thing for the U.S. economy. Rigid compensation meant that companies resorted to overtime when demand picked up rather than hire more workers. While it also deterred them from laying off workers when there was a downturn in demand since the attendant cost savings would be slight, the short-term stability was an ephemeral benefit to workers. There were fewer jobs available as a result and it did nothing to encourage employment growth in such industries.

Some of these benefits were jettisoned—or at least scaled back—after the bankruptcy of GM and Chrysler in 2008—fifteen years after at Caterpillar—and today the manufacturing workers in a union are much more likely to have a 401k, health insurance with co-pays, deductibles and a monthly contribution, and modest ancillary benefits.

Unions changed course only in part because of their reduced leverage after the diminution of manufacturing in the U.S. economy. They also perceived that their workers would rather have money than an additional benefit. Also, the realization that many workers’ manufacturing jobs may be less permanent than a generation ago also helped change demand. A long-term benefit means little for someone who worries that their job may not exist after the next recession.

More flexible compensation that is directly tied to a worker benefits the economy in the long run. Firms find it less expensive to contract and expand, which should increase employment in the long run. It should also increase wages, if and when we return to a full-employment economy—the tremendous wage gains in the bottom quintiles of the income distribution in the late 1990s should be the goal of every administration of both parties.

Now the DC government is countering this trend by providing a new benefit, financed not by the companies directly but via a tax of .62 percent on corporate profits. To its credit, there has been some thought put into how to efficiently create this benefit, and the Council concluded that by having the government finance it rather than having the employer pay for it directly removes any disincentive that such a benefit would have towards hiring expectant parents. It also reduced the cost, along with the attendant tax increase, by capping the benefits at roughly $1,000 a week, so it’s a little more egalitarian than it would otherwise be.

But the new benefit is still a mistake. It will end up increasing the cost of doing business in DC and will likely end up pushing a few businesses that are trying to decide between DC or Virginia or Maryland to head to one of the other states. To suggest that it’s too small of a tax to matter may sound intuitively appealing, but the notion that costs do not really matter is becoming a tired trope. It is the reason why the left says the minimum wage will not decrease employment, land-use restrictions don’t increase housing costs, or that unemployment insurance benefits don’t lengthen unemployment spells. One can argue about the degree of the impact, but to pretend firms can “swallow” costs ad infinitum is just facile.

If the DC City Council wants to do more about the plight of the working poor, it should focus more on how to encourage them to acquire a better education. DC’s aggressive embrace of charter schools has paid dividends in that respect, as I have observed firsthand. Additionally, the federal government should take steps to reduce the disincentives to work that exist in the tax code. University of Chicago economist Casey Mulligan has found in his research that most working Americans earning between $30,000 and $50,000 face an implicit marginal tax rate in excess of 50 percent.

A narrowly-focused benefit such as paid family leave will be a costly solution with unintended consequences, the least of which is serving as a harbinger for other taxes for other benefits.

 

 

 

There’s a lot of speculation in Washington about what a Trump Administration will do on government spending. Based on his rhetoric it’s hard to know whether he’ll be a big-spending populist or a budget-cutting businessman.

But what if that fight is pointless?

Back in October, Will Wilkinson of the Niskanen Center wrote a very interesting—albeit depressing—article about the potential futility of trying to reduce the size of government. He starts with the observation that government tends to get bigger as nations get richer.

“Wagner’s Law” says that as an economy’s per capita output grows larger over time, government spending consumes a larger share of that output. …Wagner’s Law names a real, observed, robust empirical pattern. …It’s mainly the positive relationship between rising demand for welfare services/transfers and rising GDP per capita that drives Wagner’s Law.

I’ve also written about Wagner’s Law, mostly to debunk the silly leftist interpretation that bigger government causes more wealth (in other words, they get the causality backwards), but also to point out that other policies matter and that some big-government nations have wisely mitigated the harmful economic impact of excessive spending and taxation by having very pro-market policies in areas such as trade and regulation.

In any event, Will includes a chart showing that there certainly has been a lot more redistribution spending in the United States over the past 70 years, so it certainly is true that the political process has produced results consistent with Wagner’s Law. As America has become richer, voters and politicians have figured out how to redistribute ever-larger amounts of money.

By the way, this data is completely consistent with my recent column that pointed out how defense spending plays only a minor role in America’s fiscal challenge.

But let’s get back to Will’s article. He asserts that Wagner’s Law is bad news for advocates of smaller government.

…free-marketeers tend to insist that the key to achieving higher rates of economic growth is slashing the size of government. After all, it’s true that the private sector is better than government at putting resources to their most productive use and that some public spending crowds out private investment. If you’re really committed to the idea of stronger economic growth through government contraction, you’re pretty much committed to the idea that the pattern behind Wagner’s Law is a sort of fluke—a contingent correlation without any real cause-and-effect basis—and that there’s got to be some workaround or fix.

I don’t particularly agree with his characterization. You can believe (as I surely do) that smaller government would lead to faster growth without having to disbelieve, deny, or debunk Wagner’s Law.

  • First, it’s quite possible to have decent growth along with expanding government so long as other policy levers are moving in the right direction. Which is exactly what one Spanish scholar found when examining data for developed nations during the post-World War II period.
  • Second, it’s overly simplistic to characterize this debate as government or growth. The real issue is the rate of growth. After all, even France has a bit of growth in an average year. The real issue is whether there could be more growth with a lower level of taxes and spending. In other words, would the rest of the developed world grow faster with Hong Kong-sized government?

All that being said, Will certainly is right in his article when he points out that libertarians and other advocates of smaller government haven’t done a good job of constraining government spending.

He then examines some of the ideas have been proposed by folks on the right who want to constrain spending. Beginning with the starve-the-beast hypothesis.

The idea that it is possible to “starve the beast”—to reduce the size of government by starving the government of tax revenue—springs from this hope. But the actual effect of cutting taxes below the amount necessary to sustain current levels of government spending only underscores the unforgiving lawlikeness of Wagner’s Law. As our namesake Bill Niskanen showed, tax cuts that lead to budget shortfalls don’t lead to corresponding cuts in government spending. On the contrary, financing government spending through debt rather than taxes makes voters feel that government spending is cheaper than it really is, which makes them want even more of it.

Here’s my first substantive disagreement with Will. I’m definitely not in the all-we-have-to-do-is-cut-taxes camp, but I certainly like lower tax rates and I definitely believe that higher taxes would worsen our long-run fiscal outlook.

And I’ve looked closely at the starve-the-beast academic research. Niskanen’s study has some methodological problems and the Romer & Romer study that most people cite when arguing against the starve-the-beast hypothesis actually shows that cutting taxes is somewhat effective so long as tax cuts are durable.

