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The Department of Homeland Security (DHS) and the Department of Justice (DOJ) today released a report that found that about 94 percent of foreign-born inmates in Federal prisons are illegal immigrants.  That is not surprising, as illegal immigrants convicted of an immigration offense are incarcerated in federal prison and account 7.3 percent of all inmates.  Likewise, drug traffickers who cross international borders are also in federal prison and account 46.3 percent of all prisoners.  Thus, illegal immigrants are overrepresented in federal prison because the federal government enforces immigration laws and many drug trafficking laws but only a small fraction of all those incarcerated for all crimes committed in the U.S. are in federal prisons. 

The authors of this DHS/DOJ report do deserve credit for highlighting its shortcomings.  On the first page, it states:

This report does not include data on the foreign-born or alien populations in state prisons and local jails because state and local facilities do not routinely provide DHS or DOJ with comprehensive information about their inmates and detainees.  This limitation is noteworthy because state and local facilities account for approximately 90 percent of the total U.S. incarcerated population.

The federal prison population is not representative of incarcerated populations on the state and local level, so excluding them from the report means that it sheds little light on nationwide incarcerations by nativity, legal status, or type of crime.  On the last point, it is shocking how unrepresentative federal prison is regarding the types of crimes its inmates are convicted of. In 2016, 67,742 people were sentenced to federal prison.  Almost 30 percent of them were for immigration offenses.  Those immigration convictions comprised 100 percent of the convictions for immigration crimes in the United States in 2016.  By contrast, there were only 85 federal convictions for murder out of a nationwide total of 17,785 murder convictions that year, comprising less than 0.5 percent of all murders.


If Garcia Zarate had actually been convicted of murdering Kate Steinle, then he would have been incarcerated in California state prison and he would not show up as an illegal immigrant murderer in this DHS/DOJ report.  What good is a federal report on illegal immigrant incarceration rates if it would have excluded Kate Steinle’s murderer had he been convicted? 

The DHS/DOJ report also explained why they did not include an estimate of illegal immigrants incarcerated on the state and local level:

DHS and DOJ are working to develop a reliable methodology for estimating the status of state and local incarcerated populations in future reports.

A March 2017 Cato Institute Immigration Research and Policy Brief employed a commonly used residual statistical methodology to analyze the incarcerated population in the U.S. Census for 2014.  We found that illegal immigrants were about 44 percent less likely to be incarcerated than native-born Americans.  I look forward to reviewing any methodology that the federal government comes up with but illegal immigrant criminals would have to be severely undercounted in prisons to give them an incarceration rate that even approaches native-born Americans.     

The broad finding among criminologists and economists who study this topic is that immigrants are less crime-prone than natives whether measured by the areas where they live or their incarceration rates.  Although there is less research on illegal immigrant criminals, the general finding is that they are less crime-prone or about as criminally inclined as native-born Americans.  The DHS/DOJ report reveals no new information about incarcerations on the federal level, does not provide evidence for a higher nation-wide illegal immigrant incarceration rate, nor does it support the administration’s plea for more border security.    

National Review’s Ramesh Ponnuru has a new article, “The Tax Cut Doesn’t ‘Tilt Toward the Middle Class.” The piece apparently responds to commentary by Veronique de Rugy and me about the effects of the GOP tax plan.

Ramesh says:

According to the Joint Committee on Taxation (JCT), households making between $20,000 and $30,000 pay 0.7 percent of all federal taxes now and will pay 0.8 percent of them under this law in 2025 … Households making $30-40,000 pay 1.3 percent of federal taxes now and will pay 1.4 percent of them in 2025. Households making between $40,000 and $75,000 will see their share of federal taxes unchanged at 10.2 percent.

His point is, “the tax cut reduces tax burdens proportionally,” rather than giving the biggest cuts to the middle, as I found here and here.

Alas, Ramesh used the wrong data. The tables published on the JCT website include reduced subsidies from repeal of the ACA individual mandate. Those would be almost entirely spending cuts, not tax increases. (This JCT score shows that the ACA effect will be $314 billion over 10 years, of which $297 billion, or 95 percent, will be spending).  

The JCT produces tables without the ACA subsidies, but they are not posted on the JCT site, in a typical example of the agency’s nontransparency. Phil Kerpen received them from GOP staffers, and they are attached below.

Anyway, here are Ramesh’s points rewritten from the JCT 2025 table that excludes the ACA piece:

Households making between $20,000 and $30,000 pay 0.7 percent of all federal taxes now and will pay 0.6 percent in 2025. Households making $30,000 to 40,000 pay 1.3 percent of federal taxes now and will pay 1.3 percent in 2025. Households making $40,000 to $50,000 will see their share of federal taxes fall from 2.2 to 2.1 percent, and households making $50,000 to $75,000 will see their share fall from 8.0 to 7.9 percent.

The non-ACA JCT table shows that the percentage tax cuts for the middle groups in 2025 are larger than the cuts for the top groups. So even aside from the (misguided) payroll tax issue raised by Ramesh, the JCT table shows that the GOP bill especially favors the middle class and will make the tax code more progressive (unfortunately).

Here is the JCT table.

The peculiarity of Congressional 10-year budgeting has left its mark on the tax debate. In the UK, if something like the Republican bill had passed, it would be regarded as a significant tax cut, pretty much across the board. And rightly so.

As JCT analysis has shown, in 2019, 44 percent would see tax cuts of more than $500, 17 percent tax cuts between $100 and $500, with just 8.1 percent seeing tax increases greater than $100. Even by 2025, just before most of the individual income tax cuts would expire, 56 percent would see tax cuts of more than $100, with just 13.5 percent seeing tax increases of $100 or more. And this includes as “tax rises” the reduction in subsidies paid out as the removal of the individual mandate penalty leads to fewer people opting for health insurance.

As Chris Edwards has explained, even on the JCT’s own figures (which attribute most of the burden of corporate income taxes to the rich), the biggest financial winners in terms of a reduction in the proportion of federal income and corporate taxes they bear will be the middle-class.

Yet the 10-year budget, with expirations of income tax changes required to pass the bill through Senate reconciliation procedures, means Democrats and much of the media have effectively portrayed the reforms as tax cuts for the wealthy. As the income tax cuts and the increase in standard deduction evaporate, the penalty associated with the individual mandate is removed (reducing the extent of subsidies) and the new lower inflation rate for uprating tax band thresholds is maintained, more and more households lower down notionally face a “tax increase” in financial terms according to the law.

The way the media has not explained this distinction between the short and longer-term implications of the law (and how it would be up to Congress to let provisions expire) is breathtaking. On Tuesday, for example, the Associated Press tweeted “BREAKING: House passes first rewrite of nation’s tax laws in three decades, providing steep tax cuts for businesses, the wealthy.” No wonder just 17 percent of people think they are getting tax cuts in 2018, against the 80 percent estimated to actually be getting a tax cut of any amount. Liberal economists such as Paul Krugman have embraced the seeming unpopularity of the reform package, and believe the political and electoral implications for Republicans will only be worse once they now start proposing spending cuts.

The Republicans say they want to keep the provisions in the bill in the longer term, making the tax cuts permanent. So what should their message be to voters to make tax reform durable?

First, it seems clear they need to make a huge deal of the expanded paychecks most people will see in February. Given how warped people’s view is of the bill now, critics of the bill will have their credibility undermined if individual voters suddenly realize they really have seen higher take-home pay.

But, second, and more importantly, Republican proponents need to flip critics’ attack lines around. Yes, under the law the income tax changes do expire, they should say. But we do not want that to happen. If you like your tax cut, and want to keep your tax cut, then you need to ensure it has Congressional support, and you should pressure your congressmen and congresswomen to curb spending growth so that the tax cuts can be locked-in sustainably.

In other words, they need to use the new baseline from the tax cuts to their advantage, and play on the endowment effect: if you want to keep this extra take-home pay, then push for lower spending delivered by members of Congress committed to smaller government.

Several days ago a colleague of mine, having been sent a copy of the Niskanen Center’s recent conspectus, wondered whether Bill Niskanen, the former Chairman of the Cato Institute after whom the Niskanen Center is named, would have agreed with a claim it made. The claim was that promoting sound monetary policy was basically a matter of encouraging “policymakers to support the Federal Reserve’s dual-mandate” and of getting “pro-growth” candidates appointed to the Board of Governors.

