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Have you ever played fantasy sports for money? Have you ever participated in your office March Madness pool? Well, if you did, you may have broken federal law, which is quite ridiculous. If you’ve bet on your local jai alai match, though, that was probably safe.

In sports gambling, as is so often the case with many things, the law is not keeping up with our behavior and attitudes. There’s a growing movement to modernizing our gambling laws, including some new coalitions, such as the American Sports Betting Coalition (ASBC), and at least one case pending at the Supreme Court. That case, Christie v. NCAA, is a challenge to the constitutionality of the Professional and Amateur Sports Protection Act of 1992 (PASPA). Cato supported the petition, which will be discussed by the justices next week. 

PASPA outlawed sports betting, with the exception of horse racing and jai alai (obviously), in most states. In classic, horse-trading style, carve outs were made for Oregon, Delaware, Montana, and Nevada. Even worse, the law prohibits states from “authorizing” sports gambling “by law,” which should be regarded as a violation of states’ rights protected by the Tenth Amendment—but the Third Circuit didn’t see it that way. The irony, of course, is that 44 states and 47 jurisdictions (D.C., U.S. Virgin Islands, and Puerto Rico) all have government-run lotteries, because evidently those governments are okay with gambling that benefits their budgets.

By overturning the restrictive federal ban on sports betting, states will be empowered to make their own decision about whether or not to allow it. If states were able to make their own laws about sports betting, areas where it is allowed could see economic growth sparked by increased tourism and an increase in betting-related jobs, as well as other industries springing up around this new frontier of economic possibility. Oxford Economics—one of the world’s leaders in global forecasting and quantitative analysis—has estimated that legal sports betting could add $14 billion to the national economy, generate up to $27 billion in total economic impact, and support 152,000 American jobs. In addition to these economic benefits, overturning such a ban would give states and local law enforcement the ability to oversee legal gambling, thus taking power from dangerous underground gambling rings. 

At its root, this is an issue of federalism; people in cities and towns across America should be able to decide for themselves if sports betting is something they want for their communities. Many of them do; nearly 7 in 10 Americans believe that the issue should not be left to the federal government, and 72 percent of avid sports fans support the legalization of sports betting. 

This concern is becoming more relevant as states move to classify fantasy sports leagues as “sports betting” under PASPA and prevent a growing American pastime from thriving in an open, legal market. From 2007 to 2016, 37.6 million people in the U.S. and Canada started playing fantasy sports. As of 2016, a total of 57.4 million people in both countries take part in them. Widespread participation in casual betting extends well beyond fantasy sports websites: during this year’s NCAA March Madness, 70 million brackets were filled out, with people placing a total of $10.4 billion in bets, of which only 3 percent were made legally. Even former presidential candidate Mitt Romney got in on the action in 2015’s March Madness (and nearly had the best bracket in the country).

Clearly, people have not stopped betting because of PASPA; on the contrary, these legally ambiguous arrangements are becoming even more popular and lucrative. The line between legal and illegal is increasingly difficult to define, if not arbitrary. In states that are cracking down on fantasy sports leagues, the leagues are considered “chance based” rather than “skill based.” If a fantasy sports player researches draft picks, checks injury reports, or consults expert opinions, are they merely leaving it to chance? There are surely players who play randomly, with no thought to strategy, but does this justify outlawing such a popular practice over a semantic difference between “chance” and “skill?”

As evidenced by the nation’s annual tradition of March Madness office pools, average people want to bet on sports. It should not be a crime for a regular person to put $5 on the game. Big government bans and one-size-fits-all legislation are ineffective, and states, localities, and individuals should be empowered by repealing the federal ban on sports betting.

(Thanks to legal intern Patrick Moran for assistance with this post.)

That is the subject line from a friend’s email that passed along this story about the latest proposed escalation of the Drug War:

Congress is considering a bill that would expand the federal government’s ability to pursue the war on drugs, granting new power to the attorney general to set federal drug policy. 

My friend explained in a follow-up call that, as he started reading, he assumed the bill reflected Jeff Sessions’ passion for the Drug War, but he then realized the bill is bi-partisan insanity:

The bipartisan legislation, sponsored by powerful committee chairs in both chambers of Congress, would allow the attorney general to unilaterally outlaw certain unregulated chemical compounds on a temporary basis. It would create a special legal category for these drugs, the first time in nearly 50 years that the Controlled Substances Act has been expanded in this way. And it would set penalties, potentially including mandatory minimum sentences, for the manufacture and distribution of these drugs.

Hence my friend’s assessment that “everyone” is terrible (on drug policy).

This is an important point. Much discussion assumes liberals are more libertarian-leaning on drug policy than conservatives. This is partly right; liberals are more likely to favor marijuana legalization, for example.

But many liberals endorse marijuana legalization because they view marijuana as relatively benign, not because of a principled stance for freedom or a consistent understanding that prohibition of any substance almost certainly causes more harm than good. Thus politicians across the spectrum are indeed “terrible” on drug policy.

 

Free society came under attack twice this month, first when Islamists rammed a van into pedestrians and went on a knife-slashing rampage in the Southwark district of London, and then when a gunman opened fire on Republican lawmakers in the Del Rey neighborhood of Northern Virginia.

In both cases, police had barely begun their investigations when an American politician—first the Republican president, then a Democratic governor—seized on the carnage to advocate political causes via electronic media.

In the hours after the London attack, President Trump took to Twitter to push his administration’s proposed travel ban on people from several predominantly Muslim countries:

Then, in the first police briefing on the Del Rey shooting, Virginia Gov. Terry McAuliffe called for expanded gun control:

It’s reasonable for a politician to advocate policies that he thinks will reduce future recurrences of a fresh tragedy. However, Trump’s immigration proposals are supported by people who typically oppose McAuliffe’s gun control proposals, and McAuliffe’s are supported by people who typically oppose Trump’s. This is puzzling because the proposals themselves are remarkably similar: they would constrain individuals’ freedoms in an effort to improve public safety. So why do the two proposals get such different responses from different people?

It’s not that there’s a big difference in the risk to public safety posed by immigrants or guns. Both have proven to be harmful, in the sense that both immigrants and guns have caused violence. But the risk posed by the typical gun or immigrant is tiny.

In the United States, there are roughly 11,000 gun homicides a year, 22,000 other gun deaths (largely suicides), and perhaps 75,000 other gun injuries. Those numbers are grisly, but assuming that a different gun is used in each incident (an extremely conservative, false assumption), the sum of those numbers is dwarfed by the estimated 300 million guns in the United States. Less than 0.04% of guns are involved in one of those incidents each year.

The risk posed by immigrants is also tiny. As Michelangelo Landgrave and Alex Nowrasteh have noted, less than 1% of illegal immigrants (about 123,000 people) and less than 0.5% of legal immigrants (roughly 64,000 people) in the United States were incarcerated in a given year for the commission of any sort of crime (compared to about 1.5% of natives, some 2 million people). Concerning terrorism specifically, the numbers are unimaginably small; Alex calculates that 0.0006% of refugees and 0.00004% of illegals who have entered the United States in the last few decades have committed a domestic act of terror or were convicted of planning one.

Reasonable efforts to reduce dangerous persons’ legal access to guns and to bar entry for dangerous would-be immigrants are sensible. Some such controls are permitted under the U.S. Constitution and American law, though they generally protect the right to keep and bear arms (especially for protection) and prohibit discrimination on the basis of religion (though, it should be acknowledged, there’s no constitutional right to immigrate). But, constitutional concerns aside, the risk numbers hardly support broad travel bans, “extreme vetting,” or “gun controls” that—speaking empirically—don’t appear to enhance public safety.

Beyond constitutionally protected rights, any policy to control guns or immigration should recognize the benefits they provide. Guns offer protection and recreation for millions of Americans. Estimates of the number of crimes thwarted each year by firearms in the United States range between the tens of thousands and millions. Meanwhile, each new wave of immigrants provides the country with more workers, more entrepreneurs, more consumers, and more contributors to the nation’s social fabric.

As a libertarian, I highly value those benefits and freedoms. Given my priors and the numbers mentioned above, I’m skeptical of calls for tighter controls on either immigration or legal gun ownership. But, putting those priors aside, I’m puzzled by the selective risk-intolerance of Trump, McAuliffe, and their supporters.

Why are Trump and so many red-teamers willing to adopt restrictions to curb the tiny risks posed by immigrants, but aren’t willing to do so for the similarly tiny risks posed by guns? Conversely, why are McAuliffe and blue-teamers willing to restrict guns but not immigration? Shouldn’t their risk sensitivities for either be the same?

And, if you agree with me that they should be, then what is this red/blue fight over guns and immigration really about?

Our departed colleague Andrew Coulson spent the last years of his life producing School Inc., a wonderful and informative documentary about the possibilities of private, choice-based schooling. I highly suggest it. Amazingly, at least to me, PBS agreed to air the documentary, and in April it debuted on PBS stations around the country.

Unsurprisingly, a chorus of critics are angered that PBS would air such a program. Media Matters for America seems to call for the outright censorship of any critique of public education on public television by wondering, “why would a public broadcast channel air a documentary that is produced by a right-wing think tank and funded by ultra-conservative donors, and that presents a single point of view without meaningful critique, all the while denigrating public education?” Diane Ravitch, a prominent critic of private schools, complains that “uninformed viewers who see this very slickly produced program will learn about the glories of unregulated schooling, for-profit schools, [and] teachers selling their lessons to students on the Internet,” but “what they will not see or hear is the other side of the story.” Now a petition has been started calling for PBS to air “the other side” of the story by showing the anti-private school film Backpack Full of Cash.

I have nothing against showing the “other side” to Andrew’s series, but we need to put this debate in context. When it comes to PBS and the Corporation for Public Broadcasting, the “other side” that doesn’t get heard is usually the conservative or libertarian side, and CPB has generally been deeply antagonistic to those ideas. That Ravitch and others are now the ones complaining is at least somewhat ironic.

But I do not want to denigrate their efforts. By its very nature, public broadcasting excludes viewpoints (airtime is finite) and requires citizens to speak up when they think something is unbalanced. But public broadcasting is unbalanced all the time. The Flat Earth Society did not get equal time to refute Carl Sagan’s Cosmos, and creationists didn’t get airtime to refute The Ascent of Man.

The true source of bias occurs when certain ideas are labeled either “mainstream” or “extremist.” Extremist ideas don’t deserve airtime, but mainstream ideas do. That lesson was learned in the 70s when Milton Friedman and Bob Chitester fought to put Friedman’s 10-part, pro-free market documentary Free to Choose on PBS. Interestingly, School Inc. was produced by Free to Choose Media and Bob Chitester. Free to Choose Media funds and creates freedom-oriented videos and documentaries, and Bob Chitester has been fighting to put freedom-oriented ideas on PBS for almost five decades.

