Cato Op-Eds

Individual Liberty, Free Markets, and Peace
Subscribe to Cato Op-Eds feed

Yesterday my colleague Alex Nowrasteh wrote an extensive list of reasons why Donald Trump, the presumptive Republican Party presidential nominee, is the nativist dream candidate. The list leaves little doubt that if Trump makes it to the White House he will seek to violate the Constitution, create a police state, put citizens’ privacy at risk, and build a border wall (despite its estimated $25 billion price tag) all in the name of reducing legal and illegal immigration to the United States.

Trump’s immigration plan ought to worry civil libertarians because, as Alex points out, he supports mandatory E-Verify, the ineffective employment eligibility verification program that puts privacy at risk. Trump’s disregard for effective policy and privacy rights can be seen not only in his views on E-Verify but also his support for 24/7 border drones.

Last month Trump told that he would order the 24/7 surveillance of the U.S. borders, adding, “I want surveillance for our borders, and the drone has great capabilities for surveillance.”

What Trump might not know is that drones on the U.S. border don’t have a great track record. At the end of 2014 the Department of Homeland Security’s Inspector General released an audit of the Custom and Border Protection’s Unmanned Aircraft System Program. The program includes MQ -9 Predator B drones (also called “Reapers”), perhaps best known for its combat missions abroad, as well as the Guardian, the Predator B’s maritime variant. The program’s audit was unambiguous:

The program has also not achieved the expected results. Specifically, the unmanned aircraft are not meeting flight hour goals. Although CBP anticipated increased apprehensions of illegal border crossers, a reduction in border surveillance costs, and improvement in the U.S. Border Patrol’s efficiency, we found little or no evidence that CBP met those program expectations.

Unsurprisingly, cartels at the southern border are taking part in an arms race with CBP, using jamming devices on patrol drones. Almost a year after the inspector general’s audit Timothy Bennett, a science-and-technology program manager at the Department of Homeland Security, explained how the cartels hinder CBP operations:

DHS was unable to say just how often smugglers tried to jam or spoof border-watching UAVs. But Bennett said the attacks are hindering law enforcement abilities to map drug routes. “You’re out there looking, trying to find out this path [they’re] going through with drugs, and we can’t get good coordinate systems on it because we’re getting spoofed. That screws up the whole thing. We got to fix that problem,” he said.

The ineffectiveness of drones on the border is not the only concern. CBP drones also pose privacy concerns. Predator B drones carrying out combat missions abroad have been outfitted with Gorgon Stare, a wide-area surveillance technology that allows users to track objects within an area at least 10 square kilometers in size. Almost two years ago it was reported that once incorporated with Autonomous Real-Time Ground Ubiquitous Surveillance Imaging System (ARGUS-IS), another wide-area surveillance tool, Gorgon Stare can monitor 100 square kilometers. A video outlining ARGUS-IS’ capabilities is below.

I’m not aware of any reports of CBP drones equipped with ARGUS-IS, but given American law enforcement’s history of using equipment originally designed for the battlefield, such as Mine-Resistant Ambush Protected vehicles (MRAPs) and Stingrays, it is reasonable to be concerned about military wide area surveillance equipment making its way to domestic patrol drones.

Not that Trump would find that at all concerning. For Trump  it seems like any policy, no matter how ineffective or damaging to our civil liberties, is worth trying as long as it seeks to reduce immigration.  

It’s increasingly clear that attacks on academic freedom from within the academy are only growing. I was recently invited to give two major speeches on the subject, one on academic freedom as such, the other more broadly on tolerance in a free society. And just a week ago I blogged here on the breaking news about the uproar at George Mason University over the GMU administration’s decision to rename its law school after the late Justice Antonin Scalia.

Just yesterday the Manhattan Institute and Wall Street Journal’s Jason Riley recounted in the Journal his recent “disinvitation” to speak at Virginia Tech. It seems that faculty members were “concerned” that Riley’s writings on race in the Journal “would spark protests.” On today’s campus, we can’t have those—unless, of course, they’re politically correct protests, as at GMU. There, the protest only grows, with a lengthy report about it in today’s Washington Post and a sharp op-ed against the uproar in today’s Journal by GMU law professor Lloyd Cohen.

As Prof. Cohen outlines developments there, they arose from the university’s announcement in late March of a $10 million gift from the Charles Koch Foundation to expand law-school scholarships and $20 million from an anonymous donor to rename the law school in honor of Justice Scalia. In response, “a vocal group of professors, none of whom teaches at the law school itself, is now attempting to convince the university administration and the State Council of Higher Education for Virginia to reject the grant and abandon the school’s new name.” In late April the faculty senate passed a condemnation resolution. And just yesterday it voted in favor of a nonbinding resolution to delay any changes in the law school’s name.

In opposing the resolution, Prof. Cohen took the gloves off at the meeting—where, he reports, “several of my faculty colleagues interrupted me by calling for me to be prevented from speaking, a sad commentary on their tolerance for open debate and intellectual inquiry.” It’s worth citing in full the portion of his remarks that the Post highlights:

Consider the irony of this body’s proposed resolution: In purporting to take a stand in favor of academic freedom this body would adopt a statement that constitutes one of the most egregious attacks on academic freedom not only in the history of this university but in higher education in this country.