Will then looks at whether it would be effective to end withholding.

…withholding made tax collection cheaper and more reliable. …paying taxes automatically and with a minimum of pain makes it less likely that you’ll be livid about them when you vote. The complaint…is the libertarian/conservative argument against a VAT or national sales tax in a nutshell. It’s the same line of reasoning that leads some libertarians and conservatives to flirt with the idea that we ought to pass a law that requires us to write a single, hugely infuriating check to the IRS each year. The idea is that if voters are really ticked off about taxes, they’ll want lower tax rates. So taxes need to be as salient and painful—i.e., as inefficient and distortionary—as possible.

Will is skeptical of this approach, though I would point out that the one major developed economy that doesn’t have withholding is Hong Kong. And that’s a place that has successfully constrained government spending.

To be sure, the spending restraint could exist for other reasons (such as the spending cap in Article 107 of the jurisdiction’s Basic Law), but the hypothesis that people will want less government if taxes are painful is quite reasonable.

And, by the way, requiring lump-sum payments rather than withholding wouldn’t change the degree to which taxes are distortionary.

Will then turns his attention to the “supply-side” argument about lower tax rates.

Supply-siders generally present two scenarios, and neither helps reduce the size of government. One: If the tax cuts pushed by ticked-off taxpayers create supply-side stimulus and increase rather than decrease revenue, there’s no downward pressure on spending. …But it doesn’t make government smaller. Two: If tax cuts aren’t self-funding and simply leave a hole in the budget, the beast (as Niskanen showed) does not therefore get starved. Instead, spending feels cheap, the beast grows even more, and the tax bill gets shifted to the future.

Since I’ve already addressed the starve-the-beast issue, I’ll simply note that self-financing tax cuts (which do exist, though only in rare cases) are only possible if there’s a big uptick in growth and/or compliance. And to the extent that the revenue feedback is due to growth, that will mean that the burden of government spending will fall relative to the size of the private sector even if actual outlays stay the same.

Maybe I’m insufficiently libertarian, but I’ll take that outcome every day of the week. Heck, I’m willing to let government get bigger so long as the private sector gets to grow at a faster pace (in other words, a world in which government is shrinking as a share of overall economic output).

Now we get to Will’s main point. He suggests that maybe libertarians shouldn’t be so fixated on the size of government.

…well-funded and well-organized attempts “to convince voters to reduce their demand for the services financed by federal spending” so far have all failed. It’s time to consider the possibility that there’s no convincing them. …If we look at the world, what we see is that when people get richer, they want more welfare state. Maybe there’s nothing much we can do about that. …When people get richer, they want more welfare state. You can want Americans to get continuously wealthier and also want the government to consume a smaller share of national economic output, but there’s very little reason to think you can have both of those things. That is what the world is telling us.

To the extent that Will is simply making a prediction about the likelihood of continued government expansion, I assume (and fear) he’s right.

But to the degree he’s arguing that we should meekly acquiesce to that outcome, then I’ll strongly disagree. I may lose the fight against big government, but I intend to go down swinging.

Interestingly, Will and I may not actually disagree. This passage points out that it’s a good idea to fight against ineffective programs and to support entitlement reform.

…accepting that it’s probably not possible to shrink government would have a transformative effect on right-leaning politics. We would focus on figuring out the best ways to match receipts to outlays… You start to accept that spending cuts are ultimately more about optimizing the composition and effectiveness of spending than about the overall level of spending or its rate of growth. This doesn’t mean not fighting like hell to slash nonsense programs, or not prioritizing reforms to make entitlement programs fiscally sustainable, or not trying to balance budgets from the spending side, or not trying to minimize the rate of spending growth. This just means that you do it all knowing that the rate of spending growth isn’t going to go negative unless you hit a recession, a debt crisis, or end a major war.

And, most important, this passage also highlights the desirability of a policy to “minimize the rate of spending growth.”

Gee, I think I know someone who relentlessly argues in favor of that approach. Indeed, this guy is so fixated on that policy that he even created a “Rule” to give the concept more attention.

I can’t remember his name right now, but I’m sure he’s a swell guy.

More seriously (and to echo the point I made above), it would be a libertarian victory to have government grow slower than the productive sector of the economy. To be sure, obeying my rule (which actually does happen every so often) doesn’t mean we’ll soon reach the libertarian Nirvana of the “night watchman” state set forth in the Constitution.

But the real fiscal fight in America is whether government is becoming a bigger burden, relative to the private economy, or whether its growth is being constrained so that it’s becoming a smaller burden.

Will closes with a very sensible point about not overlooking the other policy areas where government is hindering prosperity (though that doesn’t require us to give up on the very practical quest to limit the growth of government).

Giving up on the quixotic quest to…falsify Wagner’s Law would also lead us to…focus our energy on removing regulatory barriers to economic participation, innovation, and growth.

And his concluding passage is correct, but too pessimistic.

This is just a conjecture. But when…the United States—where the freedom-as-small-government philosophy is most powerfully promoted and most widely accepted—has lost ground in economic freedom year after year for nearly two decades, it’s a conjecture worth taking very seriously.

Yes, he’s right that overall economic freedom has declined during the Bush-Obama years.

But what about the fact that overall economic freedom increased during the Reagan-Clinton years? And what about the fact that we achieved a five-year nominal spending freeze even with Obama in the White House?

In other words, there’s no need to throw in the towel. I may not be overflowing with optimism about whether we ultimately succeed in sufficiently constraining the growth of government, but I feel very confident that it’s a worthwhile fight.

P.S. While I disagree with a few of Will’s points, I think his article is very worthwhile. Moreover, a consensus on restraining the growth of government would be an excellent outcome to the debate he has triggered.

But I can’t resist being a bit more critical about something Noah Smith wrote about Will’s article. In his Bloomberg column discussing the hypothesis that libertarians should focus less on (or perhaps even give up on) the battle against government spending, he has a passage that is designed to lure readers into thinking that small government is associated with economic deprivation.

…a stark fact – the richer a country is, the more its government tends to spend. …Today, the top spenders include countries such as France, Denmark and Finland, while the small-government ranks include Sudan, Nigeria and Bangladesh.

Sigh.

It’s true that the burden of government spending is much higher in France, Denmark, and Finland than in Sudan, Nigeria, and Bangladesh, but let’s take a look at the overall data from Economic Freedom of the World.

France (#57), Denmark (#21), and Finland (#20) are all much more market-oriented than Sudan (unrated, but would have an awful score), Nigeria (#113), and Bangladesh (#121). Smith’s argument is akin to me saying that government-built roads cause economic misery because that’s how they do it in the hellhole of North Korea.

More important, he either ignores or is unaware of the research showing that nations such as France, Denmark, and Finland became rich when government spending was very small. Sigh, again.