The fight to put Free to Choose on the air began when W. Allen Wallis, a free-market economist and member of the CPB board, was troubled by PBS’s airing of John Kenneth Galbraith’s 13-hour paean to planned economies and “new socialism” called The Age of Uncertainty. Galbraith was one of the most prominent public intellectuals of the day (somewhat like Paul Krugman but more extreme), and an avowed proponent of increased government involvement in the economy, from higher taxes to the nationalization of some industries. But his ideas were perceived as “mainstream,” so The Age of Uncertainty aired with almost no “balance.” Critics were given three to five minutes to respond to Galbraith at the end of each episode, which was seen as sufficient balance for PBS–55 minutes of Galbraith; 3-5 minutes of critics.

Appalled by this slightly watered-down state-sponsored support for near-socialist ideas, Wallis put into motion the production of Free to Choose and Bob Chitester took the reins. But it wouldn’t be easy. Friedman won the Nobel Prize in Economics in 1976, but, in the words of Wallis, “public broadcasting people regarded Friedman as a fascist, an extreme right-winger.” Galbraith, however, was “a middle-of-the-road person.” In Friedman’s words: “From the point of view of the people who were running PBS, Galbraith’s series was politically correct and mine was incorrect.”

Chitester was asked by PBS executives how he intended to provide “balance” in Friedman’s program. “I don’t intend to have any balance,” he responded, “in light of the thirteen hours given to Galbraith.” Yet Chitester and Friedman decided to address PBS’s concerns by devoting more than half of Friedman’s ten-hour series to critics. The second half of each episode, as well as the entire last episode, features critics challenging Friedman’s ideas.

Even though Friedman skillfully and devastatingly addresses his critics (it’s really the best part of the series), PBS executives could hardly call the series unbalanced. Nevertheless, they still resisted giving the series any more exposure than they thought it deserved. While Galbraith’s series got a choice 9 p.m. weeknight time slot, as part of the core PBS schedule, Free to Choose was relegated to 10 p.m. on Fridays. In New York City, they even showed it opposite the Super Bowl. Friedman and Chitester complained, but complaints from viewers, and the growing popularity of the program, finally pushed PBS to give it a better spot.

Despite “using” the avenue of PBS–and remember that, for many people in 1980, PBS was one of only four networks they could watch–Friedman was always deeply skeptical of government-run media. In Capitalism and Freedom, Friedman explains why markets are the best protectors of those who wish to espouse unpopular ideas:

The suppliers of paper are as willing to sell it to the Daily Worker as to the Wall Street Journal. In a socialist society, it would not be enough to have the funds. The hypothetical supporter of capitalism would have to persuade a government factory making paper to sell it to him, the government printing press to print his pamphlets, a government post office to distribute them among the people, a government agency to rent him a hall in which to talk, and so on.

Friedman also reminds us of a time when government-controlled broadcasting had a pronounced effect on the world:

From 1933 to the outbreak of World War II, Churchill was not permited to talk over British radio, which was, of course, a government monopoly administered by the British Broadcasting Corporation. Here was a leading citizen of his country, a Member of Parliament, a former cabinet minister, a man who was desperately trying by nearly every device possible to persuade his countrymen to ward off the menace of Hitler’s Germany. He was not permitted to talk over the radio to the British people because the BBC was a government monopoly and his position was too “controversial.”

Again, I support the efforts to convince PBS to air “the other side” to Andrew’s views, but I’d be more supportive of abolishing a public broadcasting system that only pretends to be objective. Maybe, when Ravitch and other supporters of government schools are considered “extremist,” they’ll support that too.

History hasn’t been kind to Alexander Hamilton’s hypothesis, in Federalist 68, that “there will be a constant probability of seeing the [office of the presidency] filled by characters pre-eminent for ability and virtue.” Still, he was spot-on in No. 65, when he predicted that impeachment debates would stoke partisan rancor, driving “pre-existing factions [to] enlist all their animosities, partialities, influence, and interest on one side or on the other.”

Impeachment talk started unusually early in the Trump administration, and seems likely to get louder as we go. So far it’s been an even richer source of hyperbole and hypocrisy than the judicial filibuster.

“Congress must begin impeachment proceedings immediately,” insists MoveOn.org, the activist group born in a 1998 campaign urging Congress to “Move On to pressing issues facing the country,” instead of impeaching Bill Clinton. They’ve lately developed an interest in presidential obstruction of justice, so today MoveOn would rather linger. Meanwhile, the American Spectator—the magazine that put itself on the map (and the Paula Jones lawsuit in play) with investigative reporting on Clinton’s sex scandals—already has a case of “impeachment fatigue.”The times are sour and ill-mannered enough without unnecessary strife over removal of a duly elected president of the United States,” William Murchison sniffs at the AmSpec site. 

As I noted in a piece for U.S. News earlier this week, the emerging refrain on the Right is that anyone who dares mention the “I-word” has thrown in with a vast left-wing conspiracy plotting “a coup attempt against a lawfully elected government.” That’s from Dinesh D’Souza, but Gary BauerTom TancredoBen SteinLou Dobbs, and Pat Buchanan are all singing from the same hymnal. If Trump is eventually brought down via impeachment, Buchanan charges, “this city will have executed a nonviolent coup against a constitutionally elected president.” 

In our last national debate over impeachment, the coup was on the other foot (sorry!). Congressional Democrats used the term liberally, railing against the GOP attempt to remove Bill Clinton for perjury and obstruction of justice. “A partisan coup d’etat,” cried Rep. Jerrold Nadler (D-NY); a “Republican coup d’etat,” echoed John Conyers (D-MI). Rep. Maxine Waters (D-CA) pronounced herself appalled by “the raw, unmasked, unbridled hatred and meanness that drives this impeachment coup d’etat, this unapologetic disregard for the voice of the people.’’

All three are, of course, still in Congress today, ready to weigh in Trump’s current predicament. Nadler has affirmed that “impeachment[’s] a possibility”; “Auntie Maxine” is leading the charge, and while it doesn’t appear that Conyers has used the “I-word” yet, it’s surely just a matter of time, given that he’s tried to impeach nearly every Republican president over his five-decade career, (while giving Democrats a pass for similar behavior).  

It’s hard to take the coup comparison seriously or literally. A leading constitutional law casebook observes that:  

Because of the twelfth and twenty-fifth amendments, the successor to the president will most likely be a member of his own party.… Because in the case of Clinton, Democrat Al Gore would have become the next president, charges of usurpation or coup d’etat are ungrounded.  

In the as-yet unlikely event of Donald Trump’s impeachment and removal, he’d be replaced by his hand-picked, lawfully elected, and obsequiously loyal running mate, Mike Pence. Some “coup.”

Our last two serious efforts at presidential impeachment arguably presented greater democratic deficiencies than Trump’s case would. Nixon’s resignation elevated Gerald Ford, who’d never stood before a national electorate, having been installed via the 25th amendment after Vice President Spiro Agnew resigned on corruption charges. And when the House Republicans set the Clinton impeachment in motion in October 1998, they faced a president with a 65 percent approval rating and a public overwhelmingly opposed to their efforts. In fact, it was a lame-duck Republican Congress that impeached Bill Clinton, a month and a half after the GOP lost five seats in the House.

I don’t recall folks like Gary Bauer genuflecting to the “will of the people” when they were trying to oust Clinton. Back then, doing the unpopular thing was an example of “grace under pressure and political courage,” per Pat Buchanan. Today, it’s a corrupt elite’s desperate attempt to overturn the results of the last election.

True, the impeachment remedy is in tension with pure democracy: “countermajoritarian,” like independent judicial review. It’s perfectly valid to argue that impeachment shouldn’t be done cavalierly, and that contemplating it in the first months of a new administration is premature. But if you only cry “coup” when your party’s president is in the dock, maybe sacred democratic principles aren’t what you’re actually worried about.

The 2010 Patient Protection and Affordable Care Act, also known as Obamacare, may perhaps be the most contentious and polarizing law we’ve seen enacted in the past several decades. For seven years, Democrats have remained convinced they like it and Republicans confident that they don’t.

But once we get past the partisanship and polarization, what do Democrats and Republicans think about the fundamental regulations that constitute the core of Obamacare? These core regulations include pre-existing conditions rules that require insurance companies cover anyone who applies (guaranteed issue) and charge people the same rates regardless of pre-existing conditions (community rating).

All government policies and their ostensible benefits come with a price. What are Americans willing to pay?

As I’ve previously written, the Cato Institute 2017 Health Care Survey found that while Americans initially support core Obamacare regulations of community rating and guaranteed issue, support plummets if such regulations harm access to high quality medical services, require higher premiums or higher taxes. That being said, Americans appear to care more about their access to high quality medical services than they care about higher taxes, higher premiums, or universal coverage for those with pre-existing conditions.

Democrats are unique, however. They are the only group who says they’d be willing to pay more if it guaranteed coverage to those with pre-existing conditions. Six in 10 Democrats say they’d be willing to personally pay higher taxes and 58% say they’d pay higher premiums so that insurance companies wouldn’t charge people higher rates based on pre-existing conditions (community rating). Similar shares say they’d pay higher taxes (60%) and premiums (51%) so that insurance companies would cover anyone who applies (guaranteed issue).

Yet, the survey found that Democrats turn against the core regulations of Obamacare if they threaten their access to medical services and treatments, limit their access to top hospitals and surgeons, or require them wait several months to see a specialist.

Indeed, 62% would oppose regulations that ban insurance companies from charging higher rates to people based on pre-existing conditions if it limited their access to medical tests and treatments. Similarly, 65% would oppose the community rating rule if it required they wait several months before getting in to see a specialist for medically necessary care. And 54% would oppose if it limited their access to top rated medical facilities.

Similarly, two-thirds would oppose regulations requiring insurance companies cover anyone who applies if these harmed the quality of health care in the US.

 

 

Why should we care about these results? Academic research examining the impact of these regulations find that they do come with significant costs to the quality of health care—limiting access in the exchanges to top hospitals and surgeons and to medical services and treatments that people need.

Moreover, threats to the quality of health care constitute the one cost that Americans of all partisan persuasions would be unwilling to accept.

This doesn’t mean Americans would oppose other methods to help those with pre-existing conditions obtain the health care they need. Instead, they may support other policies that achieve this goal so long as they don’t come at the expense of quality in the U.S. health care system, raise premiums or hike taxes.

For too long, the national dialogue has focused almost exclusively on the cost versus coverage debate. This misses a third and incredibly important dimension that is a top priority of the American public: health care quality in the United States. Health care regulations and proposed reforms must be assessed not only according to their impact on cost and coverage, but also their impact on Americans’ access to timely high-quality medical care.

Survey results and methodology can be found here. The Cato Institute in collaboration with YouGov conducted two health care surveys online February 22-23, 2017. The first survey interviewed 1,152 American adults with a margin of error of ± 2.93 percentage points. This survey asked about community rating. The second survey interviewed 1,103 American adults with a margin of error of ± 2.85 percentage points. This survey asked about guaranteed issue. The margin of error for items used in half-samples is approximately ± 5.1 percentage points.