This body is prepared to accuse the faculty and administration of the school of law of selling out its integrity, independence, and academic values for a pottage — all while hiding under the gutless guise of expressing “concerns” about public perceptions and other weasel words designed to disguise what this really is — an unprecedented assault on the academic freedom of one unit of this university by a mob of faculty from the rest of the university.

And let’s not kid ourselves — the whole world knows what is going on here. If this were a gift from George Soros to create the Harry Blackman Law School we would not be here today.

The political agenda of this body is transparent.

And it is the transparency of this political agenda to attack academic freedom cloaked in the garb of a purported defense of academic freedom that leads me to call on every Senator to think about the principle that you would be voting for today if you go along with this statement.

Indeed, if this assault is in the name of defending academic freedom, then that concept has lost all meaning.

ERBIL, IRAQ—Kurdistan in the north of Iraq has become a refuge for Christians and other religious minorities in the midst of the Islamic State’s murderous rampage. The abundant crimes of Daesh, as it also is known, constitute an unprecedented religious war against members of minority faiths who until recently largely lived in peace with their Muslim neighbors.

As ISIS expanded it attacked most everyone, especially Christians, Yazidis, and other religious minorities. Hence the brutal campaign detailed in the nearly 300-page report, “Genocide against Christians in the Middle East,” issued by the Knights of Columbus and In Defense of Christians, a group which focuses on the Mideast.

The report argued simply: “ISIS is committing genocide” against Christians in Iraq, Libya, and Syria. The words of Daesh are clear.

The organization publishes a magazine named Dabiq, the place where the movement expects to destroy the “Crusader army,” meaning Christians. Explained the Islamic State: “We will conquer your Rome, break your crosses, and enslave your women, by the permission of Allah, the Exalted.”

To describe the Islamic State’s crimes in generalities does not adequately communicate the truly horrific nature of its campaign. The NGO Shlomo recorded 1131 Christians murdered between 2003 and 2014 in Iraq’s Nineveh Plain, with more than 100 more since then.

Patriarch Ignatius Youssef III Younan of Antioch, Syria believed more than 500 Christians in Iraq and more than 1000 in Syria were killed. The Archbishop of Aleppo, Syria, Jean-Clement Jeanbart, said that hundreds of Christians have been executed or kidnapped in his city and perhaps thousands in Syria as a whole. Others have been slaughtered in Libya and elsewhere.

While widespread murder is the Islamic State’s most odious crime, the group inflicts grievous harm on those it does not kill. Those interviewed for the report cited all manner of bodily harm: “Choking, beatings with guns and electrical cords, mock executions, and withholding of food and water in the extreme heat are commonplace.”

Rape also is widespread, with more than “1500 Yazidi and Christian girls” taken as sex slaves. As in ancient times, they are sold and shared like chattel.

Moreover, the Islamic State coerced religious conversion. This process might seem unimportant to nonbelievers but, reported the authors, “the violation of conscience—the spiritual rape—involved in a conversion through force works a state of mental and spiritual unrest that is difficult to put into words.”

Finally, there is religious cleansing. For instance, “Christians were rounded up into busses and driven out to a remote place to fend for themselves.” Left without food and water, many had to walk for hours to reach safety.

What to do about widespread genocidal persecution of religious minorities?

Many who pushed for the designation of “genocide” hoped to force a response from Washington. But there is little military option. After all, foolish U.S. intervention triggered the crises in Iraq and Libya and exacerbated the conflict in Syria.

Indictments under the International Criminal Court would provide moral satisfaction, but the Islamic State must be defeated for any prosecutions to occur. Indeed, defeat itself is the most important way to stop ISIS, and is primarily the responsibility of the Middle Eastern nations under attack from Daesh.

Americans can help religious minorities directly. The group HardWired brought me to Kurdistan, where it was working with people of all faiths to promote religious liberty and tolerance.

As I pointed out in Forbes: “The U.S. also should accept additional refugees. Despite security fears, the Islamic State is unlikely to attempt to use refugees, who typically wait years for resettlement, to attack America. In particular need are Christians, Yazidis, and other religious minorities. Only Lebanon is hospitable to non-Muslims, and it is overwhelmed with refugees of all faiths.”

The slaughter of Middle Eastern Christians and other persecuted faiths is one of the great tragedies of our age. Americans should act even when their government does not.

Over at Cato’s Police Misconduct web site, we have selected the worst case for the month of April.  It was the case involving a Michigan man by the name of James King.



King was minding his own business when he was confronted by two menacing men.   King didn’t know these men and he wanted to get away from them, but they chased him down and beat him up.

Turns out the men were police officers working on a fugitive task force.  They thought King was one of their fugitives, but they were mistaken about that.  They were out of uniform when they confronted King and, according to King’s lawsuit, they did not identify themselves as police officers.  Worried about his own safety, King ran away from them.

One of the officers put King in a chokehold till he lost consciousness.  When King came to, he again feared for his own safety, thinking that these men were criminal attackers, so he bit the arm of one of the officers in a gambit to get away from them.  The bite infuriated the officer, who then unleashed a torrent of punches on King’s face and head.

Bystanders were alarmed by what they were witnessing and they called 911.  The responding officer, for his part, told the witnesses to delete their cell phone videos of the incident.  He was worried about the safety of the officers, who had undercover jobs.  He said they shouldn’t be recorded.

When things settled down, and the police realized their mistake, they decided to arrest King anyway.  He fought back during his arrest–that’s a crime.