Two front-page stories in the Metro section of Monday’s Washington Post depict protected service providers desperately trying to fight off innovations that might serve customers better and threaten the comfortable incomes of the established providers.

First up, Tesla and the automobile dealers:

Don Hall, president of the Virginia Automobile Dealers Association, was making the hard sell.

Staring directly into the camera, using the language of war, he urged car dealers to unite against a force that he said threatened their livelihoods: electric-car-maker Tesla….

The reason that Hall was sounding the alarm: Tesla, which sells its cars directly to consumers rather than through franchise dealers, is trying to open a second store in Virginia.

Car dealers in Virginia and across the country have been fighting Tesla, seeing the company’s direct-to-consumer sales model as a threat to the franchise system that they say protects consumers as well as their own business interests.

In Virginia, as in most states, it is generally illegal for manufacturers to sell cars directly to consumers. Like all regulatory rent-seekers, the automobile dealers have some public interest rationales, such as the claim that customers benefit by being able to shop for service among multiple dealers of the same automobile. But their arguments may rest more firmly on the fact that “over the past decade, VADA has given Virginia politicians $4 million in campaign contributions.”   Private companies aren’t the only protected providers. Just below the Tesla story was one about advocates of the federally funded school voucher program in the District of Columbia hoping that a new president will be more supportive of school choice than President Obama has been. Defenders of the traditional school monopoly are not giving up:

The prospect of an expanded voucher program is not a welcome one among the District’s elected officials, who chafe as Congress — where the District has no vote — passes laws that shape the landscape of city education. Many also are ideologically opposed and worry that an expanded voucher program could threaten the progress and growth of the city’s traditional public and public charter schools.

“I’m 100 percent opposed to public dollars going to private schools like this,” said D.C. Council Member David Grosso (I-At Large), who has spoken forcefully against the voucher program for years.

In a world where millions of students, especially low-income and urban kids, are getting a poor education, teachers unions and school bureaucracies have been fighting choice programs for more than two decades. Just like automobile dealers, they put their own interests ahead of those of their customers.

I should note that Clayton Christensen, who coined the term “disruptive innovation,” would probably say that these examples don’t qualify. Maybe I should just use the older term “creative destruction.” By any name, it’s people trying to protect their own lucrative position against competitors who think they can serve consumer needs better.

The U.S. Court of Appeals for the D.C. Circuit is considering whether the Environmental Protection Agency acted unreasonably when it issued regulations of hazardous air pollutants from coal and oil power plants under Section 112 of the Clean Air Act, regulations that provide far less than a penny in benefits for each of the nearly $10 billion in costs it imposes on the U.S. economy.

If this question sounds familiar, it’s because EPA tried this gambit before—and lost. In Michigan v. EPA (2015)—in which Cato also filed a brief—the Supreme Court rebuffed the agency for its failure to consider the costs of very the same regulations. On remand, EPA doubled down by issuing a supplemental finding that did no more than pay lip service to the Court’s admonition that rules whose benefits are greatly outweighed by their costs are irrational.

In light of the agency’s grudging concession that it could quantify only $4 to $6 million in statutorily-defined benefits to “women of child-bearing age in subsistence fishing populations who consume freshwater fish that they or their family caught” in enormous quantities, EPA attempted to justify its $10 billon rule by pointing to other non-statutory benefits, which it euphemistically calls “co-benefits.”

As we argue in our new brief, the D.C. Circuit should reject EPA’s end run around the Supreme Court’s decision and statutory limits on its regulatory authority. EPA’s failure to identify anything more than de minimis benefits for an action that will impose billions of dollars of costs is the height of arbitrariness. If EPA cannot justify the regulations forthrightly, it should withdraw them—not re-write the statute to target industries that it disfavors. 

Donald Trump is not backing away from his plan to build a wall along the U.S.-Mexico border. Here’s what you need to know about the proposal.

Public Support for a Fence or Wall

In 2013, 57 percent of likely voters told Rasmussen that they think that “the United States should continue building a border fence along the Mexican border.” In 2015, that number fell to 51 percent when asked about a “wall along the Mexican border.” CBS News asked the same question of registered voters in 2016 and found only 39 percent agreed with “a wall along the Mexican border.” Unfortunately, those surveys failed to specify the length of the fence or wall. Only 36 percent of registered voters told Pew in 2016 that they wanted to see a wall “along the entire border with Mexico.” In November, 54 percent of voters in the national exit poll also opposed to that proposal. In May, Arizona’s Cronkite News, Univision, and Dallas Morning News found that 72 percent of U.S. residents living in border cities opposed a wall.

The Wall Trump Has Proposed

When Trump announced he was launching his campaign for president in June 2015, he said that he would build a “great, great wall on our southern border.” The U.S-Mexico border is almost 2,000 miles, but he later clarified that the wall would only cover 1,000 miles due to “natural barriers.” As for the height, he has given estimates from as low as 30 feet to as high as 50 feet. His most common estimate appears to be 35 feet, and he said as recently as August that the wall would be between 35 and 45 feet high. Below is a Washington Post visualization of the size of a 35-foot wall.

Image 1: Size of Proposed Trump Wall

Source: Washington Post

In his plan released in August of 2015, he made it clear that this wall would not be rhetorical, symbolic, or “virtual,” but rather an “impenetrable physical wall on the southern border.” He described the wall being built out of “precast [concrete] plank… 30 feet long, 40 feet long, 50 feet long.” In August 2016, he said, “People are not going to be able to tunnel. We’re going to have tunnel technology.” He has also repeatedly promised a “big, fat beautiful door on the wall.”

Trump also insisted during his campaign that “a wall is better than fencing, and it’s much more powerful” and has called the current fence “a joke.” Despite this specificity, he admitted, when pressed in an interview following the election, that he would accept “some fencing,” but in “certain areas, a wall is more appropriate.”

The Fence That Already Exists

Image 2: Construction of U.S. Mexico-Border Fence between Tijuana and Imperial Beach, California

Source: Los Angeles Times

Fences were initially erected along the border in urban areas following the Immigration Reform and Control Act of 1986. In 1990, 10-foot-high welded steel fences were introduced along a 14-mile stretch in San Diego and soon reinforced with a second 9-mile layer of fencing authorized by a new law in 1996. By 2000, Border Patrol had erected about 58 miles of fencing intended to deter pedestrian crossing. Almost all of it was in urban areas. Ten miles of this was reinforced with a second layer, and another 10 miles was blocked off by vehicle barriers. Above is an image of San Diego’s double-layered portion of the fence being extended into the Pacific Ocean in 2011, and the growth in the miles of total fencing is below.