My short answer to the question was, “No.” But it occurs to me that that answer is worth fleshing-out here, because many people may not be familiar with Niskanen’s ideas for improving monetary policy, and because those ideas show that he was far from being a cheerleader for the status quo, or for a more “pro-growth” version of the status quo, whatever that might mean.

The Dual Mandate

For one thing, Niskanen was no fan of the dual mandate. That mandate had its roots in the 1946 Full Employment Act and was formally established by the 1978 Full Employment and Balanced Growth Act, a.k.a. the Humphrey-Hawkins Act. The latter act originally gave the Fed five years to reduce the overall (16 years or older) unemployment rate to 4 percent, while getting inflation down to 3 percent. The assumption that these goals were perfectly compatible rested, at least implicitly, on legislators’ belief in the presence of a stable Phillips Curve, implying a negative relationship between the rate of inflation and the rate of unemployment. Yet that belief had already been discredited by empirical developments by the time the legislation was passed.

It did not take long after the passage of Humphrey-Hawkins for wiser Federal Reserve officials, including Paul Volcker (who became Chair in 1979), to conclude that the “dual mandate,” far from defining a new and sustainable approach to monetary policy, was simply a nuisance — something they had to pay lip service to, whilst really concerning themselves with keeping a lid on inflation. For the most part they managed this by insisting that, in the long run at least, price stability was itself the best guarantee of “full employment.”

Bill Niskanen shared that perspective. Like all monetary economists who take empirical evidence seriously, he knew that the stable Phillips Curve was a myth, while regretting that other “macroeconomists have confused each other, generations of students, and too many policymakers” by pretending otherwise. Indeed, the evidence for the period between 1960 and 2001 suggested a “strong positive relation between the unemployment rate and the inflation rate lagged one or two years.” That meant that the best way to achieve a minimum long-run unemployment rate really was to aim at a zero steady state inflation rate.

In short, so far as Niskanen was concerned, the dual mandate was one mandate too many. If anyone doubts it, I invite them to review the opening passages of Niskanen’s entry on “Monetary Policy and Financial Regulation” for the 2008 edition of Cato’s Handbook for Policymakers. “For the past 30 years,” Niskanen observes,

the Full Employment and Balanced Growth Act of 1978 instructed the Board of Governors of the Federal Reserve to establish a monetary policy to maintain long-term economic growth and minimum inflation. As these two goals are sometimes inconsistent, this congressional guidance has not been very effective. The Federal Reserve has had almost full discretion in the conduct of monetary policy, subject only to the balance of current political concerns.

The intent of Congress would be better served and monetary policy would be more effective if Congress instructed the Federal Reserve to establish a monetary policy that reflects both their [i.e. Congress’s] concerns in a single target.

A Nominal Spending Target

Yet Niskanen did not favor the single-minded pursuit of zero inflation. Although he preferred a zero steady-state (or long-run) rate of inflation, he believed that that long-run objective was best achieved, not by having the central bank directly target some measure of the price level or inflation rate, but by having it target the growth rate of total spending on goods and services, as measured by the Department of Commerce’s statistical series “final sales to domestic purchasers.”

A final demand target, Niskanen explained in a 1992 Cato Journal article, is better than a price level or inflation target “because of the different response to changes in supply conditions.” Whereas a central bank that stabilizes spending “would not respond to either positive or negative supply shocks,” one that endeavored to stabilize the price level at all times would seek to increase the money stock and spending to keep prices from falling in response to a positive supply shock, and would seek to reduce the money stock and spending to keep prices from rising in response to a negative supply shock. While either approach could be consistent with achieving a zero long-run inflation rate, targeting demand reduces the variance of output.

Although Niskanen’s choice of a demand measure distinguishes his proposal from those of Scott Sumner and some other Market Monetarists, who would have the Fed stabilize nominal GDP rather than final sales, the difference is one of second-order importance only.[1] Also like some Market Monetarists, and unlike apologists for the monetary status quo, Niskanen favored a monetary rule imposed upon the Fed by Congress, as opposed to unbridled monetary discretion. Congress, he observed in that 1992 article, has delegated its Constitutional authority to “coin money” to the Fed

either without guidance or, more recently, with sufficiently confused, redundant, or contradictory guidance to permit the Fed to chart its own course. We could do worse. The performance of the Federal Reserve has usually been better than that of most other central banks.

I believe we can also do better — much better… .

We could do better, Niskansen said, by having Congress “approve a target path of total demand in the American economy,” specifically by passing legislation “that would formally instruct the Fed to follow a specific target path of nominal domestic final sales,” and by having “the administration and Congress…monitor the Fed’s performance” as often as once every quarter. That monitoring

should focus on the reasons why actual final sales may have differed from the target path in the previous quarter. An increasing difference between the actual and the target final sales over a period as long as two quarters should automatically trigger… a review. There is ample reason to criticize the Fed for an accumulating difference between the actual final sales path and the approved target path. But as long as the Fed maintains a roughly stable level of final sales relative to this path, both the administration and Congress should refrain from criticizing the Fed… .

In his 2008 Cato Handbook chapter, Niskanen offers more specific advice. Congress would be wise, he says,

(1) to specify a target rate of increase of final sales and (2) to instruct the Federal Reserve to minimize the variance around this target rate. The target rate of increase of final sales may best be about 5 percent a year, sufficient to finance a realistic rate of economic growth of 3 percent and an acceptable rate of inflation of about 2 percent.

Niskanen goes on here to accuse the Fed of “creating three ‘bubbles’ of aggregate demand” — between 1987 and 1991, 1997 and 2000, and 2002-2006 — each of which in turn contributed to bubbles in other markets, followed by recessions. In every instance, Niskanen argues, the Fed appeared to overreact to a previous financial crisis by allowing demand to increase relative to its target path, instead of merely taking steps “to avoid a decline in the growth of demand relative to the target path.”

Observe that Niskanen’s proposal would place the Fed on a much tighter leash than the one contained in the FORM (Fed Oversight and Modernization) Act, both in its original, 2015 version  and as incorporated in the latest version of the CHOICE Act. Unlike Niskanen’s plan, the FORM Act  leaves the choice of a specific monetary rule entirely to the FOMC.

Last Resort Lending

Besides wanting to place strict limits on the Fed’s conduct of monetary policy, Niskanen also wanted to curb its emergency lending powers. In particular, he opposed the de facto broadening of those powers that took place during the first months of the most recent financial crisis, observing (again in the Cato Handbook) that

the combination of deposit insurance and access to the [Fed’s] discount window created a serious level of moral hazard that reduced the incentive of both depositors and banks to avoid adverse risks. Adding securities firms and the government-sponsored mortgage firms to the list of financial firms eligible for access to the discount window and subject to regulation by the Federal Reserve would only expand the level of moral hazard in the financial system.

Rather than have it permit a permanent broadening of the Fed’s lending powers, Niskanen urged Congress to “consider amending the Federal Reserve Act of 1913 to restrict access to the discount window to depository institutions only.” Here again, Niskanen goes further than the CHOICE Act, in essentially proposing a complete repeal of the Federal Reserve Act’s section 13(3). The CHOICE Act, in contrast, would still allow the Fed to make emergency loans to non-banks, albeit on more strictly regulated terms, and only if the presidents of nine Reserve Banks (along with five members of the Federal Reserve Board and the Treasury Secretary) agree that allowing the firms in question to fail would “pose a threat to the financial stability of the United States.”

Against Central Banking?

The reforms Niskanen favored show that he was far from being a monetary policy conservative, to give that adjective its literal meaning. But was Niskanen really a monetary policy “radical”? Sure, he wanted to limit the Fed’s powers. But that hardly means that he questioned the need for a Federal Reserve System, or some other sort of central bank.

Yet question it he did. What’s more, he ultimately became convinced that we would, in principle at least, be better off without central banks. I ought to know, because I’m the one who convinced him!