Prosecutors evidently agreed that King needed to be punished–so they charged him with three felonies.

King declined to plea bargain and insisted on a jury trial.  After hearing all the arguments and evidence, the jury acquitted him of all charges.

A civil lawsuit is now pending.  There’s no indication of any discipline for the officers involved.  They’re apparently still out there policing.

Writing as background for their work, the six-member research team of Koweek et al. (2015) cite several concerns about the future of Earth’s corals that have been projected to result from the so-called twin evils of global warming and ocean acidification, including “coral bleaching (Glynn, 1993; Hughes et al., 2003; van Hooidonk et al., 2013), increased dissolution and bioerosion (Andersson and Gledhill, 2013; Dove et al., 2013; Reyes-Nivia et al., 2013), decreased biodiversity (Fabricius et al., 2011), and shifts toward algal-dominated reefs (Hoegh-Guldberg et al., 2007; Kroeker et al., 2010; 2013).” However, despite these concerns, which have captured the attention of scientists and policy makers for more than two decades now, such worries may well be overestimated and overplayed.

The reason for such growing optimism has to do with the corals themselves, which along with other marine organisms appear to have an inherent ability “of controlling their own biogeochemical environments.” Such biologically-mediated controls, if they are of sufficient magnitude, could potentially offset future changes in the marine environment brought about by rising atmospheric CO2 (projected ocean warming and pH decline). It is therefore of considerable importance for scientists to continue investigating these biological feedbacks in order to better ascertain the future of these precious marine species, for as noted by Koweek et al., “the paradigm of coral reefs as passive responders to their biogeochemical environments is rapidly changing.”

In further expanding the scientific knowledge on this important topic, the six American researchers set out to conduct a “short, high-resolution physical and biogeochemical pilot field study” on the back reefs of Ofu, American Samoa, where they measured a number of hydrodynamic and biogeochemical parameters there over a seven-day period in November, 2011. The specific study location was Pool 100 (14.185°S, 169.666°W), a shallow lagoon containing 85 coral species and various kinds of crustose coralline algae and non-calcifying algae. Koweek et al. selected Pool 100 because, as they state, shallow back reefs “commonly experience greater thermal and biogeochemical variability owing to a combination of coral community metabolism, environmental forcing, flow regime, and water depth.”

Results of their data collection and analysis revealed that temperatures within the shallow back reef environment were consistently 2-3°C warmer during the day than that observed in the offshore environment. In addition, and as expected, the ranges of the physical and biogeochemical parameters studied in Pool 100 greatly exceeded the variability observed in the open ocean. Inside Pool 100, the pH values fluctuated between a low of 7.80 and a high of 8.39 across the seven days of study, with daily ranges spanning between 0.5 and 0.6 of a unit (Figure 1). What is more, Koweek et al. report that the reef community in Pool 100 spent far more time outside of the offshore pH range than within it (pH values were between 8.0 and 8.2 during only 30 percent of the observational period, less than 8.0 for 34 percent of the time and greater than 8.2 for the remaining 36 percent of the observations). Additional measurements and calculations indicated that these fluctuations in pH were largely the product of community primary production and respiration, as well as tidal modulation and wave-driven flow.

Figure 1. Time series of pHT (top panel) and pCO2 (bottom panel) in Pool 100, Ofu, American Samoa from November 16-20, 2011. Vertical blue and orange lines show the occurrence of high and low tides, respectively. Gray vertical shading shows the period from sundown to sunrise. The different colored circles represent data that were collected from different locations in Pool 100 and the dashed horizontal black lines represent the mean value of each parameter in the offshore ocean. Adapted from Koweek et al. (2015).

Commenting on these and other of their findings, Koweek et al. write that “our measurements have provided insight into the physical–biogeochemical coupling on Ofu.” And that insight, they add, “suggests a significantly more nuanced view of the fate of coral reefs” than the demise of global reef systems that is traditionally forecast under the combined stresses of climate change and ocean acidification.

Indeed, if these ecosystems presently thrive under such variable (and more severe) environmental conditions than those predicted for the future—which conditions are largely derived and modulated by themselves—why wouldn’t they persist?



Andersson, A.J. and Gledhill, D. 2013. Ocean acidification and coral reefs: effects on breakdown, dissolution, and net ecosystem calcification. Annual Review of Marine Science 5: 321-348.

Dove, S.G., Kline, D.I., Pantos, O., Angly, F.E., Tyson, G.W. and Hoegh-Guldberg, O. 2013. Future reef decalcification under a business-as-usual CO2 emission scenario. Proceedings of the National Academy of Sciences, USA 110: 15342-15347.

Fabricius, K.E., Langdon, C., Uthicke, S., Humphrey, C., Noonan, S.H.C., De’ath, G., Okazaki, R., Muehllehner, N., Glas, M.S. and Lough, J.M. 2011. Losers and winners in coral reefs acclimatized to elevated carbon dioxide concentrations. Nature Climate Change 1: 165-169.

Glynn, P.W. 1993. Coral reef bleaching: ecological perspectives. Coral Reefs 12: 1-17.

Hoegh-Guldberg, O., Mumby, P.J., Hooten, A.J., Steneck, R.S., Greenfield, P., Gomez, E., Harvell, C.D., Sale, P.F., Edwards, A.J., Caldeira, K., Knowlton, N., Eakin, C.M., Iglesias-Prieto, R., Muthiga, N., Bradbury, R.H., Dubi, A. and Hatziolos, M.E. 2007. Coral reefs under rapid climate change and ocean acidification. Science 318: 1737-1742.