Image 3: Total Tactical Infrastructure Appropriations and Miles of U.S.-Mexico Border Fencing

Source: CRS

In 2006, Congress passed the Secure Fence Act, which required the creation of 700 total miles of fence. According to the Department of Homeland Security, there were 317 miles of pedestrian fencing of varying heights as of September 2015, and 36 miles of this was backed up with a secondary fence. The department met its mandate under the law by erecting an additional 300 miles of vehicle barriers. The map below shows what portions of the border have fencing. According to Border Patrol, there were 123 miles of pedestrian fencing in Arizona (of 373 total miles of border); 112 in Texas (of 1,241); 101 in California (of 140); and 14 in New Mexico (of 180). DHS has close-up maps of the fence in each state, but here’s a map of the border showing both pedestrian and vehicular barriers.

Image 4: Map of U.S.-Mexico Border with Fencing (Green)

Source: Customs and Border Protection

Even within the 300 miles of pedestrian border fence, the fence varies in height and quality dramatically depending on location. Border Patrol utilizes some half dozen different types of fencing—wire mesh, landing mat, chain link, bollard, aesthetic, and sheet piling just to control on-foot crossings (see image below). According to Popular Mechanics, these fences all vary in thickness and height from 6 feet to 18 feet. Popular Mechanics has maps that purport to show the exact locations of each type of fencing.

Image 5: Types of Fences along the U.S.-Mexico Border

Source: Department of Homeland Security

Legal Issues with Border Fences and Walls

Trump promised his wall would be built “ahead of schedule.” But in order for this to happen, he will need to avoid a variety of legal difficulties that the fence builders encountered. Well over two-thirds of the border is already owned by states, tribes, and private parties. As the image below shows, almost all of the land in Texas is owned by private or state parties. Comparing the image of the locations of the current fence above to the one below, it is readily apparent that the areas where the fence was constructed almost entirely overlap the areas with federal land.

Image 6: Federal or Tribal Ownership of the United States-Mexico Border Areas by Border Patrol Sector

Source: Government Accountability Office

In 2007, as the Bush administration was extending the fence, it sent letters to property owners threatening to sue them if they did not “voluntarily” hand over their rights to their land. The letters offered no compensation for the use of the land. Some intimidated property owners signed the letters thinking that they had no recourse. Others refused, and the government sued them for access. Although the government can—and did—attempt to use eminent domain to seize property from landowners, the lawsuits took years to complete (7 years in one case), causing substantial delays.

DHS’s Inspector General (IG) concluded in 2009 that “acquiring non-federal property has delayed the completion of fence construction,” and that “CBP achieved [its] progress primarily in areas where environmental and real estate issues did not cause significant delay.” The IG report again:

For example one landowner in New Mexico refused to allow CBP to acquire his land for the fence. The land ownership predated the Roosevelt easement that provides the federal government with a 60-foot border right-of-way. As a result, construction of fencing was delayed and a 1.2-mile gap in the fence existed for a time in this area. CBP later acquired this land through a negotiated settlement.

The IG found more than 480 cases in which the federal government negotiated the “voluntary” sale of property, and up to 300 cases in which condemnation would be sought through the courts. Because the right of just compensation is protected by the Constitution, there is little Donald Trump or Congress can do to expedite these issues.

A related issue is the impact on tribal lands. Although technically owned by the federal government, tribal lands are held in trust for Indian tribes, which federal law recognizes as distinct, independent, political entities. The Tohono O’odham Nation, which has land on both sides of the border, has already pledged to fight the Trump administration on building a wall there. In 2007, the tribe agreed to allow the construction of a vehicle barrier on their land, but the Bush administration then waived laws that protect tribal burial grounds, and during construction, human remains were dug up. If the tribe refuses to cooperate, the Trump administration would need a stand-alone bill from Congress condemning the land.

Even on federal lands, it can take months to get various agencies to agree to allow Border Patrol to move forward on various projects. In 2010, two-thirds of patrol agents-in-charge told the Government Accountability Office that under land management laws, the interagency compliance process had delayed or limited access to portions of some federal lands. Some 54 percent said that they were unable to obtain responses to requests for permission to use the lands in a timely manner. In one case, it took nearly 8 months for Border Patrol to get permission to install a single underground sensor. Only 15 percent, however, said that these issues adversely impacted the overall security in their areas.

Practical Problems with Border Fences and Walls

Fences are difficult to maintain because they can be knocked down in storms and erode if they are near beaches or rivers that flood, as has happened in San Diego. Fences are also relatively easy to cut through, and Border Patrol repaired more than 4,000 breaches in one year alone. Low fencing can be easily mounted from the roof of a truck. Some fences can even be driven over with a ramp. All can be climbed or tunneled under. Watch this video of two American women climbing to the top of the 18-foot border fence in under 20 seconds. Border patrol spokesperson Mike Scioli calls the fence “a speed bump in the desert.”

Image 7: Vulnerabilities in a Border Fence or Wall

Source: Huffington Post

Tunnels are typically used more for drug smuggling, but they are still a serious vulnerability in any kind of physical barrier. From 2007 to 2010, Border Patrol found more than 1 tunnel every month. “For every tunnel we find, we feel they’re building another one somewhere,” a Border Patrol tunnel expert told the New York Times this year.

Trump’s wall could address some of these problems. A concrete wall, while not “impenetrable,” would probably significantly cut down on attempts at going through it, though it is clearly not impossible (see image above). He has also claimed that no one would ever use a ladder to go over a 50-foot wall because “there’s no way to get down,” before thinking about it for a second and conceding “maybe a rope.” Nonetheless, the height might discourage some migrants from climbing, and it would certainly take them longer to do so, which would give Border Patrol more time to reach them.

Trump has also attempted to say that no one could tunnel under his wall due to “tunnel technology,” but the Science and Technology Directorate has concluded that all current technology to detect tunnels beneath the border would not be “suited to Border Patrol agents’ operational needs.” As far as dealing with water, Border Patrol agents told Fox news that a border wall would still “have to allow water to pass through, or the sheer force of raging water could damage its integrity, not to mention the legal rights of both the U.S. and Mexico to seasonal rains.”

One major obvious downside to a wall is that it would be opaque. “A cinder block or rock wall, in the traditional sense, isn’t necessarily the most effective or desirable choice,” the agents told Fox news. “Seeing through a fence allows agents to anticipate and mobilize, prior to illegal immigrants actually climbing or cutting through the fence.” For this reason, the agency is desperate to replace the landing mat fences that are also nontransparent. Popular Mechanics called this part of the fence “obsolete, in need of replacement” because they “can be easy to foil since Border Patrol agents can’t see what’s going on the other side.”