In an environment of heightened partisanship there is at least one policy issue that people across the political spectrum agree on: The current status quo for Fannie Mae and Freddie Mac–the government-sponsored enterprises dedicated to creating and buttressing the market for mortgage-backed securities–needs to be fixed soon.

There is an arithmetic exigency underlying this sentiment: under the terms of the third Amendment to HERA in 2012, the two GSEs will be utterly bereft of capital next year, and will thereafter need Treasury to provide them with such if they are to continue buying, packaging, and reselling mortgages. Such an arrangement is politically untenable and would exacerbate their current problems even if it were.

The larger imperative is that the current mortgage market is broken and dragging the economy down: home building in 2016 was roughly 60% of its pre-financial-crisis levels: To put that number in perspective, new housing starts last year were lower than every other non-recession year prior to the Great Recession since 1966, when there were ⅔ as many households as today.

There are myriad reasons why we’re not building nearly as many houses these days: for instance, new regulations the last eight years have increased the cost of building a new home by roughly 30%–a datum that’s true both for single family homes and multi-unit dwellings.

Other people have pointed to the ever-expanding nimbyism that constrains development in most major metropolitan areas, as well as the apparent reluctance of millennials to follow their forebears and move to the suburbs soon after tying the knot.

But the biggest reason home building lags is simply that getting a mortgage is more difficult than ever before. The private market for mortgage-backed securities all but dried up in the aftermath of the Great Recession, so Fannie and Freddie are the only games in town. If they won’t buy a mortgage–or if there is any possibility that it could declare ex post that mortgage it purchased did not, in fact, meet its exceedingly strict standards and could be returned–a home loan will simply not be made in most instances.

These standards create difficulties in obtaining a mortgage that would be laughable if they didn’t happen to you: My own attempt to get a conforming mortgage has been difficult despite our ability to put a down payment in excess of 50% on a new home. The bank that finally agreed to take our loan–run by a family friend doing me a favor–realized it was a zero-risk investment but confessed that the heartburn they will invariably receive from the regulators may make them come to regret such a thing.

There’s little question that the disintermediation between the mortgage originators and the MBS investors–combined with the implicit government guarantee of GSE debt–created an environment rife with moral hazard where too little care was paid with regard to who obtained a mortgage and on what terms. But our attempt to foreclose the possibility of the previous financial collapse occurring, rather than thinking holistically about how to remedy what was–and remains–a spectacularly flawed financial regulatory apparatus, was a missed opportunity to make our economy more efficient and boost economic growth. Instead, our moribund financial system constrains investment, risk, and entrepreneurship.

The current administration has vowed to fix it, and amongst their numbers are quite a few financial market veterans who understand some of what plagues the system.

Let’s hope they start with Fannie and Freddie. 

The Trump administration today issued a memorandum amending his travel ban in light of court decisions that have held up, and maybe permanently halted, its implementation.  Specifically, Trump’s memorandum delays the implementation of the provisions that the courts have halted:

In light of questions in litigation about the effective date of the enjoined provisions and in the interest of clarity, I hereby declare the effective date of each enjoined provision to be the date and time at which the referenced injunctions are lifted or stayed with respect to that provision.  To the extent it is necessary, this memorandum should be construed to amend the Executive Order.

President Trump’s executive order was supposed to temporarily limit the issuance of visas to nationals from six countries for 90 days and suspend decisions on refugee applications for 120 days in order to give time for immigration and security officials to plug visa vetting gaps.  Many of us thought that Trump would extend this ban indefinitely and expand it to more countries if the courts upheld his first order.

It has now been more than 120 days since Trump’s first executive order, which was supposed to be enough time for his administration to plug the supposed gaps in visa screening.  Instead of announcing success at plugging those gaps, unless you count some new potential TSA rules as a success, the administration is pushing off the start date so those 90 and 120-day clocks do not start ticking until the order goes into effect. 

The most charitable explanation for this is that the Trump administration wants to increase the odds that the Supreme Court will take up the case by removing the argument that the travel ban is now moot.  However, the administrative ease with which President Trump issued this memorandum also shows that we would always be on the precipice of a permanent or otherwise capricious immigration executive order extended to more countries for dubious reasons over an indefinite period of time.  Regardless of the constitutionality of the President’s executive order, the potential for abuse should be obvious to all.  Arbitrary visa bans for uncertain periods are no way for the government of a developed nation to run its immigration system.       

Stalwart public schooling defender Diane Ravitch does not like what she saw in School Inc., a three-part documentary series created by former Cato education analyst Andrew Coulson. Of course, she is welcome to disagree with it. But her main complaint—that PBS dared show the documentary in the first place—is concerning from a public debate perspective, while her more substantive critiques of School Inc. illustrate precisely why we need to let all voices engage in debates, not just those with whom we agree.

From the outset, let’s be clear. Neither the documentary itself nor PBS hide one iota what is being presented: the views of Andrew Coulson. Heck, the subtitle of School Inc. is “A Personal Journey with Andrew Coulson.” It leaves it to viewers—not gatekeepers who may just dislike Coulson’s point of view—to decide if the case Coulson makes is persuasive. And if we are after open discussion and truth, what should matter is not who funded the documentary—Ravitch portrays School Inc. sponsors as frightening bogeymen—but the content of the documentary.

Ravitch does address some of the substance of School Inc., but in so doing reveals why it is so crucial that all sides of controversial issues get heard, not just those with which she agrees. Quite simply, many of her knocks on the substance are themselves highly questionable.

Ravitch, for instance, says that by states allowing money to follow children to private schools, “the long-standing tradition of separating church and state in K-12 education is crumbling.” This ignores that for most of our history, American public schools were largely de facto Protestant institutions, with readings from the King James Bible and sometimes pointed attacks on Roman Catholicism. Indeed, the “Blaine” amendments to which Ravitch obliquely refers as prohibiting vouchers were inspired by blatantly anti-Catholic efforts to make sure public funds only went to the Protestant public schools.

Next, Ravitch suggests that private school choice does not work because recent studies have shown that “vouchers actually have had a negative effect on students in the District of Columbia, Indiana, Louisiana, and Ohio.” It is true that some recent research has found negative standardized test score effects for voucher programs. But all come with huge caveats Ravitch fails to mention. For instance, the DC study covered only one year, and the majority of non-voucher students went to other schools of choice—private and charter schools. The Indiana study to which Ravitch is likely referring has not actually been published; initial findings were from a preliminary conference discussion and were not supposed to be publicly disclosed. The Louisiana results may well reflect a program that is so heavily regulated it kept good schools from participating—not the kind of program Coulson would call for. And the Ohio study? Assuming I am thinking of the same one Ravitch is, it says this: “We can only identify with relative confidence the estimated effects…for those students who had been attending the highest-performing EdChoice-eligible public schools and not those who would have been attending lower-performing public schools.”

Then there’s this: While some recent studies have detected some possibly negative outcomes, the large majority of random-assignment studies—the research “gold-standard”—have found at least some positive effects with few negative outcomes.

There is a lot more Ravitch has written that is dubious, including much about the documentary itself. For instance, when you watch it you’ll find that Coulson does not just rave about South Korea, as Ravitch intimates, but also discusses the downsides of an achievement-obsessed culture. And while it is true that the documentary does not show “the absence of any students in wheelchairs or any other evidence of students with disabilities in the highly regarded KIPP charter schools,” it also does not note that the vast majority of New York City public school are not “fully accessible” to students with disabilities. Why didn’t Ravitch mention the latter?

Diane Ravitch has every right to critique School Inc. Indeed, such critiques are exactly what we should want, because they enable us to dive deeper into serious issues. But if School Inc. had never gotten airtime, we would not be having this debate. And that would be too bad, because no one has a monopoly on truth.

The Miami-Dade Police Department (MDPD) is scrapping plans to test persistent aerial surveillance technology following criticism from privacy advocates. This kind of technology has prompted privacy concerns in others cities, with Baltimore being perhaps the most notable. One of the best-known aerial surveillance companies allows users to keep a roughly 25 square mile area under surveillance and comes with “Google Earth with TiVo” capability, The news from Miami-Dade county. while reassuring, underlines a number of issues concerning federalism, privacy, and transparency that lawmakers must tackle as aerial surveillance tools improve and proliferate.

MDPD Director Juan Perez was set to ask county commissioners to retroactively approve a grant application to the Department of Justice for the aerial surveillance testing. The fact that MDPD was seeking federal money for the surveillance equipment reminds us that federal involvement in state and local policing should be strictly limited.

The aptly-named Persistent Surveillance Systems (PSS), the Ohio-based company that made the sensor system deployed in Baltimore, uses technology originally designed for military operations in Iraq and Afghanistan.

Military equipment has an unfortunate tendency to make its way from foreign battlefields into the hands of domestic law enforcement, as my colleagues have been outlining for years. This is a trend that ought to be strongly resisted.

It’s not clear if the Department of Justice’s Office of Justice Programs would have approved MDPD’s grant application, but given the current attorney general’s record on civil liberties, as well as the president’s own enthusiasm for aerial surveillance, we shouldn’t be surprised if similar grants are approved during the Trump administration.

In the most recent edition of the Cato Handbook for Policymakers my colleague Adam Bates and I argue that federal grants for drones, cell-site simulators, and body cameras should be dependent on a number of privacy, transparency, and accountability policies. Among the privacy policies we outline are a warrant requirement for police use of drones. Both of us fear the kind of persistent snooping made possible by aerial surveillance technology, whether it is attached to manned or unmanned aircraft.

Thanks to a handful of Supreme Court cases from the 1980s, police do not need a warrant to observe your property from the air. PSS and Baltimore police relied on these cases when issuing a memorandum supporting the use of persistent aerial surveillance, which reads in part:

Here, like in Ciraolo, Dow Chemical, and Riley, the photographs taken from a manned aircraft flying within publicly navigable airspace do not constitute a search, and do not run afoul of the Constitution. Particularly, the photographs were obtained by wide area airborne surveillance by manned aircraft operating in publicly navigable airspace at 3,000 to 12,000 feet altitude. 

It is hard to see how PSS’ technology can be used with a warrant requirement in place given that it requires the continuous filming of a 25 square mile area. Perhaps some kind of safeguard could be implemented that requires law enforcement to have a court order before examining PSS’ data, thereby preventing police from going on fishing expeditions for crimes. Indeed, PSS’ own privacy policy already states that its sensors are only used to support crime investigations. But PSS’ privacy policy isn’t law, and until such policies are codified into law it’s probably best for PSS’ technology to be grounded and for the federal government not to fund state and local persistent aerial surveillance operations.

Aside from the privacy concerns associated this persistent aerial surveillance there are also worries related to transparency.