The occasion was the 7th installment of Cato’s Annual Monetary Conference, in 1989, at which I presented my paper “Legal Restrictions, Financial Weakening and the Lender of Last Resort.” The argument of that paper is, essentially, that financial systems would be robust enough to avoid major crises altogether, and to do so without the help of central banks, were it not for government meddling, including central bank misconduct, that makes them unnaturally fragile.[2]

Niskanen, who was asked to comment on my paper, began his remarks as follows:

May I make a confession. In some areas of public policy I sense that my views are usually radical, in that I am prepared to promise a substantial reduction of the contemporary role of government. In other areas my views are more conservative, more from lack of understanding than from any conviction that the status quo is appropriate.

George Selgin has convinced me that my conservative acquiescence to the contemporary role of central banks has been misplaced. I had long recognized that central banks were the primary agents of both major recessions and sustained inflation, but I had casually accepted the argument that a lender of last resort and a monopoly of note issue were necessary to prevent panics in a fractional-reserve banking system. …[It] is increasingly clear that the conventional arguments for a central bank are second-best arguments that assume the restrictions that have increased the vulnerability of private banks.

To be sure, Niskanen’s new-found understanding didn’t cause him to propose that the Federal Reserve Act be repealed in its entirety! It merely caused him to believe that an alternative set of arrangements “would be better… if it could be implemented without transition costs.” The challenge is to come up with a transition process that would make the change worth it despite its short-run costs.

Of course I, too, would rather we chip away at the Fed’s powers than risk raising havoc by trying to “end” it in one fell swoop. The same goes for many of my fellow free bankers. So Niskanen’s position is actually no less radical than ours.

In portraying Bill Niskanen as a monetary policy radical, I’ve limited myself to his views on the Fed and central banking more generally, without venturing to consider what he had to say about other financial regulatory agencies. But readers may rest assured that his views concerning many of these were equally radical. Had Niskanen had his way, Congress would have done away with Fannie and Freddie, the Community Reinvestment Act, and U.S. support for the IMF; and I’m pretty sure that with a little more digging the list could be made much longer. One thing, though, is certain: Niskanen was never one to settle for conventional wisdom. As he himself explained, when he didn’t question some aspect of the status quo, more often than not it was because he hadn’t yet had a chance to noodle around with other options.

[1] Unlike final sales, nominal GDP includes spending on private inventories and net imports.

[2] The thesis is essentially the same as that expounded at greater length by Charles Calomiris and Stephen Haber in their 2014 book, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit.

[Cross-posted from]

Republicans have enacted the Tax Cuts and Jobs Act, the largest tax overhaul since 1986. While many people seem to think that the legislation favors the rich, it actually delivers the largest relative tax cuts to the middle class. That is clear if you dig beneath the surface of estimates from the liberal Tax Policy Center (TPC).

TPC’s new analysis shows tax changes for the final GOP bill for households by income quintile (or fifth). But the data is not presented in a neutral context to understand the relative sizes of tax cuts for each group. I present TPC data in context in the table below.

Column 1 shows the GOP tax cuts as a percent of income in 2018 from the new TPC study.

Column 2 shows total current federal taxes (income, payroll, excise, and estate) as a percent of income for 2018, estimated by TPC here.

Column 3 shows the GOP cuts (column 1) as a percent of total current taxes (column 2). The cuts are fairly equal across-the-board, although a little smaller at the top.

However, the tax bill does not change payroll taxes, so including them in the denominator of the column 3 calculation slants the results. Column 4 removes them. (The tax bill tweaks a few minor excise taxes, but with little effect on overall excise revenues, so I removed them also).

Column 4 shows TPC estimates of current-law income and estate taxes for 2018. The bottom two quintiles are negative because those groups do not pay any income and estate taxes, on net.

Column 5 shows the GOP cuts (column 1) as a percent of total current-law income and estate taxes (column 4). Middle-income households will receive a 28 percent tax cut, which is substantially larger than the cuts received by the higher income groups.

This is the fairest way to present the effects of the Republican tax bill. It indicates that for 2018, the tax changes will make the federal tax system more progressive. The GOP tax bill will result in higher earners paying a larger share of the overall federal tax burden.


A similar analysis of the official Joint Tax Committee data is here.

The House GOP leadership must be at least somewhat worried about the prospects for passage of their Foreign Intelligence Surveillance Amendments Act (FAA) Sec. 702 bill, HR 4478, which the House Rules Committee will consider later today in an “emergency” session.

I say this because this morning, the House GOP leadership circulated a wanted poster-style flyer of a dead man: Haji Iman, the alleged ISIS deputy finance minister and second in command to ISIS leader Abu Bakr al-Baghdadi, who was killed in eastern Syria on March 25, 2016. The flyer puts the phrase “ISIS” in a huge font, just in case the reader wasn’t getting the message.

Claiming that “Iman would still be plotting to kill Americans without Section 702,” the flyer then makes an interesting admission: that the search for Iman “was ultimately successful based almost exclusively on intelligence activities under Section 702” (emphasis added).

Not only does the flyer provide no proof that Iman was planning attacks on the United States, it omits the fact that both the Iraqi and U.S. governments had previously claimed repeatedly that Iman had been killed—six times, in fact.

As I’ve noted previously, two other major post-9/11 surveillance programs—the illegal STELLAR WIND mass surveillance program, and the PATRIOT Act’s Sec. 215 telephone metadata collection program—failed to stop a single attack on America. If it took the NSA two years to find Iman using Section 702 “almost exclusively” after claiming repeatedly the man was dead, it should raise major questions about the veracity of the official government (and now House GOP leadership) account of this incident and the effectiveness of the Section 702 program.

And then there’s that tantalizing phrase—”almost exclusively.”

The flyer admits that programs besides Section 702 were responsible for finally—allegedly—killing Iman. So Section 702 collection was not, apparently, a “but for” capability (i.e., but for Section 702, Iman would still be alive). How effective is Secton 702? We don’t know. There’s never been an independent, case-by-case audit of claimed Section 702 “successes” during the nearly 10-year life of the program. And the bill being considered by the House Rules Committee today does not call for such an audit.

What the flyer also doesn’t say is that as written, HR 4788 would effectively expand warrantless surveillance under Section 702, including potentially against purely domestic targets. Given the abuses of the Section 702 program that have been exposed over the past several years, HR 4478 is an amazing statement of the contempt the House GOP leadership has for the Fourth Amendment rights of Americans.

There is a lot of circumstantial evidence pointing to electoral fraud in Honduras’ presidential election. Yet neither the opposition nor international electoral observers have conclusively demonstrated that such has occurred. In other words, there is a lot of gun smoke in the room, but no smoking gun.

Perhaps the most damning piece of circumstantial evidence so far is a statistical analysis by Georgetown professor Irfan Noorudin at the request of the Organization of American States (OAS). It demonstrates that:

The Honduran national election of 2017 experienced a dramatic vote swing away from the opposition alliance and towards the incumbent National Party. This analysis raises doubts about the plausibility of such a reversal of fortunes. If one believes the vote tallies to be accurate, it is plausible to have such a swing. But the pattern of votes, particularly in turnout rates, is suspicious. As documented above, there’s a marked break in the data that is hard to explain as pure chance.

Noorudin firmly concludes: “On the basis of this analysis, I would reject the proposition that the National Party won the election legitimately.”

Partly based on this analysis, the OAS Electoral Observation Mission in Honduras stated it could not be certain about the validity of the results. OAS Secretary General Luis Almagro has called for a new election.

But despite how compelling Noorudin’s analysis is, there is still a missing link that he mentions: the vote tallies from polling stations. Up until now, neither the opposition nor international observers have presented evidence showing that the vote tallies were systematically altered.

Given the magnitude of the alleged fraud—a little over 50,000 votes to swing the election—one would expect that during the recount the international observers would have discovered plenty of evidence of how vote tallies were tampered with or did not match the amount of votes registered in each ballot box. While the OAS found irregularities in a “small number” of vote tallies, it does not mention anything significant enough to change the result.

Thus, all the suspicion lies on how the computer system went down when opposition candidate Salvador Nasralla was ahead with 57% of vote tallies counted and the subsequent dramatic (and statistically implausible) swing in favor of president Juan Orlando Hernández. However, the results announced by the Electoral Tribunal are ultimately backed up by physical vote tallies from each polling station.