At a basic level, a wall or fence can never stop illegal immigration because a wall or fence cannot apprehend anyone. The agents that Fox News spoke to called a wall “meaningless” without agents and technology to back it up. Mayor Michael Gomez of Douglas, Arizona labeled the fence a failure in 2010, saying “they jump right over it.”

Efficacy of Border Fences and Walls

The most important question in this debate is how much illegal immigration is reduced per each additional dollar spent on a wall compared to each additional dollar spent on more manpower or other technologies. Despite the importance of this question, apparently no estimate of the impact of the current border fence on illegal immigration exists at all, let alone a comparison to other technologies. This is despite more than a decade to conduct such a study for the recent fences, and even longer to study the earlier fences.  

Rep. Henry Cuellar (D-TX) attempted to obtain the answer to this exact question from the administration as a sitting congressman on the House Homeland Security Committee and failed. A Migration Policy Institute 2016 review of the impact of walls and fences around the world turned up no academic literature specifically on the deterrent effect of physical barriers and concluded somewhat vaguely that walls appear to be “relatively ineffective.” The closest thing I could find to a cost-benefit analysis of this type was from House Homeland Security Committee Chairman Michael McCaul, a Republican from Texas, who concluded after careful study in 2015 that “it would be an inefficient use of taxpayer money to complete the fence. … We are using that money to utilize other technology to create a secure border.” Rep. McCaul, however, did not detail the methodology underlying his conclusion.

Fences could have strong local effects. The case for more fencing often relies completely on these regional effects. The San Diego border sector is probably the most commonly cited success story in the debate over the fence. From 1990 to 1993, it replaced its “totally ineffective” fence with a taller sturdier landing mat fence along 14 miles of the border. This had little impact on the number of apprehensions. The Congressional Research Service concluded, “The primary fence, by itself, did not have a discernible impact on the influx of unauthorized aliens coming across the border in San Diego.”

From 1994 to 1996, Operation Gatekeeper doubled the number of agents in the sector, but this too apparently had little effect on illegal immigration. Instead, as the image below shows, the flow dramatically moved eastward away from the Imperial Beach station and the Chula Vista station where fences were built and massively toward the other eastern stations.

Image 8: Apprehensions in San Diego Border Sector by Border Patrol Station

Source: CRS

Eventually the number of apprehensions in the San Diego sector crashed, indicating a huge shift in the flow of entries. But it is far from clear that this change actually reduced total entries. Indeed, the evidence indicates that walling off San Diego simply sent migrants looking for other means of entry further east—in the El Centro, Yuma, and Tucson sectors.

Image 9: Border Patrol Sectors in California and Arizona

Source: Tucson.com

From 1997 to 1999, Border Patrol installed 9 miles of secondary fencing in San Diego and extended the primary fence there. This period saw falling apprehensions in San Diego and rapidly expanding apprehensions in the adjacent sectors, almost equaling the previous flow.

Image 10: Apprehensions of Aliens at the Southwest Border by Sector in El Centro, San Diego, and Yuma

Source: Customs and Border Protection

Of course, apprehensions could have increased in El Centro or decreased in San Diego due to less enforcement activity. Image 11 provides the number of apprehensions per border agent for each sector. But controlling for the number of agents changes the picture very little. In fact, it seems to indicate that the flow rose much more dramatically in Yuma and fell further in San Diego than the number of raw apprehension figures show. The total flow by this measurement actually rose overall in these areas, while the fences were built.  

Image 11: Apprehensions Per Border Agent by Sector in El Centro, San Diego, and Yuma

Source: Customs and Border Protection (agents, apprehensions)

It would be ideal to perform the same type of analysis on the impact of the Secure Fence Act of 2006, but the problem is that the fences were rolled out at the same time as Congress doubled the size of the Border Patrol, jumping the numbers from 12,000 to 21,000. Moreover, fences went up on portions in many different sectors, so it is more difficult to isolate the effects. To complicate matters further, this period of time saw the collapse of the housing bubble, which caused a huge exodus of unauthorized workers back to Mexico even before the Great Recession hit.

This analysis reveals that Trump was likely correct to initially say that a wall only makes sense if it is truly across the entire border. But it also seems to indicate that the primary fencing alone had little impact on illegal immigration. Even the secondary fence needed to be reinforced with substantial increases in the number of border agents. It also does little to answer the question of whether a fence is worth its cost relative to other uses.

Douglas Massey, a professor at the University of Pennsylvania, argues that the true measure of efficacy should be not the flow into the United States, but also the flow out of the country. He notes that until the fences and agents were deployed in the 1990s, unauthorized immigrants typically returned home at the end of the harvest, leaving the total illegal population almost the same during the 1980s (image below). But as the costs and risks of doing so increased, they tried almost as hard to enter, while barely any tried to leave. The border security efforts essentially trapped them in and made the problem worse.

Image 12: Unauthorized Immigrant Population and Number of Border Patrol Agents (1980-2009)

Sources: Warren and Passel (1980); Census Bureau (14 and up only, 1983); Congressional Research Service (1986-1988); Pew Research Center (1990-2009); Border Patrol; CRS (fencing)

As the image above shows, the illegal population continued to rise in parallel with the growth in agents until the housing bubble burst in 2007. Growth in the fence length is also correlated to a lesser extent with increases in the illegal population over this period. Massey estimates that 5.3 million fewer people would be here illegally had enforcement not been changed and argues that a large guest worker program that mimicked the earlier illegal traffic would eliminate illegal immigration as well as lower the total immigrant population in the United States. Donald Trump has repeatedly promised doors in his wall to expedite legal immigration into the United States, so it is possible that he could follow through on this proposal, but his more specific positions on legal immigration have been targeted to decrease legal admissions, not increase them.

Financial Costs of the Border Fences

There appears to be no official estimate for the entire cost of the current fence from 1986 to today. Congress initially expected to spend $1.2 billion on the project, but actually spent $2.4 billion on just the fences—including vehicle barriers—constructed between 2006 and 2009 with another $1.1 billion appropriated ($3.5 billion total).

In 2009, Customs and Border Protection predicted that it would need another $6.5 billion over 20 years to maintain just that fencing. The Washington Post reported in 2015 that the Congressional Research Service found that this fencing had already cost $7 billion, which implies the maintenance costs were far higher than predicted. The Obama administration requested $274 million to maintain the fences in 2015—nearly $1 million per mile of pedestrian fencing. Assuming costs escalate over time, that’s close to $3 billion per decade.

If we simply divide $3.5 billion by 617 miles of fence, we get an estimate of $5.4 million per mile. Using the $7 billion figure, then each mile cost $10.9 million. We simply cannot project these costs into the future because the first fences built were in urban, flat areas that were easily accessible, so costs were lower. The General Accountability Office found that the average mile of fence for the first 70 miles cost $2.8 million. For the next 225, the average cost rose to $5 million per mile. The GAO assumed the average cost per mile for the next 26 miles would be $6.5 million. Some particular areas were astronomically high—$16 million per mile in the mountainous region east of San Diego.