Members of the public deserve to know what surveillance technologies police are using and what data about their behavior are being collected. In Baltimore, PSS’ technology was flown over the city without elected officials (including the mayor), the state’s attorney, or members of the public being informed first. In Miami-Dade county, the mayor wasn’t aware of MDPD’s persistent aerial surveillance plans. 

Local and state officials can take steps to address surveillance secrecy. For example, earlier this year California lawmakers introduced a bill that would require police to reveal information about the surveillance equipment they use to local officials. The bill would also require local officials to approve police using new surveillance technology.

Persistent aerial surveillance can be useful in investigating crimes, but we should be conscious of its costs as well as its benefits. Policies that protect privacy should be in place before snooping airplanes take to the sky, and the public as well as local officials should be informed about the surveillance tools police are using.

A pdf of this statement may be found here.

Statement for the Record
of David Bier of the Cato Institute
Submitted to
House Committee on the Judiciary
Markup of
“Refugee Program Integrity Restoration Act of 2017 – H.R. 2826”
June 14, 2017

The Refugee Program Integrity Restoration Act of 2017 (H.R. 2826) would restrict the liberty of Americans to welcome people fleeing violence and persecution around the world. It would enact a hard and inflexible limit on America’s generosity toward refugees. This arbitrary restriction has no basis in American tradition, individual Americans’ desire or ability to assimilate refugees, or the state of the world today. Indeed, it turns a cold shoulder toward the most severe refugee crisis in many decades.

The legislation adopts a flawed approach to refugee resettlement based on a fundamentally flawed premise: that refugees pose a significant threat to the lives of Americans. The facts cannot sustain the belief that widespread fraud has allowed the admission of large numbers of refugee terrorists. Only two refugees admitted since 9/11 have plotted or attempted attacks in the United States. Neither killed anyone. Looking over the last four decades, refugees have been far less likely to kill Americans in acts of terrorism in the United States than other immigrants or U.S.-born citizens, and none have since 1976.

Above all else, successful refugee integration requires a hospitable policy environment toward refugees. Yet this legislation would move America in the opposite direction: it politicizes refugee acceptance and imposes new constraints on integration for those few refugees that it would continue to admit. Rather than policies intended to promote rapid adoption of America’s way of life, this legislation would keep refugees in a state of long-term legal limbo without permanent status in the United States and allow certain localities to ban their resettlement in their jurisdictions. It notably lacks any provision for welcoming communities to accept refugees beyond its arbitrary cap.

These policies would have negative economic and fiscal effects on the United States. Refugees contribute significantly to the economy through employment, entrepreneurship, and consumption. While their upfront fiscal costs are higher than for other immigrants, studies have shown that they do eventually become net fiscal contributors. Rather than taking measures to reduce refugee dependence on welfare—such as relying on private sponsorship—or creating policies to encourage faster movement into the labor market—such as validating professional credentials prior to arrival—H.R. 2826 will actually make integration more difficult and costly.

H.R. 2826’s Numerical Limit on Refugees Is Not Grounded in America’s Capacity or the World’s Humanitarian Need

Sec. 2(a) of H.R. 2826 would limit individual Americans’ freedom to welcome refugees into the United States by imposing a new annual statutory limit of 50,000 refugees. Assuming that the federal government should directly determine the extent of Americans’ generosity toward refugees, it should consider two primary factors: the humanitarian need for resettlement around the world and the capacity of the United States to accept refugees.

Since its conception, the primary purpose of the U.S. Refugee Admissions Program (USRAP) has been—as the Refugee Act of 1980 put it—“to provide a permanent and systematic procedure for the admission to this country of refugees of special humanitarian concern.”[1] Thus, the need for resettlement should factor highly into the government’s calculation of the refugee limit. Yet this legislation dramatically escalates a trend of the U.S. government toward accepting a smaller and smaller proportion of people displaced by violence and persecution around the world.

As Figure 1 below highlights, America has chosen to accept a rapidly decreasing share of displaced persons under the United Nations High Commissioner for Refugee’s mandate since the early 1990s.[2] H.R. 2826 would worsen this trend, essentially rejecting the highest share of displaced persons worldwide in the history of the modern U.S. refugee program. H.R. 2826’s cap for 2018 would constitute a share of internationally displaced persons nearly one-sixth of the historical average from 1981 to 2017 and a mere 4 percent of the historic high in 1981. 

Figure: Share of U.N. High Commissioner for Refugee Population of Concern Resettled in the United States, FY 1981 to 2018

Sources: United Nations High Commissioner for Refugees; U.S. Department of State

In absolute terms, this refugee crisis is the largest since World War II.[3] The raw numbers fail to capture fully the horrors that underlie them. The United Nations, the U.S. Department of State, and Congress have all found that the Islamic State is carrying out a “genocide” against Christians, Shia Muslims, and other religious groups in the region.[4] More than 7,000 refugees have drowned in the Mediterranean alone in 2015 and 2016.[5] In total, more than 10,000 displaced people around the world died in flight in 2016, the most on record.[6] Doctors Without Borders has found “catastrophic malnutrition” in refugee camps.[7]

H.R. 2826 would also be abnormal relative to the capacity of the United States, representing a major departure from its historic refugee intake. It would allow a per-capita admission rate almost half the average from 1980 to 2017, and 250 percent below the average rate under the Reagan and H.W. Bush administrations from 1981 to 1993.[8] Refugee inflows already add only a tiny amount to U.S. population growth. Had all 110,000 refugees come in 2017, it would have amounted to only a 0.03 percent increase in the U.S. population. Even in absolute numbers, 50,000 is almost 40 percent below the historic average of 80,000 from 1980 to 2017. Given that America is more populous and wealthier than ever, it is clear that H.R. 2826’s cap is not based on America’s capacity to accept refugees.

In most other immigration programs, the government determines the capacity and desire of Americans to accept immigrants directly. The Department of State, for example, does not attempt to calculate how many foreign spouses to admit indirectly. Instead, it admits those spouses whom Americans have chosen to sponsor and petitioned for their admission. If the Committee is concerned that the administration inaccurately estimates the capacity and demands of the public, it should allow U.S. residents and U.S. humanitarian organizations to petition for refugees and sponsor them directly.

Canada has successfully operated a private refugee sponsorship program since 1978, resettling more than 220,000 refugees with private sponsors during that time.[9] One government report found that privately sponsored refugees had better economic outcomes than government sponsored refugees.[10] In 2016, sponsors, including churches, nonprofits, and groups of five Canadian citizens, have helped resettle 18,000 Syrian refugees with private money—more than the entire United States government during the same period.[11] In recent years, other countries have also adopted this model.[12]

H.R. 2826’s Cap Is Inflexible to Changing Circumstances

H.R. 2826’s cap is thoroughly divorced from current realities, but even if the bill had based its cap on the current needs and capacity of the United States, its approach would still be wrongheaded. This legislation will have effects on refugee resettlement long after 2018 and its rigid refugee limit has no provision to adjust to changing circumstances or unforeseen emergencies that arise over time. Good governance requires that Congress create systems that are responsive to changes in the world so that its laws do not become anachronistic.

In 1980, Congress had the foresight to understand that it could not predict the future. Under the Refugee Act of 1980, the president establishes a refugee target at the start of each fiscal year after consulting with nonprofits, localities, and Congress.[13] This arrangement allows the administration to adjust flows based on a thorough accounting of the needs of the world and capacity of the country. Congress always has the opportunity to review, reject, or revise the target before it goes into effect.

The Refugee Act also reflects the reality that no one can predict even a few months into the future. Thus, it allows the president to raise the refugee limit in the middle of the year in response to certain refugee emergencies. This authority cannot be exercised without first consulting and notifying Congress, and the president must establish that the emergency was unforeseeable and that he cannot admit the refugees under the existing target.[14] H.R. 2826 authors themselves should understand the impossibility of predicting the correct future refugee limits, given that they proposed a 60,000 refugee cap less than a year ago in a bill by the same name.[15] Nonetheless, Sec. 2(b) would strike this important flexibility for the president.

Indeed, the bill’s only “procedure” for an adjustment in the refugee limit is its repeal by a future Congress. History amply demonstrates that Congress has had little ability or desire to revise its immigration laws despite vast domestic crises that these laws have created. The idea that it will pass new refugee legislation every single year—and possibly multiple times a year—in response to international crises simply cannot be believed. If the Committee does accept this view, then it should explicitly build that assumption into the legislation, stating that Congress must take action to establish a new cap or concede its duty to the Executive.

Refugees Are Not a Serious Terrorist Threat

H.R. 2826’s other provisions highlight that the reduction in the refugee limit is based on the premise that refugees pose a significant terrorism risk to the lives of Americans in the United States.[*] Yet this premise is false. Refugees not only have posed an infinitesimally small risk of terrorism in absolute terms—they have posed a much lower risk of terrorism to Americans than all other legal immigrants and foreign travelers as well as U.S. citizens themselves.

The Cato Institute’s 2016 report on immigration and terrorism provides the only estimate of terrorism risk by category of admission to the United States.[16] From 1975 to 2015, the chance of an American being murdered by a refugee terrorist in the United States was 1 in 3.64 billion per year. This risk is 135 times less than the risk of death from all U.S.-born terrorists, 1,000 times less than all other foreign terrorists, and 255,000 times less than the risk of death from a regular homicide in the United States (see the Table below). By no measure can the data support the conclusion that refugees are a major threat to the lives of Americans.

Nor is there any reason to believe that this risk will change significantly in the future. Refugee terrorists committed all three of their murders in the 1970s, and more than half of the 21 refugees who have even plotted or attempted an attack of any kind—include non-deadly ones—did so before 1990. Refugees have not involved themselves in any kind of plots or attacks of any scale that would have altered these estimates in any important way. At the same time, the U.S. immigration system has substantially upgraded its vetting procedures since 9/11, making the likelihood of a major terrorist infiltration even more remote today than in the past.

Table: Annual Chance of Being Killed in an Attack on U.S. Soil by Original Visa of Terrorist, 1975-2015

Category Deaths Annual Chance of Being Killed Tourist

2,834

1 in 3.9 million U.S.-Born

408

1 in 26.7 million Student Visa

159

1 in 68.9 million Fiancé Visa

14

1 in 779.7 million Permanent Resident

8

1 in 1.4 billion Asylee

4

1 in 2.7 billion Refugee

3

1 in 3.6 billion

Sources: Alex Nowrasteh, “Terrorism and Immigration: A Risk Analysis,” Cato Institute: Policy Analysis No. 798, September 13, 2016.

The bill also emphasizes the risk of terrorists committing fraud to access the refugee program. Again, this risk is incredibly small. Only two refugees admitted since 9/11—Uzbek national Fazliddin Kurbanov and Somali national Abdul Artan—have plotted or carried out a terrorist attack in the United States. Neither killed anyone. While it is possible that they committed fraud to obtain refugee status, the government never presented any evidence that they did.[†] It is impossible to view these numbers and consider refugee fraud a major threat to Americans. 