And that is the conundrum: Either widespread fraud was conducted with surgical precision up to a point where a multitude of international observers cannot conclusively prove that it happened, or the statistically implausible actually happened and Hernández won the election fairly.

The wreck of the 501–the Amtrak train that crashed near Seattle on Monday–is raising lots of questions about Amtrak operations, but they aren’t always the right ones. Here are some questions that should be asked and some of my preliminary answers. Answers from Amtrak (the operator), FRA (the funder), Sound Transit (the track owner), or WSDOT (the train owner) may differ.

1. Congress required passenger railroads to install positive train control (PTC) by the end of 2015. Why did the Federal Railroad Administration (FRA) give money to the Washington Department of Transportation (WSDOT) for a new passenger rail line that would not open until after 2015 when the project didn’t guarantee funding for positive train control?

Answer: The Obama administration wanted to distribute high-speed rail funds to as many states as possible in order to build political backing for the program, so it couldn’t be bothered with positive train control. The tracks the train was on are owned by Sound Transit, which says it is installing PTC, but it won’t be finished until spring. Public releases of WSDOT’s application for funds for this train didn’t mention PTC.

2. Around 800 people die in railroad accidents a year. PTC would prevent only about 1 percent of these fatalities; far more would be saved by spending the same amount of money on better grade crossings and fencing of rail rights of way. Why do we put so much emphasis on an expensive technology that will do so little?

Answer: Accidents that PTC could have prevented tend to be more spectacular than people getting killed when a train hits their car at a grade crossing. This suggests that, when politicians decide where private businesses spend their money, it’ll get spent on grandiose programs rather than things that could really make a difference.

3. When an auto driver runs a red light and kills a pedestrian, we don’t blame the auto maker for not making driverless cars sooner; we blame the driver and, perhaps, the people who were supposed to train the driver. Why blame this accident on the lack of positive train control when the train driver should have slowed down and Amtrak should have made sure the driver was qualified to operate this section of track?

Answer: Everyone is looking for a scapegoat, and it is easier to blame an institution than an individual.

4. The train in question had about 250 seats, and this was the inaugural run on this route, which usually generates a lot of interest among rail enthusiasts. Yet there were only 80 passengers on board. Does this confirm that Lakewood Mayor Don Anderson was right when he said “this project was never needed”?

Answer: The big change in Seattle-Portland service was not an increase in speeds but an increase in frequencies (a change that may be delayed by the wreck of one of the new train sets funded by the federal government). Amtrak has only been able to fill 54 percent of this train’s seats, and WSDOT was hoping that more frequent and more reliable trains would increase the percentage of seats filled. We’ll know more after a year or so, but it doesn’t look good if the inaugural run filled less than a third of the seats.

5. Why do so many reporters call this a high-speed train? The top speed between Portland and Seattle is 79 mph, the same as it has always been and the same as most other Amtrak routes. In technical terms, this was a conventional, low-speed train.

Answer: Though this was a low-speed train, it was funded by Obama’s high-speed rail fund. By repeatedly using the term “high-speed trains,” reporters are keeping that idea in the public consciousness, perhaps in the hopes that Trump’s infrastructure plan will include money for more such trains. (This could backfire, however, by making people think that high-speed trains are more dangerous. They aren’t–but they are a lot more expensive.)

6. Why do we need passenger trains at all? Amtrak fares from Seattle to Portland start at $26 and cover less than half the costs of the train. Bolt Bus has six buses a day that take less time than the train at fares of around $15. Plane fares start at $65, though most are around $100 (which may still be less than the full costs of Amtrak), and there are dozens of flights a day.

Short-distance trains were made obsolete by buses in the 1920s. Long-distance trains were made obsolete by planes in the 1950s. When other transportation technologies, such as horseback riding, steamboats, and canals went obsolete, we let them go. Why can’t we let go of the passenger train?

Answer: America was suffering an inferiority complex in the early 1960s. We were losing the space race; some thought there was a missile gap with Russia; Japanese electronics were beginning to take over American markets. When Japan introduced its bullet trains in 1964, suddenly there was one more area in which our technology appeared to be inferior. Never mind that our jet airplanes were several times faster than Japan’s trains; Congress began funding passenger trains in 1965, and once a federal program gets started, it generates special interest groups dedicated to keeping it going.

Question: At least Amtrak is getting closer to covering its operating costs, right?

Answer: No, when Amtrak says that, it is lying. Amtrak counts more than $200 million in annual subsidies that it gets from the states as “passenger revenues.” Amtrak also pretends depreciation is zero even though, at more than $800 million per year, it is the second largest line item on its operating budget. Amtrak’s deferred maintenance has led to a backlog of needs in the tens of billions of dollars. When counting only ticket fares and on-board food service revenues against operating costs, including depreciation, Amtrak operations lose more than $1 billion a year and ticket fares cover only a little more than half the costs.

Question: At least Amtrak’s Northeast Corridor makes money, right?

Answer: Only if you don’t count depreciation, deferred maintenance, or other costs that Amtrak doesn’t try to allocate to individual routes. The Northeast Corridor needs at least $35 billion in rehabilitation work just to bring it up to a state of good repair. Another way Amtrak has made its trains appear to be profitable is by calling much of its maintenance work a capital cost, and Amtrak can’t afford to do all of the “basic infrastructure” maintenance needed in the Northeast Corridor, much less the rehabilitation work, without federal subsidies of around $500 million dollars per year (see page 15).

Question: So is Amtrak’s maintenance backlog only in the Northeast Corridor?

Answer: No, Amtrak doesn’t own most of the tracks it uses outside of the Northeast Corridor, but it still has maintenance needs for its stations and rolling stock. When Amtrak took over private passenger service in 1971, the average age of passenger cars that it acquired from the railroads was 22 years, and they were so worn out that nearly all were replaced within a decade. Today, the average age of Amtrak’s passenger cars is more than 30 years, suggesting that it will soon need to spend billions replacing them.

Question: So are all trains obsolete?

Answer: No, only passenger trains are obsolete. Freight trains are extremely productive, and America has the finest, most advanced rail system in the world. That’s because it is mostly private and operates to produce profits, not to give politicians ribbon-cutting opportunities.

Republicans are set to pass the largest federal tax overhaul in decades. The centerpiece of the bill is a reduction of the corporate tax rate from 35 to 21 percent. That reform will help attract global investment to America and boost capital spending, hiring, and wages over time.

House Speaker Paul Ryan of Wisconsin deserves chief credit for the reform. Ryan has pushed tax reform for years, and he keenly understands how high business taxes are undermining U.S. economic growth. Ways and Means chair Kevin Brady of Texas has also worked tirelessly for reform.

Ryan read our book Global Tax Revolution when it came out in 2008, and he discussed some of the themes at a Cato forum on Capitol Hill in 2009. At the time, he was the ranking member on the House Budget Committee. Here are some of his comments:

If you haven’t read this book you should, the book by Chris Edwards and Dan Mitchell. If you go to pages 46 and 47, you will see America is slipping in worldwide competition. America is behind the curve when it comes to the way we tax our businesses and companies, and we’re losing jobs because of it.

… Whether you like it or not, we are in the 21st century global economy. And it matters what the incentives are for the kinds of businesses we want to keep and attract and grow jobs in America.

The GOP tax legislation headed for the president’s desk this week has plenty of flaws, but the corporate reforms are long overdue. At Cato, we have been educating policymakers and the public on the issue since at least this 2002 study on International Tax Competition (co-authored with Veronique de Rugy), as have scholars at Tax Foundation, Heritage Foundation, and other think tanks. It is gratifying that policymakers such as Ryan listened, and have finally moved Congress to make reforms.

The Republican tax bill not only cuts taxes, but also increases spending through refundable tax credits. The plan will increase spending directly by increasing child tax credits, and increase spending indirectly by changing low-income provisions that affect spending on the earned income tax credit (EITC).