Sticking with the low $6.5 million per mile number, we get some $4.4 billion to build out the existing fence to 1,000 miles—upfront cost, ignoring all later maintenance costs. We could expect another $5.4 billion for a 10-year estimate of about $10 billion. But it is almost definitely higher than this due to the costs associated with acquiring private land and building in less accessible areas. The entire 1,000 fence would have cost the government at least $18 billion (accounting for inflation) to finish. It is also important to remember that this is for a single layer of fence. A second layer, which is what many people advocate, would almost double the cost. If Trump wanted to upgrade the existing “joke” fencing and build it out to a full 1,000 miles, then it would be much higher than that.

Financial Cost of Trump’s Border Wall

Trump has insisted that his wall will not be a fence, but rather an “impenetrable physical wall,” and has also claimed that it would cost between $10 and $12 billion without revealing his methodology. But since building out the existing fence would cost more than that, his wall will undoubtedly cost even more.

Moreover, the fences were relatively inexpensive to build because they were constructed from, for example, old metal from helicopter landing pads from Vietnam or built low to the ground in certain areas. Trump has criticized the current fences on several grounds, including but not limited to their inability to prevent tunneling, their materials, their height, and their aesthetics. Trump’s wall would use, according to one engineer’s estimate, more than 1.5 times as much concrete as the Hoover Dam.

For the full 1,000 miles, Trump’s 30-foot wall (with a 10-foot tunnel barrier) would cost $31.2 billion, according to the best estimate from Massachusetts Institute of Technology engineers—that is $31.2 million per mile. If he only built 500 miles, the cost would be a more manageable, but still shocking $15.1 billion. Two other estimates placed the construction cost of the wall in the $25 billion range. Again, these are upfront construction costs, not ongoing maintenance costs, which account for roughly half of all of the fence costs over a decade.

Payment for the Wall

Donald Trump has been most insistent that Mexico will pay for the wall. He has promised a variety of ways of accomplishing this. The idea he raises most often is that Mexico can pay for the wall because it sells so much to U.S. consumers. “The wall is a fraction of the kind of money… that Mexico takes in from the United States,” he told CNN in April. “You’re talking about a trade deficit with Mexico of $58 billion.” In other words, if the Mexican government does not pay the $25 billion or more that it will take to build the wall, Trump will simply tax business with Mexico.

Of course, under this scheme, it is simply inaccurate to claim that “Mexico” will be paying for the wall since the $58 billion comes from U.S. consumers. If the United States imposes a tax on Mexican imports, then U.S. consumers will cover it. Marco Rubio told this to Trump during one of the presidential debates in January, explaining that the government “doesn’t pay the tariff—the buyer pays the tariff.” But obviously the lesson in economics failed to stick.

Trump has also proposed cutting off remittances of unauthorized immigrants to Mexico if the Mexican government refuses to cover the cost of the wall. Trump’s proposed regulatory method of doing this (claiming that cash wire transfers are actually bank accounts) is legally suspect, but even if it was legal, it would not cover the cost of the wall. Although Mexican immigrants remit $26 billion to their families in Mexico, this plan is fundamentally flawed for several reasons.

First of all, this amount is not enough to cover the cost of the wall. Second, only half of the Mexican immigrants in the United States are here illegally. Third, the majority of the remittances from unauthorized immigrants would find a way home through means other than wire transfers. Fourth, the Mexican government has no control over the remittances, so it cannot hand them over to the Trump administration. Fifth, Mexico does not want a wall, so they may be willing to take an economic hit to not have a wall.

These realities might already be occurring to Trump’s staff. Trump advisor Kris Kobach said after the election, “There’s no question the wall is going to get built. The only question is how quickly will it get done and who pays for it?” Kobach, who is part of the president-elect’s transition team, promised to find ways to begin work on the wall immediately using the existing budget.

Many Americans feel that the United States government is not in control of the border and that the lack of control is a deliberate government policy. Nothing could be further from the truth. The government has greatly expanded the scale and scope of immigration enforcement on the southern border in recent decades. 

The government built fencing on the southwest border and increased the mileage from zero in 1990 to 653 today (Figure 1). Some of that fencing is porous and much of it is made to deter vehicles, but it is located in some of the previously most heavily trafficked areas. The effect was that unlawful immigrants were forced to cross in new, more dangerous areas. President-elect Donald Trump said he wants a 1,000-mile wall at the border, which means he’s already most of the way there.

Figure 1

Border Fencing

 

Source: Congressional Research Service.

Similarly, the number of border patrol agents has grown more than 8-fold since 1982 compared to a 4 percent overall decrease in the number of non-military federal employees in the legislative, judicial, and executive branches (this does not include federal contractors). This vast expansion is underreported but it hasn’t dimmed the clamor for more resources and agents (Figure 2).    

Figure 2

Border Patrol and Non-Military Federal Employees Indexed to 1982

 

Sources: Office of Personnel Management and Customs and Border Protection.

Estimates vary, but the gross number of illegal immigrant entries has also declined. That decrease is explained in part by increased enforcement but also by poor job growth in the United States and more guest worker visas. One estimate of the gross illegal entries shows a sharper decline (Figure 3) than the other (Figure 4) but they both show a steep decline in recent years.

Figure 3

First Estimate of Gross Inflow of Illegal Immigrants

 

Sources: Massey and Singer, Warren and Kerwin, and Pew Hispanic Research Center.

Figure 4

Second Estimate of Gross Inflow of Illegal Immigrants

 

Source: Warren and Kerwin.

From 1982 to the end of 2015, 98.6 percent of all apprehended unlawful immigrants have been returned or removed (R&Rs) to their home countries (Figure 5). The Obama administration has not relaxed immigration enforcement along the border (Figure 6). Some years have more R&Rs than apprehensions because the unlawful immigrants are apprehended in the earlier year and then deported in the following year (Figure 6). 

Figure 5

Returns & Removals and Apprehensions

 

Sources: Yearbook of Immigration Statistics and Immigration and Customs Enforcement.

Figure 6

Ratio of Returns & Removals to Apprehensions

 

Source: Yearbook of Immigration Statistics and Immigration and Customs Enforcement.

The Obama administration did massively ramp up interior enforcement from 2009 to 2011. His administration increased the percentage of the entire unlawful immigrant population deported every year as well as and the total number of people deported from the interior of the United States (Figure 7).

Figure 7

Interior Removals

 

Source: Migration Policy Institute and Immigration and Customs Enforcement.