Hughes, T.P., Baird, A.H., Bellwood, D.R., Card, M., Connolly, S.R., Folke, C., Grosberg, R., Hoegh-Guldberg, O., Jackson, J.B.C., Kleypas, J.A., Lough, J.M., Marshall, P., Nystrom, M., Palumbi, S.R., Pandolfi, J.M., Rosen, B. and Roughgarden, J. 2003. Climate change, human impacts, and the resilience of coral reefs. Science 301: 929-933.

Koweek, D.A., Dunbar, R.B., Monismith, S.G., Mucciarone, D.A., Woodson, C.B. and Samuel, L. 2015. High-resolution physical and biogeochemical variability from a shallow back reef on Ofu, American Samoa: an end-member perspective. Coral Reefs 34: 979-991.

Kroeker, K.J., Kordas, R.L., Crim, R.N. and Singh, G.G. 2010. Meta-analysis reveals negative yet variable effects of ocean acidification on marine organisms. Ecology Letters 13: 1419-1434.

Kroeker, K.J., Kordas, R.L., Crim, R.N., Hendriks, I.E., Ramajo, L., Singh, G.S., Duarte, C.M. and Gattuso, J.-P. 2013. Impacts of ocean acidification on marine organisms: quantifying sensitivities and interaction with warming. Global Change Biology 19: 1884-1896.

Reyes-Nivia, C., Diaz-Pulido, G., Kline, D.I., Hoegh-Guldberg, O. and Dove, S.G. 2013. Ocean acidification and warming scenarios increase microbioerosion of coral skeletons. Global Change Biology 19: 1919-1929.

van Hooidonk, R., Maynard, J.A. and Planes, S. 2013. Temporary refugia for coral reefs in a warming world. Nature Climate Change 3: 508-511.

Donald Trump’s win in Indiana has practically clinched the Republican nomination.  Since July 2015, Trump has led in most polls of GOP candidates.  Immigration restrictionism is his most popular policy position.  That position and the way he’s talked about it have defined his candidacy and set him apart from the get go.  Trump is the nativist dream candidate – virtually whatever happens now can be blamed on his anti-immigration position. 

Here’s a list of Trump’s anti-immigration credentials:

You can read more about Trump’s immigration policies in his plan – which Ann Coulter called “the greatest political document since the Magna Carta.”

Trump is the real anti-immigration candidate that nativists have been praying for.  He owns the anti-immigration label no matter what he does or says to distance himself from it in the general election.  He spouts their ideas and appeals to their biases on a national stage.  He is the perfect spokesman in tone and style for such a policy position.  The political failure of immigration restrictionists in the past was always blamed on their moderation.  Now they have a real anti-immigration radical to test their theory – so we should give them appropriate credit for Trump’s failure in November.

Donald Trump keeps winning Republican Party primaries. He could be America’s next president. It’s a sobering thought.

But Trump is not alone. Europe is filled with populist parties, old and new.

It’s too simple to decry a proto-fascist wave, as feared by some alarmists. In fact, most of his Republican competitors were far more aggressive and irresponsible on foreign policy than Trump. Normal folks simply are tired of being viewed as problems to be solved rather than citizens to be engaged.

In the U.S. it doesn’t much matter who people vote for. Government will expand. New regulations will be issued. More tax dollars will be spent. Additional wars will be started. The only certainty is that the views of those who vote will be ignored. Much the same governing consensus dominates Europe.

At the same time, the governing class protects itself. The response of this ruling class to public challenge only increases popular anger and frustration.

This doesn’t mean the principles under attack in America and Europe are illegitimate. I rather like advanced industrial capitalism, globalization, diversity, immigration, and much (though certainly not all) of the modern liberal catechism. At issue is the ruthless campaign to not just defeat political opponents but delegitimize contending viewpoints.

Real tolerance requires hearing and debating ideas despite disagreeing with them. While there are some beliefs which appropriately fall beyond the bounds of normal discourse, the number in that category must be kept extraordinarily small. Fear of economic and cultural change does not qualify.

If opinions are barred from civil debate, they will emerge in uncivil action. If it proves impossible to debate issues in the usual political channels, advocates will push their views more loudly and offensively in other ways. The result is Donald Trump in America and a gaggle of dubious, sometimes creepy politicians across Europe.

What to do now, after the forces of populism, nationalism, and more have been unleashed?

First, popular concerns need to be acknowledged and addressed. While globalization, immigration, and trade are economically beneficial, the advantages are not shared equally. All have a stake in what their nation is and what it becomes.

Second, the political process needs to be made more responsive to popular concerns. While populism tends to be undemocratic in its expectation of overriding all competing interests, it arises at least in part in response to the normal political system’s refusal to consider disfavored interests. That doesn’t mean turning republicanism into majoritarianism, but protecting republicanism from elitism.

Third, parties within the legitimate realm of debate—say populist, not fascist—should be brought into government when appropriate. Matthew Goodwin of the University of Nottingham explained that stigmatizing disfavored parties discouraged moderation and compromise. In contrast, “parties that were not excluded but were allowed to participate in the wider party system tended, over time, to move away from more extreme positions.”