The chart shows estimated fiscal 2017 and 2019 outlays on the EITC, child credit, and American Opportunity Tax Credit (AOTC). The 2019 figure includes a $12.6 billion increase from the GOP tax bill, as estimated by the Joint Committee on Taxation in endnote 2 in here. (I’ve excluded the ACA piece).

Outlays on refundable credits or subsidies will jump from $85.1 billion in 2017 to an estimated $97.7 billion in 2019. This amount is not a “tax cut.” Rather, it represents taxes extracted from other workers and businesses, having all the usual negative effects.


See here for a critique of the EITC.

Current law spending on the EITC, child credit, and AOTC in the budget (Table 26-1). 

National security strategies are strange beasts. Their glittering generalities and kitchen sink approach to detailing threats, interests, and priorities can make it difficult to know how literally, or seriously, to take them. All strategies reflect on the importance of American leadership and bask in the warmth of American values. And thanks to the growing bipartisan consensus around primacy since the end of the Cold War all strategies have more or less looked the same. Each one promises a stronger and safer America with help from our trusted allies. Given this, most Americans would be hard pressed to tell one national security strategy from the next.

Sadly, Trump’s 2017 National Security Strategy contains not only the worst elements from the past, namely the pursuit of primacy and a commitment to an endless war on terrorism, but also charts new territory by embracing a new nationalism that unnecessarily elevates immigration to a national security threat and retreats from the post-World War II commitment to free trade.

Though Trump’s penchant for military solutions has always been obvious, the extent to which his new security strategy embraces primacy is disappointing. As a candidate, Trump railed against the war in Iraq and nation building abroad. The national security strategy, however, calls for the United States to “compete with all tools of national power to ensure that regions of the world are not dominated by one power.” The strategy also calls for an expanded – and unending – war on terrorism. In short, Trump intends to commit the United States not only to a globe-straddling military presence and to counterproductive and unending military intervention, but also to risking conflict with nations like China over regional issues that mean very little for American national security. 

Unsurprisingly, given the turn to primacy, Trump’s strategy also calls for “rebuilding” America’s military, despite the fact that the United States already possesses the world’s most powerful military, spends more on defense than the next seven nations combined, and enjoys an alliance system that far outstrips those of Russia or China. In the end, any boost in defense spending will only add to the national debt while doing little for American security.

With regard to the economic side of foreign policy, Trump’s abandonment of decades of American support for international free trade regimes signals a dangerous form of economic nationalism. Trump’s withdrawal from the Trans-Pacific Partnership, his criticism of NAFTA, and his repeated complaints about the use of unfair trading practices by China, Japan, and other trading partners, make it clear that Trump either does not understand or does not trust the process by which the United States and the rest of the world rebuilt the global economy after World War II. Contrary to Trump’s insistences, however, protectionism and trade wars will do nothing to make America great again.

Finally, Trump’s inclusion of immigration, legal and illegal, as one of the major components of the national security strategy is not only unprecedented, but it smacks of a nativism that identifies threats not based on objective metrics but on cultural differences and vague notions of “us versus them.” None of Trump’s proposed policies, from building a border wall to banning travelers from Muslim-majority nations to extreme vetting or reducing legal immigration, are based on solid evidence about likely harms to Americans. None of these policies will improve national security. Instead, Trump’s strategy is only likely to inflame tensions among races, nations, and religious groups.

Experience with previous national security documents suggests that we should treat Trump’s new strategy more as a guide than as gospel. It’s a safe bet that Trump, even more than most presidents, will deviate from the script as threats arise and opportunities emerge. But to the extent that Trump follows his new playbook, we can expect many of the same problems that have bedeviled U.S. foreign policy for the past sixteen years along with a host of new ones.

If you read the blog regularly, you might have noticed a pattern recently: Cato’s foreign policy scholars weighing in to see if Santa might be able to improve U.S. foreign policy for us. After all, American leaders seem perpetually unwilling to do so, and the Trump administration’s new National Security Strategy doesn’t seem to offer much more hope for a more realistic, sensible approach to foreign policy either.

Our scholars asked for a variety of foreign policy changes, some big and some small. Some would be relatively easy to achieve if the political will were there, such as Chris Preble’s request for a new round of Base Reallocation and Closure (BRAC), or Eric Gomez’s desire for a better North Korea strategy. Others might be more challenging, like Trevor Thrall’s call to rebalance civil-military relations in favor of civilian leadership.

But all the suggestions share one thing in common: they would all make U.S. foreign policy more rational, effective or accountable to the public. You can check them all out here, along with a more satirical take on the question in the Christmas episode of Power Problems, our foreign policy podcast.

So all we want for Christmas is…


…a BRAC (Chris Preble)

…Information about U.S. Military Deployments (Emma Ashford)

…to Fight Just the Necessary Wars (Erik Goepner)

Civilian Leadership of U.S. Foreign Policy (Trevor Thrall)

…the Travel Ban to End (Sahar Khan)

…a New North Korea Strategy (Eric Gomez)

…and an F-35 (or just better defense policy, budgeting and a partridge in a pear tree) 


Perhaps the most unusual feature of the Trump administration’s new National Security Strategy (NSS) is its heavy focus on domestic issues. Though the document covers issues from infrastructure to the manufacturing base, this is perhaps most apparent in the document’s strong focus on immigration. While previous NSS documents have briefly addressed the question of illegal immigration, this document is perhaps unique in its assertion that legal immigration is also a national security concern.

Certainly, the document does address some accurate immigration and border-related concerns, though it massively overstates their impact. Terrorism and transnational criminal networks do pose a threat to the United States, even if this threat is typically overblown. The NSS wades into murkier waters when it states that: 

“illegal immigration… burdens the economy, [and] hurts American workers…”

But while this is inaccurate, it is not entirely out-of-step with previous administrations and their approach to illegal immigration. The most jarring difference between this and prior NSS documents, however, comes in the Trump administration’s characterization of legal immigration as a national security concern, stating that:

“We will also reform our current immigration system, which, contrary to our national interest and national security, allows for randomized entry and extended-family chain migration.”

The NSS calls for increased vetting of legal immigrants and higher standards for immigration to avoid the ‘national security risks’ created by legal immigration, though the document never actually defines what these risks would be.

Perhaps most disturbing is the characterization of student visas as a potential security threat, with the NSS promising to consider restrictions on foreign students who wish to study STEM subjects in order to prevent technology transfer and intellectual property. Though the document initially places this restriction in the context of students from countries under sanctions – presumably suggesting that nuclear proliferation is a key concern – a later passage suggests that it might be applied more broadly:

“Part of China’s military modernization and economic expansion is due to its access to… America’s world-class universities.”

The implication is that it is not only sanctioned states where potential international students might be subject to such restrictions.  Chinese students are especially prominent in American universities where they make up 31 percent of all foreign students and 30 percent of all foreign-born STEM students as of May 2017.  However, they are not the source of technology breaches. Students at the University of California are not stealing F-35 blueprintshackers are.   

Even if Chinese students trained at American universities were a major source of technology for China’s military, boosting the number of skilled immigrants who can work and live here after finishing their educations will greatly diminish the number who move back to China and work in defense industries there.    

Huge percentages of Chinese skilled workers who were educated in the United States and then moved back to their homeland would return here if they had an offer of permanent residency (green card) and the better career opportunities that would undoubtedly accompany such immigration status.  According to a poll compiled by Vivek Wadhwa, a whopping 71 percent of U.S.-educated Chinese students who returned to China would either move back to the United States or seriously consider it if they could get a green card.  It is hard to see how locking skilled Chinese STEM workers and scientists in China will hamper their technological development for national security purposes.

The folly of restricting the immigration of STEM workers for national security reasons is best summarized by the tale of Qian Xuesen, a young rocket scientist who emigrated from China in 1935.  Legendary aerospace engineer, mathematician, and physicist Theodore von Karman pronounced Qian an “undisputed genius.”  He helped research jet propulsion, rockets, and then joined the Manhattan Institute during World War II.  In 1949, he was named the first Director of Caltech’s Jet Propulsion Lab (JPL) during the early years of the Cold War. 