President Obama’s administration did substantially shift how unlawful immigrants are apprehended (Figure 8). Customs and Border Protection (CBP) apprehended over 90 percent of all unlawful immigrants prior to 2008 but in that year non-CBP agencies like Immigration and Customs Enforcement (ICE) started to play a much larger role. About 39 percent of the shift from 2007 to 2008 can be accounted for by a decrease in unlawful immigrants apprehended at the border who were deterred by the Great Recession, while about 61 percent can be accounted for by an increase in non-CBP apprehensions. That trend continued until 2011 when about equal numbers of unlawful immigrants were apprehended by CBP and non-CBP agencies. Since 2011, CBP’s proportion of apprehended unlawful immigrants has climbed to just below what it was 2007 even though the number crossing the border has fallen—a trend maintained by the 79 percent decline in non-CBP apprehensions from 2011 to 2015.    

Figure 8

How Unlawful Immigrants are Apprehended

Sources: Yearbook of Immigration Statistics, Customs and Border Protection, and Author’s Calculations.

The size of the illegal immigrant population has fallen during the entire Obama administration due to the lackluster economy, increased immigration enforcement, and more guest workers (Figure 9). President Obama managed to achieve what the last three presidents before him failed to do: leave the White House with fewer illegal immigrants in the country than when he entered without a formal amnesty. Although his reputation as the Deporter-in-Chief has dimmed in recent years due to DACA and DAPA, his administration likely will have removed as many illegal immigrants from the United States during his two terms as were removed from 1978 to 2008.   

Figure 9

Unlawful Immigrant Population

 

Source: Pew Hispanic Research Center.

The decline in unlawful immigrant entries means many border patrol agents are twiddling their thumbs. As recently as 2007, each border patrol agent apprehended an average of 59 unlawful immigrants (Figure 10). By 2015, that number had fallen to a mere 17. The decline in unlawful immigrants entries and the increase in border patrol has left many of them with little to do. Their numbers should be cut or, at an absolute minimum, not expanded any further.        

Figure 10

Border Apprehensions per Border Patrol Agent

 

Sources: Immigration and Nationalization Service, Customs and Border Protection, and Yearbook of Immigration Statistics.

A major concern over unlawful immigration is how it affects crime rates. If the border was truly a zone of lawless chaos then there should be increases in violent and property crime. Although not all counties or cities bordering Mexico report violent and property crime rates per 100,000, those that do show a steady decline in crime rates over time (Figure 11). There are certainly illegal immigrants who commit violent and property crimes but it hasn’t caused a crime wave on the U.S. border. 

Figure 11

Crime Rates in Border Counties and Police Departments

 

Source: FBI Uniform Crime Reporting Statistics.

President-elect Donald Trump has called for a large increase in border enforcement including the expansion of a wall. The decline in the flow of illegal immigration, relative peace at the border, 653 miles of border wall, and a huge increase in the size of the enforcement bureaucracy are evidence that the government does not need to expand immigration enforcement.  

The federal government has suffered from waste, fraud, and abuse in its spending programs for decades—actually, centuries. A federal effort in the 1790s to run Indian trading posts, for example, was plagued by inefficiency. For almost as long, studies have been documenting the waste. An 1836 Ways and Means Committee report, for example, criticized river and harbor projects for being chronically overbudget.

The wasteful spending continues today, and the latest effort to document it is Senator James Lankford’s new study, “Federal Fumbles: 100 Ways the Government Dropped the Ball.” The study describes projects such as “$495,000 to fund a temporary exhibit for sights, sounds, tastes and yes, even smells of the Medieval period” and $2 million for a “multi-year study about kids’ eating emotions, and how they don’t like to eat food that’s been sneezed on.”

Spending on such dubious projects represents only a small share of the $4 trillion federal budget. However, Lankford’s examples illustrate the broader overspending disease that afflicts Congress and the executive branch, which I discuss here and here. Lankford’s projects are not just random failures: they stem from structural features of the government that induce politicians and agency officials to spend on low-value activities.

Senator Lankford will discuss his report at a Cato forum on Capital Hill, Wednesday at noon. Tom Schatz, Justin Bogie, and I will comment on the report and examine prospects for cutting spending during the Trump administration. All are invited.

To explore the structural reasons for ongoing waste in federal spending, see “Why the Federal Government Fails” and essays here.

As China grows more economically powerful there is growing concern about how it will convert its economic power into strategic influence. In its 2016 annual report, the U.S.-China Economic and Security Review Commission recommends closer scrutiny of Chinese economic practices and advocates creating a panel to prevent China’s state-owned enterprises from gaining “effective control” over U.S. companies. Fear of China’s commercial influence has recently spread to Hollywood as well, with recent purchases of film studios and theater chains by China’s Dalian Wanda leading to a torrent of commentary warning against Beijing’s nefarious long-term intentions.

The idea that China can easily convert its economic clout into influence is attractive and intuitive given the government’s important role in the economy. In Chinese Economic Statecraft: Commercial Actors, Grand Strategy, and State Control, William J. Norris, a professor at Texas A&M University’s Bush School of Government and Public Service, casts a skeptical eye on this assumption. Norris came to the Cato Institute recently to discuss his theory of economic statecraft and shed light on the complex domestic factors that help or hinder China from using commercial actors to achieve strategic goals. (Full disclosure, as a student at Texas A&M I spent several months as Norris’s research assistant while he worked on the book.) Using a theoretical model rooted in principal-agent theory applied to several case studies, Norris is able to show that China’s political leadership and commercial actors are not always on the same page.  

Economic statecraft is the intentional manipulation of economic interaction to produce or affect some sort of strategic end. Norris finds that effective economic statecraft requires state control over commercial actors and state unity across different sectors of government. While the Chinese government may have nominal control over its state-owned enterprises, it can be very difficult to get local officials in sync with provincial or national-level officials, which impedes the effective execution of economic statecraft. In some of Norris’s case studies Chinese commercial actors made decisions with little direction or oversight from state officials that had unintended strategic effects down the road.

The most important take-away from Norris’s book is, “economic statecraft is not an easy lever of national power for [China] to wield. To be effective, many factors need to align.” China’s economy makes it easier for the government to use its companies in strategic ways, but even in the Chinese system there are numerous factors that make it difficult to use commercial actors to achieve strategic goals. While Beijing has used commercial actors to achieve strategic goals, not every move by a Chinese state-owned enterprise is a strategic master stroke designed to maximize China’s power or undermine the United States. In order to better identify the real cases of Chinese economic statecraft, it would be prudent for analysts to apply the model in Norris’s book. 