H.R. 2826 Would Obstruct Refugee Integration

Given the fact that almost no refugees enter the United States as terrorists, the United States should focus heavily on successful post-entry assimilation and integration. Yet H.R. 2826 moves in the other direction, making it more difficult for refugees to integrate and assimilate into American life. Most importantly, Sec. 7 delays the ability of refugees to adjust from refugee status to permanent residency by two years and Sec. 8 makes it effectively impossible for the vast majority of refugees to obtain permanent residency in the United States.

Sec. 8 appears to create a system intended to discourage refugees from thinking of America as their new home. It would impose a new requirement that refugees prove that they still meet the legal definition of a refugee after three years of residence in the United States. By itself, this is already an unreasonable request because they have already firmly established themselves in the United States after three years. Moreover, being in the United States and removed from the conflict, refugees would have more difficulty obtaining evidence to support their claim. Sec. 3 would rescind their status if they returned home, so they could not even briefly return to obtain supporting evidence or find witnesses. 

Yet the bill would make this already difficult task next to impossible by requiring them to meet their burden with “clear and convincing” evidence, a standard of proof typically required only when someone’s civil liberty is at stake.[17] This would require refugees to meet the second highest standard of proof in the law—second only to “beyond a reasonable doubt”—in order to adjust to permanent residency.[18] It is even higher than the “more likely than not” standard used in most civil lawsuits.

Not only would very few refugees be able to provide “clear and convincing” evidence of their fear—which is an internal state—but the ones who enter under this bill would be even less likely to meet it. That is because the bill maintains the current lower standard of proof—“reasonable possibility”—to enter initially the United States as a refugee.[19] Refugees would enter having proven their claim under a lower threshold, and once in the United States, they would have a much higher burden to adjust to permanent residency. This strange process virtually guarantees the inability of most refugees to adjust to permanent status.[‡]

The United States has long benefited from its open labor market that rapidly incorporates refugees and other immigrants. A major difference between the U.S. refugee system and the German asylum system, for example, is that the U.S. refugees quickly receive permanent residency that allows them to compete on an equal footing. U.S. refugees are more than twice as likely to have employment during their second year in the United States as German asylees.[20] U.S. refugees in refugee status do have work authorization, but dozens of states limit professional licenses to permanent residents or citizens.[21] Thus, by keeping them in this second-class status indefinitely, H.R. 2826 would inhibit their ability to access the labor market, which is the most powerful tool for assimilation.

Various studies have demonstrated a relationship between the expected period of residency in a country and the willingness of immigrants to invest in skills relevant to that country.[22] Yet this legislation would make it clear that Americans do not accept that the United States is the refugees’ permanent home. Rather than investing in language and technical skills to succeed in the United States, H.R. 2826 would incentivize refugees to subsist on welfare while they await their return.

H.R. 2826 Would Negatively Affect the U.S. Economy

H.R. 2826 reduces the refugee limit from 110,000 to 50,000. Limitations on the entry of refugees are essentially a type of labor market regulation. Refugees, like all other immigrants, contribute to the economy through entrepreneurship, employment, and consumption—all of which benefit  U.S. residents. Studies on refugees in the United States and other countries have found that refugees can create wage gains for native workers through their consumption or through skill complementarities.[23] They can also lower prices overall by decreasing the cost of production and creating a new pool of consumers without brand loyalties for which businesses must compete.[24]

The Cato Institute has used a conservative estimate of immigrants’ positive economic contributions to project that U.S.-born citizens benefit to the tune of at least $476 in wages per refugee.[25] Over the next decade, that would equal at least $326 million in economic costs directly to U.S.-born citizens specifically, assuming that the cap had continued to average 110,000 or greater during that time. To make economic sense, refugee terrorism would have to become a much more common phenomenon. Accepting both the most extreme cost estimates of deaths from terrorism and that the cap reduction would eliminate all deaths from terrorism by refugees, the number of deaths from refugee terrorists would still have to be 26 times greater in the future than it was in the past for the security benefits of the cap reduction to outweigh its costs.

One recent study found that despite their high upfront costs, refugees “pay $21,000 more in taxes than they receive in benefits over their first 20 years in the U.S.”[26] While the legislation is correct to request further analysis of refugees’ use of welfare, the appropriate response to fiscal costs is to find ways to reduce costs by promoting economic integration and finding ways to cost-share with the private sector. Canada’s successful private refugee sponsorship system allows private parties, churches, and nonprofits to sponsor refugees with private money, removing some of the fiscal burden from the government.[27]

[*] Sec. 14 requires that the federal government to “ensure” that any refugee “does not pose a threat” based solely on a background check. Sec. 16 requires reports on refugees convicted of “terrorism-related” offenses. Sec. 8 requires 5-year inspections in federal custody of any refugee who fails to adjust status. Sec. 6 allows recurrent background checks and monitoring of refugees after admission.

[†] Even if we expand our view to refugees convicted of supporting terrorist groups abroad, we find just four other refugees admitted since 9/11 who entered as adults or older teenagers and who committed their offense within their first seven years in the United States, indicating that they may have been terrorism sympathizers at the time of their entry.

[‡] If they fail to reprove their claim, they may live in the United States for five years after which Sec. 8(b) requires the Department of Homeland Security to take “custody” of them and inspect them again. The text is unclear, but it appears possible that, if they fail to prove their eligibility again, they may actually be placed in removal proceedings.

[1] 8 U.S. Code § 1521, note. https://www.law.cornell.edu/uscode/text/8/1521

[2] United Nations High Commissioner for Refugees, “The Global Appeal and Supplementary Appeals,” http://www.unhcr.org/en-us/the-global-appeal-and-supplementary-appeals.html.

United States Department of State, “Admissions and Arrivals,” Refugee Processing Center, http://www.wrapsnet.org/admissions-and-arrivals/.

[3] Euan McKirdy, “UNHCR report: More displaced now than after WWII,” CNN, June 20, 2016, http://www.cnn.com/2016/06/20/world/unhcr-displaced-peoples-report/index….

[4] Nahal Toosi, “House unanimously condemns ISIL for genocide,” Politico, March 14, 2016, http://www.politico.com/story/2016/03/congress-genocide-220736.

Greg Myre, “John Kerry: ISIS Is Carrying Out ‘Genocide’,” NPR, March 17, 2016, http://www.npr.org/sections/parallels/2016/03/17/470801112/john-kerry-is….

“UN human rights panel concludes ISIL is committing genocide against Yazidis,” United Nations, www.un.org/apps/news/story.asp?NewsID=54247#.WUAkaOvyuUl

[5] UNHCR Staff, “Mediterranean death toll soars, 2016 is deadliest year yet,” October 25, 2016, http://www.unhcr.org/afr/news/latest/2016/10/580f3e684/mediterranean-dea….

[6] Mark Townsend and Tracy McVeigh, “Migrant death toll expected to exceed 10,000 in 2016,” The Guardian, https://www.theguardian.com/world/2016/sep/17/migrant-death-toll-2016-sy….

[7] “Catastrophic malnutrition in refugee camps,” Doctors Without Borders, http://www.msf.ca/en/article/catastrophic-malnutrition-refugee-camps.

[8] United States Department of State, “Admissions and Arrivals,” Refugee Processing Center, http://www.wrapsnet.org/admissions-and-arrivals/.

[9] Rachel Browne, “‘What’s Enough?’: Pressure Builds to Bring More Syrian Refugees to Canada,” Vice News, September 8, 2015, https://news.vice.com/article/whats-enough-pressure-builds-to-bring-more….

[10] Citizenship and Immigration Canada, “Summative Evaluation of the Private Sponsorship of Refugees Program,” April 2007, http://www.cic.gc.ca/english/resources/evaluation/psrp/psrp-summary.asp.

[11] Zi-Ann Lum, “Canada Limits New Private Sponsorships Of Syrian Refugees,” Huffington Post, January 12, 2017, http://www.huffingtonpost.ca/2017/01/12/canada-private-sponsorship-syria….

[12] Judith Kumin, “Welcoming Engagement: How Private Sponsorship Can Strengthen Refugee Resettlement in the European Union,” Migration Policy Institute, December 2015, http://www.migrationpolicy.org/research/welcoming-engagement-how-private….

[13] 8 U.S. Code § 1157(a)

[14] 8 U.S. Code § 1157(b)

[15] H.R. 4731

[16] Alex Nowrasteh, “Terrorism and Immigration: A Risk Analysis,” Cato Institute: Policy Analysis No. 798, September 13, 2016, https://www.cato.org/publications/policy-analysis/terrorism-immigration-….

[17] http://www.nolo.com/legal-encyclopedia/legal-standards-proof.html

[18] U.S. Court of Appeals for the Ninth Circuit, “Burden of Proof,” http://www3.ce9.uscourts.gov/jury-instructions/node/48

[19] U.S. Citizenship and Immigration Services, “Radio Directorate - Office Training: Well-Founded Fear Training Module,” July 18, 2012, https://www.uscis.gov/sites/default/files/USCIS/About%20Us/Directorates%….

[20] David Bier, “Why Refugees Find Jobs Faster in the U.S. Than Germany,” Cato at Liberty, October 6, 2016, https://www.cato.org/blog/why-refugees-find-jobs-faster-us-germany.

[21] Jennesa Calvo-Friedman, “The Uncertain Terrain of State Occupational Licensing Laws for Noncitizens: A Preemption Analysis,” Georgetown University Law Journal: Vol. 102:1597, 2014, https://georgetownlawjournal.org/articles/78/uncertain-terrain-of-state/pdf.

[22] Miao Chi; Scott Drewianka. “How much is a green card worth? Evidence from Mexican men who marry women born in the U.S.” Labour Economics Volume 31, December 2014, Pages 103–116. http://www.sciencedirect.com/science/article/pii/S0927537114001328.

Amuedo-Dorantes, Bansak, and Raphael, “Gender Differences in the Labor Market: Impact of IRCA,” American Economic Review, 2007, Rivera-Batiz, “Undocumented Workers in the Labor Market: An Analysis of Earnings of Legal and Illegal Mexican Immigrants in the United States,” Journal of Population Economics, 1999, Kossoudji and Cobb-Clark, “IRCA’s Impact on the Occupational Concentration and Mobility of Newly-Legalized Mexican Men,” Journal of Population Economics, 2000, Kossoudji and Cobb-Clark, “Coming Out of the Shadows: Learning about Legal Status and Wages from the Legalized Population,” Journal of Labor Economics, 2002, Baker, “Effects of the 1986 Immigration Reform and Control Act on Crime,” SSRN Working Paper, 2011.