Qian had two problems: U.S. immigration law and Cold War paranoia.  Qian never naturalized and on an immigration form in 1947, he answered that he was not a member of a group conspiring to overthrow the U.S. government.  Later unfounded allegations that he associated with Communists led to the revocation of his security clearance and his resignation from the JPL.  Despite almost no evidence and frequent denials by him and officials, the federal government ordered him to be deported for answering “no” on that 1947 form and eventually exchanged him for several downed American airmen.

John Logsdon, former director of the Space Policy Institute at George Washington University, said that “[Qian] was Joe McCarthy’s present to the Chinese.”  In Communist China, Qian is known as the Rocket King where he was foremost responsible for the research, design, and creation of Communist China’s missile and satellite launch program, including short, medium, and intercontinental ballistic missiles. After Qian’s deportation, the United States had one fewer potential subversive who could funnel secrets to the Chinese government while China gained a more advanced rocket, satellite, and nuclear program.

It seems unlikely that the Trump administration even knew about this episode, but they should.  The lesson here is not that Qian should have been deported sooner or never allowed into the country.  On the contrary, we think the lesson is that the U.S. government should not have panicked over a minor threat and deported a brilliant rocket scientist to an unfriendly power. The U.S. economy and national defense would have continued to benefit from Xuesen’s expertise, much as the United States can benefit today from the technological skills of immigrants.

In short, the Trump administration’s new National Security Strategy takes a decidedly unconventional approach to immigration, both by including it in the document in such detail, and by including various aspects of legal immigration alongside more commonly cited concerns about crime and illegal immigration. Denying America the skills and intellect of future legal immigrants is a poor way to improve our economy. And if the improving technological prowess of states such as China poses a potential threat to U.S. national security, locking more scientists inside of China seems a particularly poor way to deal with it.  

The Joint Committee on Taxation (JCT) has released its distributional analysis of the final Republican tax bill. The bill provides even larger percentage cuts for middle earners than previous versions of the legislation.

If the legislation is enacted, higher earners will pay an even larger share of the overall income tax burden than they do now. Our highly “progressive” income tax will be even more progressive. That approach is counter to sound fiscal governance and undermines the growth potential of tax reform, but that is what Republicans are delivering.

Looking at JCT’s table for 2019, second column, the percentage cuts are roughly similar across income groups from $20,000 to $1,000,000. But the JCT table slants the results by including payroll and excise taxes. The table under-measures the percentage cuts to the middle compared to the top.

The table below takes estimated payroll and excise taxes out of the JCT data. It shows individual and corporate income tax cuts as a percentage of estimated individual and corporate income taxes paid under current law. Middle-income households will receive by far the largest percentage income tax cuts in 2019.


Data Notes: Households less than $40,000 are shown as “n/a” because they do not pay income taxes in aggregate. JCT does not appear to publish current law estimates of individual and corporate income taxes only for 2019, so I estimated them using ratios from this TPC table

Like most Americans, I did not receive an advance copy of President Trump’s National Security Strategy. I saw it when it was released by the White House, a few hours before the president’s speech. I wanted to actually read it, or, failing that, to find certain terms, and go back and read the entire document after the president’s speech.

News stories are stressing that great power competition is back. The text of the NSS provides considerable support for that conclusion: Russia appears 15 times; China is mentioned 23 times.

I was most interested in what the president said about Russia in his speech, and how, if at all, that differed from the text of the strategy issued under his name. Before Donald Trump’s election, there was a reasonable argument to be made that the United States should improve its relationship with Russia. During the course of the 2016 election campaign, Trump often claimed that there were areas where the two countries could and should work together. In his speech today, he called attention to information provided to the Russians that allegedly helped thwart a terror attack that, the president said, might have killed thousands.

But hope for improved U.S.-Russia relations has been set back by the credible evidence of Russian interference in the 2016 election. President Trump reportedly, and understandably, hates this story and wants it to go away, as it appears to undermine the legitimacy of his election. But the story has hamstrung how the president talks about Russia, and how his administration has handled U.S.-Russia relations. It has made any actual rapprochement with Russia essentially unthinkable.

The NSS reflects that reality – not candidate Donald Trump’s aspirations.

For example:

Russia aims to weaken U.S. influence in the world and divide us from our allies and partners. Russia views the North Atlantic Treaty Organization (NATO) and European Union (EU) as threats. Russia is investing in new military capabilities, including nuclear systems that remain the most significant existential threat to the United States, and in destabilizing cyber capabilities. ­Through modernized forms of subversive tactics, Russia interferes in the domestic political affairs of countries around the world. The combination of Russian ambition and growing military capabilities creates an unstable frontier in Eurasia, where the risk of conflict due to Russian miscalculation is growing. (pp. 25-26)


Although the menace of Soviet communism is gone, new threats test our will. Russia is using subversive measures to weaken the credibility of America’s commitment to Europe, undermine transatlantic unity, and weaken European institutions and governments. With its invasions of Georgia and Ukraine, Russia demonstrated its willingness to violate the sovereignty of states in the region. Russia continues to intimidate its neighbors with threatening behavior, such as nuclear posturing and the forward deployment of offensive capabilities. (p. 47)

I also was curious to see how the NSS handled the specific question of Russian interference in politics, generally, and its use of social media, in particular. Does the document, in any way, give credence to the argument that there is something to this story, and that it shouldn’t just be swept under the rug?

Short answer: yes.

Russia uses information operations as part of its offensive cyber efforts to influence public opinion across the globe. Its influence campaigns blend covert intelligence operations and false online personas with state-funded media, third-party intermediaries, and paid social media users or “trolls.” (p. 35)

The NSS claims that the way to combat such influence operations is through a better informed public.

A democracy is only as resilient as its people. An informed and engaged citizenry is the fundamental requirement for a free and resilient nation. For generations, our society has protected free press, free speech, and free thought. Today, actors such as Russia are using information tools in an attempt to undermine the legitimacy of democracies. Adversaries target media, political processes, financial networks, and personal data. The American public and private sectors must recognize this and work together to defend our way of life. No external threat can be allowed to shake our shared commitment to our values, undermine our system of government, or divide our Nation. (p. 14)

I would like to believe that the White House actually believes what the document says. Then again, President Trump has engaged in a relentless battle against the U.S. media, at times seeming to question the value of free speech and free press.

Meanwhile, the Russians aren’t the only ones spreading blatantly false stories that undermine Americans’ confidence. There is no evidence, for example, that the Russians were behind the Maryland man who claimed to have discovered “’Tens of thousands’ of fraudulent Clinton votes in [an] Ohio warehouse.” I am not aware of Russians alleging that Hillary Clinton and John Podesta were running a child sex operation in the basement of a Northwest DC pizzeria, but members of the Trump campaign regularly promoted the views of those who did; Michael Flynn Jr had a direct hand in spreading the story. His father, retired Gen. Michael Flynn, had a history of promoting baseless conspiracy theories, and yet Donald Trump chose him to be his National Security Adviser. The president himself recently spread anti-Muslim messages from a fringe group in the United Kingdom, prompting a public rebuke from British Prime Minister Theresa May. His struggles with basic facts are legendary (in a bad way).

Such behavior doesn’t give me much confidence that the president is as committed to building a resilient country that values individual liberty and individual dignity as his NSS claims. For starters, the president could consult the source of dubious stories before hitting the RT button.

Today is not a proud day for the Washington State Department of Transportation (WSDOT). The agency spent close to $800 million of federal funds on a so-called high-speed rail project between Seattle and Portland–only “so-called” because top speeds would be just 79 mph, which is conventional rail. Much of the money was spent upgrading existing tracks to give passenger trains a shorter (but less scenic) route through and around Tacoma.

As you probably know, the very first train to use this route derailed on an overpass over Interstate 5, blocking half the freeway and killing at least six people. To make matters worse, Mayor Don Anderson of Lakewood, Washington, about 10 miles north of the crash, warned WSDOT a few weeks ago that it was not taking safety seriously enough. “This project was never needed and endangers our citizens,” he cautioned.

To be fair, Mayor Anderson was worried that grade crossings in Lakewood were inadequately protected for 79-mph trains. But his comments more generally suggest that WSDOT was putting the goal of saving Seattle-Portland passengers ten minutes of time–increasing average speeds by just 2.7 mph–ahead of safety.