Fidel Castro died, finally. His life was consequential, but his death was anti-climactic. The world has been expecting Castro’s demise for at least 10 years when he handed power to his brother Raul because of illness, and Cubans have been waiting far longer. But like Cuban communism, Castro seemingly refused to die, even when his ideas long ago failed to inspire widespread enthusiasm, and indeed led his country to ruin and generated resignation, fear and rejection among Cubans who had to live under the only totalitarian system this hemisphere has ever seen.

Six years ago, Cuban dissident Yoani Sanchez captured the mindset that results from being forced to live according to what most Cubans considered a discredited ideology when she wrote: “Fidel Castro, fortunately, will never return.” To the vast majority of Cubans, Castro, or at least the appeal of his ideas, was already dead.

When I first visited Cuba in 2002 for a series of official and non-official meetings, it became clear to me that nobody there, except maybe two people, believed in communism. The level of cynicism was high, apparently reminiscent of the final years of Soviet socialism, and it was extensive. I met nobody who was pleased with the current state of affairs. That has not changed, though for a time Chavista Venezuela came to the rescue with oil subsidies and other support that are now unreliable with the failure of Venezuela’s own socialist experiment.

There will always be some nostalgia and belief in the region about the legend of Castro being a crusader for the poor and a champion of social equality, but fortunately, the Cuban model in today’s Latin America holds little to no appeal. And the crude reality of Castro’s legacy is more widely recognized than ever before. As the Peruvian establishment newspaper El Comercio noted, Castro was “simply, the bloodiest, most repressive and longest-lasting dictator of Latin America.” And although the authoritarian system he set up has not yet been defeated, his death marks a symbolic endpoint in the worst excesses of 20th century repression in the region.

Fidel Castro represented the worst of the worst of Latin America’s centralizing tradition. In the region’s history, nobody had so much control over so many aspects of people’s lives for so long a period as he did. He achieved it through sheer intolerance and cruelty. From the beginning of the revolution, he did not hesitate to imprison and execute his closest allies, “friends” and even children when it served his purposes. People will debate for a long time how many millions of lives he disrupted, how many thousands of political dissidents he imprisoned, and for how many tens or hundreds of thousands of lives lost he is responsible. But he was a master of deceit and a cunning manipulator of public opinion; in person, he was a “snake charmer” in the words of Peruvian novelist Mario Vargas Llosa. As Yale Professor Carlos Eire notes, “His lies were beautiful and so appealing.”

Here too, he was the most talented of Latin American dictators. Castro justified the worst crimes through the supposed achievement of the greater good—national sovereignty, universal health care and education, social equality, the fight against imperialism, etc. Never mind that the reality was quite different. With all its problems, Cuba, the most developed country in Latin America before the revolution, became relatively less developed and even more dependent on outside powers after the revolution, first on the Soviet Union, then on Venezuela. And if we are to believe Cuba’s official figures, plenty of countries around the world and in Latin America showed equal or greater gains in social development indicators without having to sacrifice civil, political or economic liberties. The extent of control that the communist nomenclatura has over others in society represents an inequality of power that Cuba had never before seen.

Castro knew that much of the outside world would overlook that reality and buy into official myths. He didn’t always lie. The use of moral equivalence in argumentation, or the old trick of suggesting that criticism of the new regime was the same as support for the old status quo went a long way. Castro knew that the world was imperfect and turned Cuba into the focal point of what Latin America had long been: a place where outsiders could project their vision of utopia or express dissatisfaction with the many things wrong in their own societies. In this way, the revolution became useful to intellectuals, journalists, activists, and countless others around the world. In this way also, Castro’s cynicism about the downtrodden, world peace or whatnot was unmatched. As my colleague Juan Carlos Hidalgo notes, just three years ago the regime hosted a summit of Latin American leaders, which called on the region to strengthen human rights and democracy.

How the future will unfold in Cuba is unpredictable, but we can expect its military dictatorship to remain in control in the short term and probably longer. The regime has been preparing for Fidel’s death for the past decade and its repression has increased over the past year. Without Fidel, though, there may be less fear to experiment with change. Whatever change comes about, however, will be undertaken by a regime intent on maintaining power. It will be a task that will be harder and harder for anybody to control.

Castro’s death gives us the opportunity to do as my friend Javier Fernandez-Lasquetty suggests, and pay homage to the millions of Cubans who have suffered under the tyranny he imposed, including writers like Heberto Padilla and Guillermo Cabrera Infante, activists like the Ladies in White or the late Oswaldo Paya, journalists and intellectuals like Antonio Rodiles, and the many, many Cuban dissenters who continue to face despotism with dignity. The world is a better place because of them.

On his radio show last night, Mark Levin asked his audience whether they thought President-elect Donald Trump would turn out to be a big-government Richard Nixon or a small-government Ronald Reagan. On the infrastructure issue, I fear that we may be headed in a big government direction.

Trump, of course, is a “populist,” not a small-government conservative. His advisor, Stephen Bannon, indicated the other day what that means:

Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” Stephen K. Bannon told the Hollywood Reporter. “The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan.

Bannon should know that on fiscal policy, Jackson’s populism was anti-debt and small government. Echoing Thomas Jefferson’s views, Jackson thought that federal debt undermined liberty, and he pushed to eradicate it. Jackson’s views were in tune with the public, which strongly supported frugality in the federal government.

Jackson and his allies were dubious of federal investments in infrastructure (“internal improvements”). His vice president, Martin Van Buren, thought that “Congress had no power to construct roads and canals within the states.” He said that spending on such projects “was sure in the end to impoverish the National Treasury by improvident grants to private companies and State works, and to corrupt Federal legislation by the opportunities it would present for favoritism.”

On assuming office, Jackson made a list of his priorities, including “the Public debt paid off, the Tariff modified and no power usurped over internal improvements.” In his first inaugural address, he promised “extinguishment of the national debt, the unnecessary duration of which is incompatible with real independence.” Jackson famously vetoed funding of Kentucky’s Maysville Road in 1830, citing constitutional objections and his goal of debt elimination.

Jackson was also skeptical of federal investments for practical reasons. In his 1830 message to Congress, he said, “Positive experience, and a more thorough consideration of the subject, have convinced me of the impropriety as well as inexpediency of such investments.” One practical concern was what we now call “crony capitalism.” Jackson noted that when the government gave some initial subsidies to companies, they tended to get hooked on the hand-outs and kept coming back for more.

In his book about the Jackson era, Carl Lane concluded that federal debt elimination, “Americans in the Jacksonian era believed, would improve the material quality of life in the United States. It would reduce taxes, increase disposable income, reduce the privileges of the creditor class, and, in general, generate greater equality as well as liberty.”

Back then, the belief was that a frugal federal government that balanced its books and did not interfere in state and local matters would secure liberty and benefit average citizens. That is the type of Jacksonian populism that Bannon and Trump should pursue.

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