[23] Mette Foged; Giovanni Peri. “Immigrants’ Effect on Native Workers: New Analysis on Longitudinal Data.” IZA DP No. 8961. March 2015. http://ftp.iza.org/dp8961.pdf

 Örn B. Bodvarsson, Joshua J. Lewer and Hendrik F. Van den Berg, “Measuring Immigration’s Effects on Labor Demand: A Reexamination of the Mariel Boatlift,” IZA Discussion Paper No. 2919, 21 July 2007. http://repec.iza.org/dp2919.pdf.

[24] Mark Bils. “Pricing in a Customer Market.” Q.J.E. 104, 1989. http://www.jstor.org/discover/10.2307/2937863?uid=3739560&uid=2&uid=4&ui… 69230837.

Saul Lach, “Immigration and Prices,” The Hebrew University of Jerusalem and Centre for Economic Policy Research, 2007. http://www.uh.edu/~adkugler/Lach.pdf.

Robert E. Lipsey and Birgitta Swedenborg, “Explaining Product Price Differences Across Countries,” National Bureau of Economic Research, July 2007. http://www.nber.org/papers/w13239.

[25] Alex Nowrasteh, “Huge Net Costs from Trump’s New Executive Order Cutting Refugees,” Cato Institute, March 6, 2017, https://www.cato.org/blog/huge-net-costs-trumps-new-executive-order-cutt….

[26] William N. Evans, Daniel Fitzgerald, “The Economic and Social Outcomes of Refugees in the United States: Evidence from the ACS,” NBER Working Paper No. 23498, June 2017, http://www.nber.org/papers/w23498?utm_campaign=ntw&utm_medium=email&utm_….

[27] Government of Canada, “Guide to the Private Sponsorship of Refugees Program,” http://www.cic.gc.ca/english/resources/publications/ref-sponsor/.

On Monday, the Treasury Department released the first of four planned reports on the U.S. financial system. While the 150-page report, focusing on banks and credit unions, includes a number of observations and recommendations worth discussing, there is one page I’d like to highlight here. It’s a single chart. And yet it speaks volumes about the current state of regulation in the financial sector. Here’s the chart:

Those in Washington often talk about the “alphabet soup” of federal agencies. We do love our acronyms here. But this chart shows that the financial sector has a complete soup all of its own. There are nine federal regulators who oversee the financial sector. Additionally, each state has its own regulators, typically one each for securities, insurance, and banking. Plus, there are the self-regulatory organizations—quasi-private bodies whose decisions can have the effect of law on the companies and individuals they oversee. A single organization can be subject to as many as six regulators. An organization that does business in multiple states can potentially be subject to regulation in each of them, in addition to regulation at the federal level.

There are two key problems with this kind of overlapping and duplicative regulation. First, there is the compliance burden. A broker-dealer in the securities markets, for example, must (with the help of expensive lawyers) thoroughly review and understand the regulations and rules issued by the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Financial Industry Regulatory Authority, the Municipal Securities Rulemaking Board, the National Futures Association, and at least one state securities board. This requires not only understanding the rules of each regulator, but also how they intersect with one another. The broker-dealer must then (with the help of expensive lawyers) devise a series of compliance protocols to ensure that each of its employees, in each of their separate duties, acts within the confines of the regulations. 

Second, such a high compliance cost creates barriers for new companies and new products. If a bank wants to try offering a new type of loan, it must ensure that the new product complies with all of the rules of every one of its regulators. Anyone with a bank account has probably noticed the massive changes new technology has brought to the financial sector. Being able to deposit a check using a smart phone is a great convenience. But before any bank rolled out that service, their lawyers had to ensure that the application’s features complied with all existing regulation. Furthermore, the bank had to consider whether any one of its regulators was likely to introduce new regulation that would affect the proposed service. There may be (and I would guess it is very likely there are) many products that consumers would like that banks are unwilling to offer because of the high cost of compliance and risk of getting that compliance wrong.

These barriers are even more challenging to new companies looking to enter the market. The technological changes that have made mobile banking possible have also opened the door to new ways of exchanging value outside of traditional banks. Anyone with a new idea will want to vet this idea with regulators before investing too much capital. And yet to conduct a vetting process, the entrepreneur will need to contact not one but often a half dozen regulators, each of whom might express a different view of the proposed product and a different set of concerns. 

These regulatory schemes are no laboratories of democracy. This chart shows a stunning pile-up of regulators and regulations. It is one thing to talk about how regulation is stifling innovation and growth. It is another to see such a stark illustration of what this web actually looks like.

The Trump administration’s proposal to repair and expand America’s roads, bridges, ports and airports includes the expanded use of public-private partnerships (P3s). Under P3s, state and local governments award franchises to private companies that agree to pay for and manage the infrastructure in exchange for the companies receiving toll payments from future users. A number of P3 projects currently operate in the United States, and they are common in other developed nations.

Despite the growing embrace of these projects by policymakers around the world, the Trump proposal is being met with skepticism. For example, the New York Times dropped this article last week ahead of Trump administration efforts to promote the proposal. According to the article, “experts agree” that “there is little hard evidence” that such projects produce long-term benefits to the public as compared to traditional government-provided infrastructure. (That “agreement” came as news to many transportation experts.)

At heart, the article charges that P3 programs are “win/no lose” proposals for the private firms: if the projects prove popular, the firms profit—sometimes handsomely, to the detriment of consumers. But if the new infrastructure doesn’t get many toll-paying users, the financial losses from the projects fall on taxpayers.

To illustrate this, the NYT cites California State Route 91, one of the first P3s in the United States. Initially intended to reduce congestion, the project awarded a private company the right to build and operate a special four-lane toll road in the middle of the highway. The road was “congestion priced,” meaning the tolls fluctuated in order to limit use just enough to guarantee the free flow of traffic.

The original lease on the road included a noncompete clause that limited the state’s ability to add additional lanes to the non-P3 part of SR-91 or to build parallel infrastructure. This resulted in heavy congestion on the old lanes, pushing motorists onto the toll lanes and producing a financial windfall for the toll company. That ultimately prompted Orange County to buy out the toll company for $207 million in 2003.

However, the SR-91 problem is not inherent to P3s. It arose as a result of the conditions under which the franchise was arranged. Traditionally, P3s have been awarded through negotiations between private companies and transportation authorities, leading to high initial private investments and uncertainty about demand for the road. That risk, in turn, encourages toll road companies to want protections like the noncompete clause.

But there are ways to reduce the risk to the private companies while also protecting taxpayers and infrastructure users, as transportation experts Eduardo Engel, Ronald Fischer, and Alexander Galetovic explained in Regulation back in 2002. The authors suggest using a particular type of auction to award highway projects: a Present-Value-Revenue (PVR) auction. In a PVR auction, it is understood that the private company will only operate the road for a time, and then it will be returned to the public. Regulators set a maximum toll level that motorists will be charged to use the road. Private companies then bid on the amount of toll revenue, measured in present value terms, they would want to receive before the road is returned to the public. The lowest PV bid wins. The winner collects revenues and pays for the maintenance of the road until it has earned the revenue that it bid in present value, regardless of whether it takes five years or 50. Thus, the term of the franchise is variable depending on road usage; if usage is less than expected, the lease extends. If usage is greater than expected, the lease is shorter-term. The private company won’t “lose,” but it won’t make a windfall either.

PVR auctions provide resilience against shocks, such as lower-than-expected traffic. They also provide the basis for governments to buy back roads. For PVR franchises, a fair buyout is simply the difference between what the company has earned to date and the total revenue it bid to earn in present value.

In the case of SR-91, a PVR auction would have reduced the risk of the investment, and therefore would have precluded the need for risk-reducing contract obligations like the noncompete clause. If difficulties still arose, the government would have been better equipped to buy back the road for a more reasonable price.

Written with research assistance from David Kemp.

Multiple organizations, businesses, taxpayers, and now the District of Columbia and state of Maryland have sued Donald Trump for violating the Emoluments Clause by not sufficiently separating himself from business holdings that benefit financially from foreign patronage. These lawsuits are a waste of time and resources, having been orchestrated by certain elites who can’t reconcile themselves to the election results and are doing their best to #resist Donald Trump to the point of denying the legitimacy of his presidency. To put a finer legal point on it, the charge that President Trump’s hotels, because they benefit from foreign business, constitute a kind of corruption that the Framers explicitly sought to prevent is, to be blunt, frivolous.

Article I, Section 9, of the Constitution provides that “no Person holding any Office of Profit or Trust under [the United States] shall, without the Consent of Congress, accept any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.” This Emoluments Clause was passed unanimously by the Constitutional Convention, based on the young nation’s own recent diplomatic history – namely, gifts given by foreign kings to Ambassador Benjamin Franklin and other diplomats, which they promptly reported to Congress. Under President Bill Clinton, the Justice Department’s Office of Legal Counsel explained that “those who hold offices under the United States must give the government their unclouded judgment and their uncompromised loyalty… . That judgment might be biased, and that loyalty divided, if they received financial benefits from a foreign government.”

In other words, the Emoluments Clause is a stopgap against the risk that foreign powers will try to curry favor by bribing U.S. officials with gifts and other baubles. (Maybe even titles of nobility, which are prohibited for all Americans by another constitutional provision.) To be sure, a politically motivated decision by a foreign government to give preferential permitting or land acquisition terms to a Trump construction project could be a favor worth millions of dollars. 

But is booking suites at a Trump hotel or holding a conference at another Trump facility really a bribe? So long as payments are made at market rates – not “here’s 100 million dollars for a room with a view” – I don’t see how they could. Whatever the Emoluments Clause protects against, arms-length business transactions ain’t it.

Indeed, to hold to the contrary would be to disqualify businessmen with a diversified portfolio from the White House. That can’t be the case; George Washington himself was a wealthy landholder who engaged in business with foreign nationals. There’s even an academic debate about whether the clause applies to the president in the first place, as distinct from those ambassadors and other officials.

In short, while scholars can disagree on legal and policy grounds about many of the Trump administration’s doings – from the travel ban, to renegotiating trade treaties, to various deregulatory initiatives – no serious person should spend time on this emoluments nonsense. They’re a distraction from the important issues our divided nation faces and the debates over how to solve them.

For an elaboration of my thinking on this matter, see Kyle Sammin’s excellent analysis, which I’ll “incorporate here by reference,” as the lawyers say.

Update: This post has been revised slightly for clarity.

 

According to media reports, President Trump is expected to announce on Friday that his administration will revert some of President Obama’s policies toward Cuba. In particular, it looks like Trump will impose new restrictions on travel, as well as limits on U.S. companies doing business in the island.

The alleged justification for the new policy is that it will pressure the Cuban dictatorship to give concessions on human rights and political liberalization. That seems odd given that the Trump administration is not particularly fond of pursuing that agenda in its foreign policy: there was no mention of human rights and political freedom during his visit to Saudi Arabia, for example.