Fourth, policies should be adapted to assuage strong public pressures without abandoning fundamental principles. For instance, to encourage public acceptance of immigration “reform” compromise is necessary, such as legalizing work by undocumented aliens while setting aside citizenship as an option.

Fifth, issues should be depoliticized and withdrawn from the electoral process. People should be left alone whenever possible. Government should not be used as a tool to remake a recalcitrant public.

Sixth, expanded economic opportunity is essential. As I point out on Forbes, “Lesser educated and skilled people are suffering. American policymakers must confront public schools which don’t teach, revamp federal taxes which cut U.S. competitiveness, and eliminate business subsidies which reward political rather than economic entrepreneurship.”

Seventh, people need to find new venues for dialogue. As the center disappears from politics and contending parties grow more estranged, people need other forums to be reminded of their common humanity and interests.

No one knows when the latest populist political wave will break. It is essential to respond to the concerns animating the angry middle.

Baton Rouge IT consultant Michael Hale is right to be concerned about the unfunded mandates in the REAL ID Act. The U.S. national ID law requires states to issue driver’s licenses and share driver data according to federal standards. States complying with REAL ID will find that the U.S. Department of Homeland Security (DHS) dictates their driver licensing policies and the expenditure of state funds in this area forevermore. But he raises that concern at the tail end of a letter to the editor of The New Orleans Advocate that broadly endorses the national ID law based on incorrect information. Here’s some information that Mr. Hale and every American concernced with our liberty and security should know.

Mr. Hale believes that state driver data “will continue to be maintained by each individual state, and each state will decide who gets access to this information.” This is not the case. The REAL ID Act requires states to share driver data across a nationwide network of databases. The DHS and other national ID advocates downplay and deny this, but they are not persuasive because the requirement is right there in the statute:

To meet the requirements of this section, a State shall adopt the following practices in the issuance of drivers’ licenses and identification cards: …
(12) Provide electronic access to all other States to information contained in the motor vehicle database of the State.
(13) Maintain a State motor vehicle database that contains, at a minimum–
(A) all data fields printed on drivers’ licenses and identification cards issued by the State; and
(B) motor vehicle drivers’ histories, including motor vehicle violations, suspensions, and points on licenses.

Mr. Hale says, “The Real ID Act allows states to either adopt the Real ID or to come up with their own version of secure ID that Homeland Security can approve.” This is not true. The option of issuing a non-federal license or ID does not waive the obligation to share driver data nationwide.

Unlike the Department of Homeland Security and its pro-national ID allies, Mr. Hale gamely tries to argue the security merits of having a national ID. “The purpose of all this is to create a trustworthy form of ID that can be used to ensure air travel security,” he says. “The first step in securing a flight is to make sure everyone on board is who they claim to be.”

That argument is intuitive. In daily life, knowing who people are permits you to find them and punish any bad behavior. But U.S. federal public policy with national security implications and billions of taxpayer dollars at stake requires more articulate calculation.

The costs or impediments a national ID system would impose on dedicated terrorists, criminal organizations, and people lacking impulse control is minimal. For billions of dollars in taxpayer dollars expended, millions of hours standing in DMV lines, and placement of all law-abiding Americans into a national tracking system, REAL ID might mildly inconvenience the bad guys. They can, for example, bribe a DMV employee, spend a few thousand dollars to manufacture a false identity, or acquire the license of someone looking similar enough to themselves to fool lazy TSA agents. I analyzed all dimensions of identification and identity systems in my book, Identity Crisis: How Identification is Overused and Misunderstood.

There are other security measures where dollars and effort deliver more benefit. Or people might be left in control of their dollars and time to live as free Americans.

The Department of Homeland Security consistently downplays and obscures the true nature of the REAL ID Act’s national ID policy, and it never even tries to defend its security merits in any serious way. In the information technology community, the security demerits of having a national ID system backed by a web of databases as required by the law seems relatively clear.  People familiar with information technology tend to be more concerned, not less, with the power and peril of a national ID system.

The quest continues to make active citizens like Mr. Hale more aware of all dimensions of this issue.

Donald Trump has offered his foreign policy vision. It was a bit of a mishmash, but he is no Neoconservative and broke with pro-war Republican orthodoxy in important ways.

The speech, delivered last week in downtown Washington, was standard campaign fare, intended to demonstrate that the candidate was serious, and included some of the usual bland generalities.

Still, there was considerable good in the talk.

After the Cold War, he noted, “Logic was replaced with foolishness and arrogance, which led to one foreign policy disaster after another.” Hard to argue with that. Moreover, said Trump, it was a mistake to believe that the U.S. could impose Western-style democracy on countries “that had no experience or interests” in the process.

Indeed, he noted that “the legacy of the Obama-Clinton interventions will be weakness, confusion and disarray, a mess.” It actually is the Bush-Obama-Clinton interventions, but point taken. “Our actions in Iraq, Libya and Syria have helped unleash ISIS,” Trump added.

Added Trump: “unlike other candidates for the presidency, war and aggression will not be my first instinct.” Those are words not often spoken by Republicans. He also criticized the Iraq debacle, whose “biggest beneficiary has been Iran.”

Further, complained Trump, “our allies are not paying their fair share.” He promised to get out “of the nation-building business.” He argued that Washington should cooperate with Russia.

But there was the bad in the talk as well.