In response to the accident, President Trump tweeted, “The train accident that just occurred in DuPont, WA shows more than ever why our soon to be submitted infrastructure plan must be approved quickly.” The implication was that this is an example of crumbling infrastructure, when in fact it is an example of misplaced infrastructure priorities.

In fact, what the accident shows is why the federal government should get out of the infrastructure business. As Mayor Anderson said, this project was unnecessary, and it was only done because President Obama wanted to spend billions of federal dollars on ideologically driven high-speed rail projects and WSDOT had a shovel-ready project (despite not being high-speed rail) on which to spend some of those dollars.

Trump’s inclination is to have the federal government back out of the infrastructure-funding game. But many members of Congress in both parties see infrastructure as a store full of candy they can give out to please their constituents and campaign contributors. The danger is that a hastily passed bill will end up spending more billions on unnecessary projects like the Seattle-Portland train.

No matter what speed, intercity passenger trains are obsolete and have been at least since the advent of jet airliner service. Even after hundreds of millions spent on improvements, this particular train would have been slower than driving from Seattle to Portland, but even the fastest high-speed trains are slower than flying.

One airline alone offers nearly two dozen flights a day between the Portland and Seattle airports. People who complain that Sea-Tac Airport is a long way from Seattle would do better to seek more flights out of King County Airport (aka Boeing Field), which is just four miles from downtown Seattle, than to support more trains.

Amtrak’s Seattle-Portland fare is $26 while the cheapest flights are $65. But Amtrak is heavily subsidized by both federal and state governments. Amtrak’s Seattle-Portland trains (which also go to Vancouver, BC and Eugene, OR) earned just under $30 million in ticket revenues in 2016 but cost Amtrak more than $68 million to operate not counting depreciation and other costs that Amtrak doesn’t allocate to individual trains. Meanwhile, subsidies to airlines are small and mostly go to support small-town airports.

On average and including all subsidies, airline travel costs about 16 cents per passenger mile while Amtrak costs about 60 cents per passenger mile. Higher-speed trains may attract more passengers but cost so much more that the costs per passenger mile are at least six times as much as the costs of flying.

Regardless of what you think of Amtrak, the point is that transportation spending decisions should be made by and in response to transportation users, not by politicians, and especially not by federal politicians. The accident in Dupont, Washington was a horrible tragedy, and we don’t yet know exactly what caused it. But, no matter what the cause, it never would have happened were it not for federal involvement in infrastructure spending.

The big question ahead of this year’s presidential election in Chile was whether Chileans were actually fed up with their country’s free-market model, or whether they were satisfied with it, but just indifferent to the ideological debate surrounding it. Up until yesterday’s run-off election, there were mixed signals. However, the decisive victory of center-right Sebastián Piñera over socialist Alejandro Guillier could be interpreted as a popular slap on the back of Chile’s successful economic model.

For nearly 20 years after the return of democracy in 1990, Chile enjoyed a political consensus on its liberal economic system. Successive center-left governments deepened the free market policies inherited from the military dictatorship, with evident success: Chile became Latin America’s most prosperous country. However, the free market consensus began to fray late last decade. Driven by massive student protests that demanded more government intervention in education—including universal free tuition in higher education—certain sectors of the erstwhile moderate center-left coalition began to openly question the free-market model. The first spell in opposition of the center-left coalition after the return of democracy in 2010-2014 (Piñera’s first term as president) consolidated this transformation.

When Michelle Bachelet became president again in 2014, her new left-wing coalition included for the first time the Communist Party, which now wields a lot of influence within her administration. Even though Bachelet’s platform called on simply softening the rough edges of the free-market model, some leading members of her coalition openly said the ultimate goal was its dismantlement. Bachelet’s thumping victory in 2013 (with 62.2% of the vote in the run-off and majorities in both houses of Congress) was interpreted as Chileans embracing much more government intervention in the economy. Surely so, in her second administration, Bachelet successfully pushed legislation raising taxes sharply on corporations, empowering unions, introducing new entitlements, and weakening the country’s mostly privately-run education system. In addition, the “No más AFP” movement—calling for an end to Chile’s private pension system—reached a critical mass, congregating tens of thousands of people all over the country in well-publicized protests. Chileans were reneging on their free-market model…

But, were they? Despite the wide margin of Bachelet’s victory in 2013, turnout in the runoff was only 43%. This was the first presidential election in which voting was voluntary—and Bachelet actually received less votes than in her first election in 2009. Some Chilean scholars, like Luis Larraín of Libertad y Desarrollo, a leading think tank, pointed out that surveys showed that a majority of Chileans were satisfied with how things were going in their lives. Moreover, they expressed a preference for policies that emphasize individual responsibility over government assistance. And even though Bachelet was able to pass her reforms in Congress, her government’s popularity plummeted—partly as a result of a corruption scandal that implicated her son.

Economic growth also plummeted. Whereas the economy grew on average 5.3% annually in 2010-2013, since 2014 growth averaged only 1.9% per year. Private employment collapsed and informality rose significantly. “Businesspeople are on the other side of the Andes waiting for the election,” an Uber driver in Santiago told me in October, referring to the lack of investors’ confidence in the policies of the current administration.

However, despite the fact that polls indicated that Sebastián Piñera was the overwhelming favorite to win back the presidency, he underperformed in the first round of the election in November, receiving only 36% of the vote.  More alarmingly, nearly half of voters casted votes for either left-wing or radical left-wing candidates. There again rose the perception that Chileans were indeed turning their backs on the free-market model…

After yesterday’s result, there are good reasons to believe that this is not the case. Guillier moved sharply to the left in the campaign leading to the runoff. It is safe to say that this is the first time that the leading candidate of the leftist coalition used such radical rhetoric against the free-market model. (He even rose eyebrows when he finished a high-profile speech with Che Guevara’s infamous line “Ever onward to victory.”). It is also telling that the turnout in yesterday’s runoff was higher than in the first round in November—actually, it is the highest since voluntary voting was introduced. This indicates that many Chileans believed that there was a lot at stake in this election. It is reasonable to believe that many Chileans who were previously uninterested in the presidential race decided to vote in the runoff when they perceived that Guillier meant to double down on Bachelet’s failed economic policies.

Despite this, Piñera is hardly champion of free-market policies. In his first term as president, he raised taxes on corporations and introduced a multitude of subsidies and transfers. His effort to steal the left flank of the center-left coalition on social policies only pushed if farther to the left. Piñera already announced that he does not intend to reverse Bachelet’s reforms.

Chileans might have dodged a bullet with Gullier, but Bachelet’s harmful economic legacy will stay on.

America’s North Korea strategy is failing.

The Trump administration’s “maximum pressure” approach of increasingly rigid economic sanctions and military posturing has not slowed down North Korea’s missile and nuclear testing schedule. Since Trump took office in January 2017, Pyongyang has successfully tested two different types of intercontinental ballistic missiles, a new intermediate-range ballistic missile, a solid-fuel missile based off a submarine-launched design, and its most powerful nuclear device. The Trump administration has consistently opted to increase pressure on North Korea in response to these developments rather than critically examine whether or not such pressure will change the North’s behavior.

The critical flaw in the U.S. North Korea strategy is its unrealistic objective. Washington demands complete, verifiable, and irreversible nuclear disarmament and is not willing to engage in negotiations with Pyongyang unless the latter makes progress towards this objective.

The current U.S. strategy requires offensively-oriented policy approaches in the pursuit of an unrealistic end goal. In order to achieve denuclearization, Washington must compel Kim Jong-un to part with his nuclear weapons by making the costs of possessing nukes unacceptably high. However, because Kim views nuclear weapons as necessary for the survival of his regime, he is willing to tolerate very high costs in order to keep his nuclear weapons. Short of going to war, it will be practically impossible for the United States to impose a high enough level of cost that compels Kim to denuclearize because possessing nuclear weapons is a matter of life or death in Kim’s mind.