Is there a clamor for a tougher approach on Cuba? According to surveys by Pew Research Center—the most recent one from December 2016—an increasing majority of Americans (73%) favors ending the trade embargo against Cuba. Trump’s new policy would not reflect the views of nearly three-quarters of U.S. citizens.

What about Cuban-Americans? A 2016 poll by Florida International University among Cuban-Americans in Miami-Dade County found that 63% opposed the continuation of the embargo and 57% supported expanding economic relations between U.S. companies and the island. Imposing new restrictions on trade and travel to Cuba is something that a majority of Cuban-Americans would frown upon.

That still leaves Cubans in Cuba, who are supposedly the ultimate beneficiaries of the changes Washington wants to bring about in the island. According to an April 2015 Washington Post poll, 96% of Cubans support lifting the trade embargo. The same number said that more tourism from the United States would benefit the local economy.

Survey after survey shows that a majority of Americans, Cuban-Americans, and Cubans in the island favor greater economic ties between the United States and Cuba. If Cubans and Americans don’t want new barriers erected between their countries, who is President Trump trying to help?  

The Republican National Committee, in the person of Chairwoman Ronna Romney McDaniel, informs me that I “have been selected to represent the Commonwealth of Virginia as a member of The President’s Club.” I know that this is an important responsibility because it comes with a Priority Mail BRE and a request for $750. There’s a lot of boilerplate in the letter about “fake news” and the Democrats and their “radical left-leaning allies.” (Really, if they’re radical, surely they’re more than “left-leaning.” Why not just come out and say it – they’re left-wingers!)

But I’m particularly struck by this line:

I believe you share President Trump’s objectives of smaller government, fiscal discipline, lower taxes, secure borders, conservative judges, a stronger military and unrestrained freedom.

Seriously – President Trump’s objective is “unrestrained freedom”?

Some of those objectives I can see. Fiscal discipline is a presumptuous claim when you’ve promised not to touch the biggest spending programs. Some of the administration’s programs might make government smaller, but others clearly would not. But seriously, “unrestrained freedom”?

For nearly two years now Donald Trump’s main policy themes have been to close our borders, to deport millions of our neighbors and co-workers, and to stop Americans from buying products made overseas. He has bullied, subsidized, and threatened businesses into making uneconomic decisions. He has also talked at length about his desire to limit freedom of speech, frustrated as he is that “our press is allowed to say whatever they want.” While Republicans and Democrats in Congress and the states work on criminal justice reform Attorney General Jeff Sessions steps up the drug war. Trump’s acceptance speech at the Republican National Convention was described in Reason as “easily the most overt display of authoritarian fear-mongering I can remember seeing in American politics.”

The idea that President Trump’s objectives include “unrestrained freedom” is ludicrous even in the context of political fundraising letters.

In 2012 the U.S. Consumer Product Safety Commission (CPSC) launched a barrage of legal and enforcement actions seeking to ban sales of tiny rare-earth magnet sets, popular under various names as a desk amusement with artistic and scientific applications. While the sets do not cause injury when used as intended by adults, they can cause serious harm to children when swallowed, so a key question was whether they may be sold for adult use with appropriate warnings against letting them into kids’ hands.  As we noted at the time, the leading maker of the sets, which sold them under the name Buckyballs, launched an unusual public campaign criticizing the logic of the ban being sought, even though “it’s rare for a regulated company to mount open and disrespectful resistance to a federal regulatory agency,” let alone in sarcastic Internet memes. The CPSC responded directly and some would say vindictively with an unprecedented recall action naming Buckyballs co-founder personally as well as his company. After expensive ventures in legal defense, Zucker agreed to exit the business, leaving only one leading maker to bid defiance to the commission, Zen Magnets. 

While the CPSC pursued recalls and jawboned retailers to drop the product, the centerpiece of its campaign was to enact a ban on the product itself. Last year, however, the Tenth Circuit struck down the ban, ruling that the commission had improperly stacked its cost-benefit analysis. (Then-Tenth Circuit Judge Neil Gorsuch concurred in throwing out the ban.) The commission has gone back to the drawing board, and perhaps at some future date it will justify a ban to courts’ satisfaction, but for now the products are lawful to sell, and in fact are being sold

None of which, however, has undone the effects of the various allied enforcement actions the CPSC took in its campaign. In one of those actions, a federal judge agreed with the commission that Zen Magnets had improperly ignored a CPSC recall order and ordered it to destroy the remainder of its relevant stock – even though that stock was indistinguishable from other magnets that are sold lawfully. 

The company recently held a “funeral” for the sets it was forced to destroy, $40,000 worth, with a slightly pointed “eulogy” read aloud by company operations director Eric Sigurdson. You can watch it here: 

More at the Denver Post and, on newer developments on the magnet issue at the CPSC, from former commissioner Nancy Nord.   

Several Twitter users blocked by President Trump have threatened to file suit, alleging that his Twitter account constitutes a public forum, rendering their exclusion an unconstitutional content-based restriction of speech. They are represented by Jameel Jaffer, director of the Knight First Amendment Institute at Columbia University, who, in a letter to the White House Counsel, contends that Trump’s decision to block critics “suppresses speech in a number of ways.” Blocked users cannot search for or easily view the president’s tweets without logging out, and are “limited in their ability to participate in comment threads associated with [Trump’s] tweets.”

The question turns upon our understanding of the purpose and character of Trump’s twitter presence. Is @realDonaldTrump simply the private Twitter account of a man who happens to be president, or does it constitute a designated public forum, as asserted by Jaffer? A designated public forum is a government-controlled space set aside for expressive activities. While the government may establish time, place, and manner constraints on speech within a designated public forum, it may not impose content-based restrictions on expression therein.

Public forums are usually imagined as physical spaces in which citizens may express themselves, but this need not be the case. In Rosenberger v. University of Virginia, the Supreme Court determined that, by establishing a policy of funding student newspapers, the University of Virginia had created a public forum from which it could not exclude qualifying publications simply because they expressed religious, rather than secular, opinions.

However, the fact that designated public forums may be non-physical, coupled with Trump’s status as President of the United States, is probably not a sufficient basis to deem his Twitter account a designated public forum. The courts have generally determined that designated public forums must be owned by the government in an official capacity, or used for official government communication.

It is unlikely that Trump’s Twitter account represents a government-controlled property. Twitter is a private company; while Southeastern Promotions, Ltd. v. Conrad established that a privately owned theater leased by the government may be considered a public forum, even as President, Trump is simply a Twitter user, bound by the same terms of service as everyone else. Twitter allows its users to block accounts they’d like to avoid, and one block-happy user happens to be president. In effect, Trump’s becoming president does not nationalize the private Twitter account that he used before ascending to the nation’s highest office, and will likely continue to use when his tenure in the White House ends. A determination that Trump’s account represents a designated public forum would greatly undermine Twitter’s ability to establish rules for the digital pseudo-commons it maintains.

Finally, it is difficult to understand Trump’s tweets as official government communications of the sort that might push his account into designated public forum territory. While Trump often announces decisions via Twitter, these releases are accompanied or followed by official statements from the White House. Furthermore, Trump does not restrict his twitter presence to the conveyance of official policy, often using it to fire back at detractors or criticize members of his own administration. Can we really regard “Who can figure out the true meaning of ‘covfefe’ ??? Enjoy!” as an official government communication?

In any case, do not expect debate regarding extension of the public forum doctrine to Internet properties to subside any time soon. As human communication increasingly moves online, and voters continue to demand authenticity from their representatives in government, the line between official and private digital communications will remain somewhat blurry. Nevertheless, for libertarians, the current legal paradigm suggests a satisfactory balance between the property rights of social media firms and users, and the First Amendment rights of both government officials and their critics. Ultimately, social media users benefit when firms are allowed to manage their digital commons as they see fit, freely experimenting with new features and means of interaction. The nationalization of politicians’ personal social media accounts would stymie this process, needlessly dividing platforms into venues governed by an evolving understanding of what makes for an enjoyable user experience, and state fora held back by crudely applied terrestrial standards.   

Many mainstream economists, perhaps a majority of those who have an opinion, are opposed to tying a central bank’s hands with any explicit monetary rule. A clear majority oppose the gold standard, at least according to an often-cited survey. Why is that?

First some preliminaries. By a “gold standard” I mean a monetary system in which gold is the basic money. So many grains of gold define the unit of account (e.g. the dollar) and gold coins or bullion serve as the medium of redemption for paper currency and deposits. By an “automatic” or “classical” gold standard I mean one in which there is no significant central-bank interference with the functioning of the market production and arbitrage mechanisms that equilibrate the stock of monetary gold with the demand to hold monetary gold. The United States was part of an international classical gold standard between 1879 (the year that the dollar’s redeemability in gold finally resumed following its suspension during the Civil War) and 1914 (the First World War).

Why isn’t the gold standard more popular with current-day economists? Milton Friedman once hypothesized that monetary economists are loath to criticize central banks because central banks are by far their largest employer. Providing some evidence for the hypothesis, I have elsewhere suggested that career incentives give monetary economists a status-quo bias. Most understandably focus their expertise on serving the current regime and disregard alternative regimes that would dispense with their services. They face negative payoffs to considering whether the current regime is the best monetary regime.

Here I want to propose an alternative hypothesis, which complements rather than replaces the employment-incentive hypothesis. I propose that many mainstream economists today instinctively oppose the idea of the self-regulating gold standard because they have been trained as social engineers. They consider the aim of scientific economics, as of engineering, to be prediction and control of phenomena (not just explanation). They are experts, and an automatically self-governing gold standard does not make use of their expertise. They prefer a regime that values them. They avert their eyes from the possibility that they are trying to optimize a Ptolemaic system, and so prefer not to study its alternatives.

The actual track record of the classical gold standard is superior in major respects to that of the modern fiat-money alternative. Compared to fiat standards, classical gold standards kept inflation lower (indeed near zero), made the price level more predictable (deepening financial markets), involved lower gold-extraction costs (when we count the gold extracted to provide coins and bullion to private hedgers under fiat standards), and provided stronger fiscal discipline. The classical gold standard regime in the US (1879-1914), despite a weak banking system, did no worse on cyclical stability, unemployment, or real growth.

The classical gold standard’s near-zero secular inflation rate was not an accident. It was the systemic result of the slow growth of the monetary gold stock. Hugh Rockoff (1984, p. 621) found that between 1839 and 1929 the annual gold mining output (averaged by decade) ran between 1.07 and 3.79 percent of the existing stock, with the one exception of the 1849-59 decade (6.39 percent growth under the impact of Californian and Australian discoveries). Furthermore, an occasion of high demand for gold (for example a large country joining the international gold standard), by raising the purchasing power of gold, would stimulate gold production and thereby bring the purchasing power back to its flat trend over the longer term.