In complaining about the cost of defending allies, Trump drew the wrong conclusion: “The countries we are defending must pay for the cost of this defense, and if not, the U.S. must be prepared to let these countries defend themselves.” Washington should not hire out its military. Rather, foreign peoples should defend their own nations.

In a speech intended to highlight his unconventional thinking, he made the standard Republican claim that “our friends are beginning to think they can’t depend on us.” Like those nations in Asia, Europe, and the Middle East that Washington continues to defend at such high cost?

He complained about the “disastrous deal with Iran” without offering an alternative. Yet the agreement has pushed back Tehran’s ability to create nuclear weapons and intensified the internal struggle over Iran’s future.

 “Our rivals no longer respect us,” complained Trump. “President Obama watches helplessly as North Korea” continues its nuclear developments. As did Presidents Bill Clinton and George W. Bush. President Trump likely would find himself in the same situation.

Finally, there was more than a little ugly.

Trump overestimated Washington’s ability to force other nations to do its will: with America’s “economic power, we can rein in and we can get [the Chinese] to do what they have to do with North Korea.” It would make more sense to use diplomacy, which Trump elsewhere lauds, to address China’s concerns over a possible North Korean collapse than to threaten to wreck the relationship between the world’s two most important states. As I point out in Forbes, “Trump should recognize the likely reaction of a proud, nationalistic people whose country only recently escaped centuries of humiliation to an attempt by arrogant foreigners to dictate policy.”

Trump announced: “ISIS will be gone if I’m elected president. And they’ll be gone quickly. They will be gone very, very quickly.” Ironically, this is another instance of Washington doing someone else’s job: America’s allies and friends are the countries threatened by ISIS, so they should do the heavy lifting.

Moreover, Trump insisted that “we have to rebuild our military.” In fact, even after adjusting for inflation Obama’s cumulative military expenditures will exceed those of his predecessor. America accounts for roughly 40 percent of the globe’s military outlays because it needlessly defends Washington’s Asian, European, and Middle Eastern friends.

Donald Trump’s foreign policy sounds a lot like his domestic policy: inconsistent, ill-formed, incomplete. But still better than those of his main rivals. If he wins the GOP nomination, the presidential race might yield a genuine debate over foreign policy.

Last week’s resignation of Michael Melaniphy as CEO of the American Public Transportation Association (APTA) is a sign that more people are seeing that America’s transit-industrial complex has no clothes. Melaniphy’s departure comes on the heels of the withdrawal of the New York Metropolitan Transportation Authority (MTA) from APTA membership.

MTA’s complaint is that APTA has failed to help the seven “legacy” transit systems, that is, rail systems that are more than 40 years old, that are suffering from severe maintenance backlogs. These transit systems, which are in New York, Chicago, Philadelphia, San Francisco, Boston, Pittsburgh, and Cleveland, carry nearly two-third of the nation’s transit riders yet–thanks in part to APTA lobbying–a disproportionate share of federal transit dollars go to smaller cities that are building new rail systems that they won’t be able to afford to maintain.

In 2010, the Federal Transit Administration estimated that the legacy rail systems (plus Washington and Atlanta) needed nearly $60 billion to restore them to a state of good repair. Yet little was done, and the latest estimate is that the maintenance backlog has grown to more than $93 billion. Meanwhile, with APTA’s encouragement, Congress has spent something like $15 billion supporting the construction of new rail systems in places like Los Angeles, Seattle, and Portland.

Even the transit systems that suffer from maintenance backlogs are spending precious resources building new rail lines because that is what Congress will fund, not maintenance. Thus, the Massachusetts Bay Transportation Authority is spending $3 billion on a light-rail line to Medford even as it let its maintenance backlog grow to $7.3 billion. The Chicago Transit Authority is spending $2.3 billion extending its Red Line even as its maintenance backlog exceeds $22 billion. The San Francisco BART system is suffering frequent breakdowns and has a $9.7 billion maintenance backlog, yet is spending $6.3 billion on a line to San Jose that partly duplicates existing commuter rail service.

Meanwhile, other cities seem to be racing to see who can spend the most on their own rail transit expansions. Having just finished spending $1.5 billion on a seven-mile light-rail line, Portland wants to spend $2 billion on a new 12-mile line. Seattle just spend $1.9 billion on a three-mile light-rail line and is now spending $3.7 billion on a fourteen-mile line to Bellevue. The Los Angeles Metropolitan Transportation Authority wants to spend $120 billion on new transit lines, including the construction of a nine-mile light-rail tunnel to the San Fernando Valley that will cost nearly $1 billion per mile. 

Despite their expense, none of these light-rail lines are anything like the Washington or other subway systems. The “light” in light rail refers to capacity, not weight: light rail is, by definition, low-capacity transit, capable of carrying only about a quarter as many people per hour as a subway or elevated line. In 1981, San Diego opened the nation’s first modern light-rail line at a cost of $5.6 million per mile (about $12.5 million in today’s money); the cost of the average line being built today is $163 million per mile, yet those new lines won’t be able to carry any more people than the San Diego line.

These new rail lines do little good for transit riders, mainly because their high cost eventually forces most transit agencies that build them to cannibalize their bus systems. For example, construction of new light-rail lines forced San Jose’s Valley Transportation Authority to reduce bus service by 22 percent since 2001, leading to a 32 percent decline in ridership

It’s no surprise that APTA sheepishly reported last month that the nation’s overall transit ridership declined in 2015. While APTA blamed the decline on low gas prices, the truth is (as noted here last year), if you don’t count the New York subway system (whose ridership has been growing in response to rising Manhattan employment), nationwide ridership has declined for the past several years. 