The new sanctions enacted by the Trump administration might slow down the development of new weapons and the rate of production of current systems, but this approach will not achieve the goal of denuclearization. Escalating pressure meant to compel Kim to denuclearize will harden his resolve to keep his nuclear weapons. Moreover, given the small size of North Korea’s nuclear arsenal and the relatively poor state of its early warning and command and control systems, Kim is likely to adopt an offensive nuclear doctrine that calls for the use of nuclear weapons early in a conflict. Without a secure second-strike capability, the best option North Korea has for deterring a U.S. attack is to threaten the use of nuclear weapons before the United States can destroy them.

Washington should put aside its quixotic goal of denuclearization and focus its efforts on deterring the first use of a nuclear weapon by North Korea. Such a goal is easier to achieve and strategically wise for a number of reasons.

First, unlike compellence, deterrence is defensively-oriented and is focused on maintaining a status quo, which is generally easier to maintain than change.

Second, if the primary goal of the United States is deterring North Korea from using a nuclear weapon, then the United States should deemphasize preventive military action against North Korea’s nuclear forces. Threats of a disarming strike against North Korea are counterproductive for deterrence because they enflame crisis instability and push Kim Jong-un into a “use or lose” situation.  

Third, abandoning the objective of denuclearization creates opportunity for greater flexibility in the U.S. approach to North Korea, especially in diplomacy. After all, there is little incentive for Pyongyang to negotiate with Washington if denuclearization is the only acceptable outcome for the United States.  

Using “maximum pressure” to achieve the denuclearization of North Korea will not work. Instead, the United States should focus its efforts on deterring North Korea from using its nuclear weapons. Sanctions and military forces will still play a role in a deterrence-focused strategy, but moving away from compelling Pyongyang to denuclearize would be a wise choice. 

The Congressional Budget Office (CBO) recently released a fiscal impact score for the DREAM Act.  It found that the DREAM Act would increase deficits by about $25.9 billion over the next decade.  There are at least two problems with this CBO score and a solution that should make fiscal conservatives and DREAM Act supporters happy.    

What is the Baseline?

The CBO’s black box fiscal estimates are frequently frustrating and this one is no exception.  The biggest difficulty is telling what their baseline is.  Their baseline could be that 700,000 DACA recipients continue to work legally, which is roughly the current situation but will continue to decline rapidly over the next few years as DACA disintegrates.  The baseline could also assume zero government costs incurred while identifying and deporting immigrants who would otherwise have been legalized, an unrealistic assumption given that this administration is building up an internal deportation apparatus. 

The American Action Forum (AAF) has estimated the federal government’s cost of deportation and indirect costs on GDP.  The AAF findings suggest that removing DACA recipients and DREAMers over the next decade will increase government expenditures by $70 billion to $103 billion and lower GDP growth by about $260 billion.  Both of those swamp and fiscal effects from the DREAM Act.  If the AAF estimates are the baseline, the DREAM Act would actually save hundreds of billions of dollars over the next decade.   

It is difficult to estimate what immigration enforcement will be like over the next decade but at least some of those large costs should be included as part of the baseline in any CBO fiscal cost analysis.  The choice of baseline matters in whether the DREAM Act will be scored as fiscally positive, negative, or neutral.

The CBO versus the National Academy of Sciences

The findings of the CBO report are inconsistent with the National Academy of Sciences (NAS) fiscal cost projection for first-generation immigrants.  The age and education of the immigrants are the two biggest factors that influence their net fiscal impact.  The greater the education and younger the age at arrivals (with some caveats), the more fiscally positive the immigration is.  In contrast, the less educated and older the age at arrival (same caveats), the less fiscally positive the immigrants is.  

Applying the age and education profiles of DACA recipients to NAS findings by age and education in table 8-21 reveals startlingly different results from that of the CBO (Figure 1).  Figure 1 shows the average net fiscal impact by DREAMers by year after legalization.  Just counting the 700,000 DACA recipients should produce a fiscally positive result over the next decade of about $1.6 billion using the NAS methods.  Expanding this to the roughly 2 million or so eligible DREAMers, assuming they have about the same education and age profiles, should produce about $4.6 billion in net positive tax revenues over the next decade.      

Figure 1: Average Fiscal Impact per DREAMers by Year


Sources: National Academy of Sciences, Migration Policy Institute, Pew Research, and Author’s Calculations.

This result comes from the age profile of DACA recipients and DREAMers, not from assuming that they will be highly educated.  For the CBO to find that legalization will turn a $1.6 to $4.6 billion dollar surplus into a $25.9 billion deficit requires an enormous increase in benefit usage or a tremendous drop in taxable income or both at exactly the age when benefit receipts drop and taxable income rises for immigrants (Figure 2). 

Figure 2: Taxes minus Benefits for Immigrants, by Age


Source: National Academy of Sciences.

Either the NAS is tremendously wrong in its widely praised fiscal cost analysis or the CBO made unrealistic projections and assumptions, perhaps having to do with a possible uptick in family-sponsored immigration after the DREAM Act.  Regardless, one cannot praise the NAS findings and believe the CBO’s.     

Hedging Our Fiscal Bets

Even if you assume that the CBO’s findings are closer to reality than those of the NAS’, there is an easy solution that Republicans should leap for: welfare reform.  As Cato scholars have written about in detail, it is easy, popular, and fiscally prudent to limit non-citizen access to means-tested welfare benefits.  As part of a DREAM Act, Congress could include stricter welfare rules denying all non-citizens access to means-tested welfare, tax credits, and health insurance subsidies.  Congress could then create a special green card for DACA recipients and DREAMers, call it the DLPR, which they cannot use to naturalize for 10 years.  In such a case, they work legally and pay taxes without access to benefits for a decade when they will then have a choice.  Permanently protecting a large population from deportation while also making this fiscal cost argument moot is a good deal and should be taken regardless of CBO findings.       

During his campaign, President Trump promised to prioritize Christian refugees facing persecution, even implying that the Obama administration was actively disfavoring Christians. Many Christian refugee communities in the United States supported him based on this promise. One of his very first executive orders promised to prioritize Christian refugees. Despite these statements, however, President Trump has failed to deliver: his administration has accepted far fewer Christian refugees than in prior years.

According to figures from the U.S. Department of State, the United States accepted 3,671 Christian refugees per month from October 2015 to December 2016. President Trump assumed office on January 20, 2017 and issued his refugee executive order on January 27. The country accepted 1,280 Christian refugees per month from February to September 2017. In other words, the Obama administration was taking in almost three times as many refugees as the Trump administration has.

Figure 1
Monthly Christian Refugee Admissions, Monthly Average of 2016 and Each Month of 2017

Sources: U.S. Department of State (through December 15, 2017)

Over the last decade, the United States has averaged roughly twice as many Christian refugees per month as it is now accepting under the Trump administration. In other words, rather than rescuing more Christian refugees than prior presidents President Trump has halved their numbers. The numbers so far for Fiscal Year 2018, which started in October, are now below 1,000.

Figure 2
Monthly Christian Refugee Admissions, FY 2007 to FY 2018

Source: U.S. Department of State *2016 carries through January 2017

President Trump’s “prioritization” of Christian refugees parallels his prioritization of skilled immigrants in his chosen vehicle for legal immigration reform—the RAISE Act. RAISE simply ends most family-based categories without increasing the number of visas for skilled immigrants, so skilled immigrants are “prioritized” over others, but not in any way that actually eases immigration for them.

In this case, the so-called prioritization has increased the share of Christian refugees from a monthly average of 45 percent from October 2015 to January 2017 to 64 percent in November 2017, while dropping the absolute number. As I wrote last week, the share has increased at the expense of Muslim refugees whose numbers have dropped a staggering 94 percent over the course of this year.

President Trump is no longer a proponent of Christian refugee resettlement. I have previously detailed the administration’s efforts to deport Iraqi Christians, many of whom have lived in the United States for decades. A federal district court has temporarily paused their removals, accusing the Trump administration of impeding the refugees’ efforts to challenge their removals in courts and stating that they are “confronting a grisly fate …  if deported to Iraq.”

The problem is that the administration’s views on all immigrants too easily extend to Christians for its policies to leave them unscathed. Foreign Christians could still “steal” jobs from Americans. They could end up using welfare. They could commit crimes in the United States. Ultimately, these objections to immigration generally generate the results that are clear to all: fewer immigrants of all types.