A recent example of a poorly grounded historical critique is provided by textbook authors Stephen Cecchetti and Kermit Schoenholtz. They imagine that the gold standard determined money growth and inflation in the US until 1933, and so they count against the gold standard the US inflation rate in excess of 20% during the First World War (specifically 1917), followed by deflation in excess of 10% a few years later (1921). These rates were actually produced by the policies of the Federal Reserve System, which began operations in 1914. The classical gold standard had ended during the Great War, abandoned by all the European combatants, and did not constrain the Fed in these years. Cecchetti and Schoenholtz are thus mistaken in condemning “the gold standard” for producing a highly volatile inflation rate. (They do find, but do not emphasize, that average inflation was much lower and real growth slightly higher under gold.) They also mistakenly blame “the gold standard” — not the Federal Reserve policies that prevailed, nor the regulatory restrictions responsible for the weak state of the US banking system — for the US banking panics of 1930, 1931, and 1933. Studies of the Fed’s balance sheet and activities during the 1930s have found that it had plenty of gold (Bordo, Choudhri and Schwartz, 1999; Hsieh and Romer, 2006, Timberlake 2008). The “tight” monetary policies it pursued were not forced on it by lack of more abundant gold reserves.

There are of course serious economic historians who have done valuable research on the performance of the classical gold standard and yet remain critics. Their main lines of criticism are two. First, they too lump the classical gold standard together with the very different interwar period and mistakenly attribute the chaos of the interwar period to the gold standard mechanisms that remained, rather than to central bank interference with those mechanisms. In rebuttal Richard Timberlake has pertinently asked how, if it was the mechanisms of the gold standard (and not central banks’ attempts to manage them) that destabilized the world economy during the interwar period, those same mechanisms managed to maintain stability before the First World War (when central banks intervened less or, as in the United States, did not exist)? Here, I suggest, a strong pre-commitment to expert guidance acts like a pair of blinders. Wearing those blinders, even if it is seen that the prewar system differed from and outperformed the interwar system, it cannot be seen that this was because the former was comparatively self-regulating and the latter was comparatively expert-guided.

Second, it is always possible to argue in defense of expert guidance that even the classical gold standard was second-best to an ideally managed fiat money where experts call the shots. Even if central bankers operated on the wrong theory during the 1920s, during the Great Depression, and under Bretton Woods, not to mention during the Great Inflation and the Great Recession, today they operate (or can be gotten to operate) on the right theory.

In the worldview of economics as social engineering, monetary policy-making by experts must almost by definition be better than a naturally evolved or self-regulating monetary system without top-down guidance. After all, the experts could always choose to mimic the self-regulating system in the unlikely event that it were the best of all options. (In the most recent issue of Gold Investor, Alan Greenspan claims that mimicking the gold standard actually was his policy as Fed chairman.) As experts they sincerely believe that “we can do better” by taking advantage of expert guidance. How can expert guidance do anything but help?

Expert-guided monetary policy can fail in at least three well-known ways to improve on a market-guided monetary system. First, experts can persist in using erroneous models (consider the decades in which the Phillips Curve reigned) or lack the timely information they would need to improve outcomes. These were the reasons Milton Friedman cited to explain why the Fed’s use of discretion has amplified rather than dampened business cycles in practice. Second, policy-makers can set experts to devising policies to meet goals that are not the public’s goals. This is James Buchanan’s case for placing constraints on monetary policy at the constitutional level. Third, where the public understands that the central bank has no pre-commitments, chronically suboptimal outcomes can result even when the central bank has full information and the most benign intentions. This problem was famously emphasized by Finn E. Kydland and Edward C. Prescott (1977).

These lessons have not been fully absorbed. A central bank that announces its own inflation target (as the Fed has), and especially one that retains a “dual mandate” to respond to real variables like the unemployment rate or the estimated output gap, retains discretion. It is free to change or abandon its inflation-rate target, with or without a new announcement. Retaining discretion — the option to change policy in this way – carries a cost. The money-using public, uncertain about what the central bank experts will decide to do, will hedge more and invest less in capital formation than they would with a credibly committed regime. A commodity standard — especially without a central bank to undermine the redemption commitments of currency and deposit issuers — more completely removes policy uncertainty and with it overall uncertainty.

Speculation about the pre-analytic outlook of monetary policy experts could be dismissed as mere armchair psychology if we had no textual evidence about their outlook. Consider, then, a recent speech by Federal Reserve Vice Chairman Stanley Fischer. At a May 5, 2017 conference at the Hoover Institution, Fischer addressed the contrast between “Committee Decisions and Monetary Policy Rules.” Fischer posed the question: Why should we have “monetary policy decisions … made by a committee rather than by a rule?” His reply: “The answer is that opinions — even on monetary policy — differ among experts.” Consequently we “prefer committees in which decisions are made by discussion among the experts” who try to persuade one another. It is taken for granted that a consensus among experts is the best guide to monetary policy-making we can have.

Fischer continued:

Emphasis on a single rule as the basis for monetary policy implies that the truth has been found, despite the record over time of major shifts in monetary policy — from the gold standard, to the Bretton Woods fixed but changeable exchange rate rule, to Keynesian approaches, to monetary targeting, to the modern frameworks of inflation targeting and the dual mandate of the Fed, and more. We should not make our monetary policy decisions based on that assumption. Rather, we need our policymakers to be continually on the lookout for structural changes in the economy and for disturbances to the economy that come from hitherto unexpected sources.

In this passage Fischer suggested that historical shifts in monetary policy fashion warn us against adopting a non-discretionary regime because they indicate that no “true” regime has been found. But how so? That governments during the First World War chose to abandon the gold standard (in order to print money to finance their war efforts), and that they subsequently failed to do what was necessary to return to a sustainable gold parity (devalue or deflate), does not imply that the mechanisms of the gold standard — rather than government policies that overrode them — must have failed. Observed changes in regimes and policies do not imply that each new policy was an improvement over its predecessor — unless we take it for granted that all changes were all wise adaptations to exogenously changing circumstances. Unless, that is, we assume that the experts guiding monetary policies have never yet failed us.

Fischer further suggested that a monetary regime is not to be evaluated just by the economy’s performance, but by how policy is made: a regime is per se better the more it incorporates the latest scientific findings of experts about the current structure of the economy and the latest models of how policy can best respond to disturbances. If we accept this as true, then we need not pay much if any attention to the gold standard’s actual performance record. But if instead we are going to judge regimes largely by their performance, then replacing the automatic gold standard by the Federal Reserve’s ever-increasing discretion cannot simply be presumed a good thing. We need to consult the evidence. And the evidence since 1914 suggests otherwise.

Contrary to Fischer, there is no good reason to presume that expert-guided monetary regimes get progressively better over time, because there is no filter for replacing mistaken experts with better experts. We have no test of the successful exercise of expertise in monetary policy (meaning, superiority at correctly diagnosing and treating exogenous monetary disturbances, while avoiding the introduction of money-supply disturbances) apart from ex post evaluation of performance. The Fed’s performance does not show continuous improvement. As previously noted, it doesn’t even show improvement over the pre-Fed regime in the US.

A fair explanation for the Fed’s poor track record is Milton Friedman’s: the information necessary for successful expert guidance of monetary policy is simply not available in a timely fashion. Those who recognize this point will be open to considering the merits of moving, to quote the title a highly pertinent article by Leland B. Yeager, “toward forecast-free monetary institutions.” Experts who firmly believe in expert guidance of monetary policy, of course, will not recognize the point. They will accordingly overlook the successful track record of the automatic gold standard (without central bank management) as a forecast-free monetary institution.

[Cross-postefd from Alt-M.org]

A lengthy New York Times article over the weekend touches on a contradiction in the U.S. strategy against the Islamic State in Iraq and Syria (ISIS). Even as the United States cooperates in a de facto tactical alliance with Iran against ISIS, we’re engaged in a longer-term strategy against Iranian influence in the Middle East. U.S. and Iranian-backed forces have even clashed in battlefield skirmishes in recent weeks.

Picking a fight with an implicit ally is problematic for many reasons. Perhaps most worryingly, such clashes risk sucking U.S. forces deeper into Syria’s civil war.

The article quotes Lebanese scholar Kamel Wazne’s argument that the Trump administration, with encouragement from Saudi Arabia and other Gulf States, is “turning up the heat against Iran,” and eager to prevent it from establishing “’Shiite crescent’ of influence from Iran to Lebanon” when the Islamic State is defeated. This stance, we’re told, “puts the United States at loggerheads with the pro-government alliance in Syria.”

The stated concern is that Shiite-controlled territory provides a land route for supplying Iranian allies and proxies. But, according to Ilan Goldenberg and Nicholas Heras, writing in The Atlantic, “moving large amounts of weaponry across a 1,000-mile stretch of difficult territory in Iraq and Syria isn’t exactly an ideal logistics plan. Plus, Iran already has the ability to fly supplies into Damascus, and, from there, move them to Hezbollah in Lebanon.”

One suspects what is really driving the U.S. approach here is fealty to existing alliances. Some of this boils down to a kind of compulsive status quo bias. The Sunni Arab Gulf states have been U.S. partners for many years, despite evidence that they act in ways that undermine U.S. interests. With oil sales, lobbying largesse, flattery, and avoidance of direct challenges to top U.S. priorities, they dissuade policymakers from reevaluating that posture.

But there is a more practical rationale. The Sunni Arab Gulf states host U.S. military bases and enable American power projection in the Middle East. If relationships sour, we could lose that access. In the minds of U.S. policymakers, that would damage American leadership and influence. Washington therefore tends to side with the Gulf states.

The problem with having huge overseas military bases, however, is that we tend to use them. Permanently maintaining tens of thousands of U.S. troops throughout the Gulf region can enhance the temptation for policymakers to intervene for bad reasons. As should be clear from the past 25 years of habitual interventionism in the Middle East, “power projection” can be more a liability than an asset.

Don’t we need bases in the Gulf to protect the free flow of oil? Actually, no. Much academic research demonstrates that threats to the flow of Gulf oil are remote and don’t require forward deployment to mitigate. According to Joshua Rovner and Caitlin Talmadge, the policy of “large, permanent peacetime land forces in the Gulf” is not particularly useful for oil security and has often been “just as counterproductive as the vacuums created by hegemonic absence.” Eugene Gholz and Daryl Press similarly argue, “the day-to-day peacetime presence of U.S. military forces in the Persian Gulf region is not merely ineffective; it is probably counterproductive for protecting U.S. oil interests.”

Another justification for America’s permanent military presence is managing local disputes between regional players. But U.S. backing may encourage clients to heighten conflict. The recent Saudi-Qatari split is a case in point.

Neither are U.S. bases necessary for counterterrorism missions. In any case, military action in the post-9/11 era, as Micah Zenko of the Council on Foreign Relations points out, has created more enemies than it has eliminated and destabilized the region seemingly beyond repair.

Long-term American interests aren’t served by placating traditional Sunni allies that host U.S. military bases. Rather than trying to protect the future of power projection, Washington should be looking for ways to extricate itself from the Middle East.

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