Why are we spending so much money building new rail lines when it doesn’t help, and often hurts, transit riders? Part of the answer is Congress likes shiny new projects more than maintenance. But part of the answer is that APTA’s membership is stacked with manufacturers and suppliersconsultantscontractors, and land developers who build subsidized projects next to rail stations. Although New York’s MTA carries nearly 37 percent of all transit riders in the country, its membership dues covered less than 2 percent of APTA’s budget because APTA gets most of its money from non-transit agencies. Thus, like Congress, APTA is biased towards new construction.

For example, APTA claims to be an educational organization, yet it hasn’t done much to educate Congress or the public about the long-term costs of rail transit and the need to almost completely and expensively rebuild those rail lines every 30 years or so. After all, this message could undermine support for building new rail transit lines in cities that don’t need them.

People who support the needs of actual transit riders, rather than rail snobs (people who say they’ll ride a train but not a bus) or contractors, should use these facts to persuade Congress to stop funding obsolete rail transit systems when cities desperately need things that will truly relieve traffic congestion and cost-effectively improve everyone’s mobility.

Neal McCluskey has updated an overview study on federal aid for K-12 education, which is posted at Neal reports that K-12 spending under the U.S. Department of Education and its predecessor agencies rose from $4.5 billion in 1965 to $40.2 billion in 2016, in constant 2016 dollars. He notes that the department funds more than 100 subsidy programs, and each comes with regulations extending federal control over local schools.

Over the years, the states have been happy to receive federal funds, but they have chafed under the mandates imposed by Washington. George W. Bush’s No Child Left Behind Act provoked a backlash because of its costly rules for academic standards, student testing, and unrealistic proficiency demands. Neal argues that the new Ensuring Student Success Act of 2016 may have reduced some aspects of top-down control, but we won’t know for sure until all the regulations have been written.

Despite large increases in federal aid since the 1960s, public school performance has not improved much, if at all. Reading and math scores on the National Assessment of Educational Progress for 17-year-olds have been stagnant. In addition, America’s performance on international tests has remained mediocre, yet we spend more per-pupil on K-12 education than most countries.

Neal concludes that federal funding and mandates are not the way to create high-quality K-12 education. He notes that Canada has an advanced economy, yet it has no federal department of education. Public education in Canada is almost solely a concern of provincial and local governments. That decentralized approach has resulted in substantial experimentation and innovation, including school vouchers, charter schools, and competing public schools. International comparison tests show that Canadian kids generally outperform American kids in reading, mathematics, and science.

Neal is right that Congress should phase out federal funding for K-12 education and end all related regulations. Federal aid is ultimately funded by the taxpayers who live in the 50 states, and thus it provides no free lunch. Indeed, the states just get money back with strings attached, while losing billions of dollars from wasteful bureaucracy. There is no advantage in federal manipulation of K-12 education, and our school systems would be better off without it.

Neal’s essay.

In his push to stop Donald Trump in Indiana, Ted Cruz has finally taken a principled stand against Trump’s economy-crushing proposal to impose a 45% tariff on all imports from China.  This comes after months of Cruz equivocating on trade policy and even adopting Trump’s own rhetoric (“we’re getting killed at international trade”) at a debate less than two months ago. 

Here’s what Cruz said on last Sunday’s Meet the Press:

Donald’s only economic agenda is imposing massive taxes on the American people with a 40 percent tax hike of a giant tariff.  That would send us into a recession.  It would drive jobs overseas.  It would kill small businesses.

In the past, Cruz has limited his criticism of Trump’s tariff proposal to the fact that it would spark retaliation against U.S exports.  He recommended his own proposal for a value-added-tax for having the same effect of stifling imports without incurring such retaliation. 

Cruz is, unfortunately, still pushing the idea that bringing manufacturing jobs back to America is a good economic policy.  The truth is that American manufacturing is thriving (especially in Indiana) even as manufacturing employment decreases, enabling other sectors of the U.S. economy to grow faster.

Thankfully, Cruz’s plan to “bring back manufacturing jobs” is to reduce the burden of taxes and regulations, which will be good for the economy whether it achieves Cruz’s stated goal or not.

In an interesting twist, Politifact has gauged Cruz’s criticism of Trump’s tariff as only Half True while still recognizing that it would cause prices “to soar” and “cost U.S. jobs.”  Here’s what they had to say:

Trump has outlined a few other economic proposals beyond tariffs like declaring China a currency manipulator, upholding intellectual property law, ending China’s export subsidies (more on this later) and lowering the corporate tax rate to incentivize American companies to stay at home. He’s also suggested renegotiating or pulling out the North American Free Trade Agreement (NAFTA) and stopping the Trans-Pacific Partnership.

I think it’s worth recognizing that complaints about what China is doing are not economic proposals.  Upholding Chinese intellectual property law and ending China’s export subsidies, for example, are goals that Trump ostensibly hopes to achieve through his tariff proposal.  They are not separate policy proposals, since even Trump wouldn’t have the power to change Chinese law.

Tariffs at the level Trump is suggesting would cause prices of cheap products like air conditioners and intermediate goods like auto parts to soar and could cost U.S. jobs. But as some of the costs would be absorbed by Chinese and Mexican exporters, a 40 percent tariff doesn’t translate directly into a 40 percent tax hike.

Most economists agree that American consumers and manufactures would bear some of the cost of these tariffs, though it’s not entirely clear if prices would increase by 40 percent, as Cruz says.

What Politifact has done here is conflate “tax” hikes with “price” hikes.  It’s true that a 40% tariff won’t increase prices by 40% and no one, not even Cruz, has said it would.  Even a 40% general sales tax wouldn’t increase prices by that amount—some of the added expense would be absorbed in the form of lower wages and lower profits.

A tariff is, by definition, a tax paid by American businesses and consumers when they purchase imports.  When only some products are taxed at a higher rate, the result is less competition and less efficiency—leading to higher prices.  The fact that foreign producers would also suffer from increased tariffs only goes to show how harmful they can be.  It doesn’t mitigate the fact that Trump’s tariff is a tax paid by Americans that would lead to higher prices for American consumers and manufacturers.

Trade is one of a number of areas where Trump’s candidacy is driving the Republican Party away from free market policies.  It’s nice to see Cruz, even at his candidacy’s apparent eleventh hour, stick up for free trade by pointing out the costs of protectionism.

In January North Korea conducted its fourth nuclear test in the face of universal international protest. Even China, Pyongyang’s one nominal ally, joined in the criticism.

With Beijing’s support the United Nations imposed new sanctions on the Democratic People’s Republic of Korea. The U.S. and its allies warned Pyongyang of further isolation if the DPRK continued to flout the will of the international community.

Now the North appears to be preparing another nuclear test. If the DPRK does so no further proof will be needed that the North intends to become a significant nuclear power.

Pyongyang has invested too much to drop the program. Moreover, the North lives the old Henry Kissinger aphorism that even paranoids have enemies. The U.S., backed by the Europeans, has demonstrated its willingness to oust dictators on its “bad” list, even after making a deal with them, such as Moammar Khadafy.

What makes the prospect of another test particularly dramatic is Kim Jong-un’s apparent willingness to proceed at any cost. He can have little doubt that the U.S. will press for additional sanctions. He knows that no other government will defend his regime.

He is aware that after the January test the People’s Republic of China approved tougher international penalties. Every additional DPRK provocation threatens to become the last back-breaking straw for China, leading it to target food and energy aid, which would cause Pyongyang enormous hardship.

What to do when nothing so far has worked?

First, the U.S., Republic of Korea, and Japan should consider how to deal with a nuclear North Korea. Two decades of pronouncements that the North must not develop nuclear weapons are for naught.

If North Korea continues to augment its capabilities, then what? What military, political, and economic steps should be taken, and by whom? The more likely the prospect of Pyongyang as a modest nuclear power, the more urgent serious thinking about a transformed Northeast Asia.

Second, Japan and the ROK should set aside past differences to confront a common threat. The colonial era ended 71 years ago. These two prosperous democratic countries should prepare for problems of the future rather than reinvigorate hatreds of the past.

Third, U.S. and its allies should further engage Beijing over Pyongyang. The PRC has the most leverage with the North because of the former’s energy and food assistance, but is hesitant to risk encouraging regime collapse. Thus, as I point out in National Interest: “the allies need to offer to share costs, acknowledge Chinese interests, and convince Beijing that they would not take geopolitical advantage of the demise of the PRC’s one East Asian ally.”

Fourth, Washington should offer to defuse the perceived threat environment facing the North, backed by an offer to negotiate on issues other than nuclear weapons. This doesn’t mean blaming America or trusting Pyongyang. Rather, it means recognizing that the current regime has reason to fear the U.S. To the extent that Kim desires a wealthier nation, he might be willing to limit his arms programs if less concerned about his dynasty’s future. Maybe not, but Washington should test the possibility.

Fifth, the allies should consider the advisability of Japan and South Korea developing countervailing nuclear arsenals. America’s nuclear umbrella keeps the U.S. dangerously entangled in a potential conflict no longer critical to American security.

We are approaching a time when Northeast Asia will have three nuclear powers, all potentially bad actors: China, Russia, and the North. Washington can forever remain in the middle of this unstable nuclear scrum. Or America’s democratic allies can deter aggression on their own. The idea certainly is worth discussing, especially within hearing of Chinese officials.

It’s still okay to hope for collapse, implosion, or some other deus ex machina to “solve” the problem of the North. But it is foolish to expect a miraculous rescue. The U.S. and its friends should start planning seriously for a nuclear DPRK.

A half century of military dictatorship has officially ended in Burma, or Myanmar. Yet taking the final steps toward democracy may be as difficult as making the transition so far.

It long seemed like this day would never come. But six years ago the military regime transformed itself into a nominally civilian administration. Suu Kyi, now a Nobel laureate, was released from house arrest. Free elections were held last November, in which the NLD won an overwhelming victory.

The new government has taken over. Suu Kyi was barred from the presidency by a constitutional provision drafted specifically against her. However, she chose classmate U Htin Kyaw as president, having previously explained that she would be “above the president.”

To formalize her authority the party’s first legislative act was to create the position of “state adviser,” which, explained MP Khin Maung Myint, would be “the president’s boss” who “can control the president and all the Cabinet members.” This step was necessary because the military refused to remove the clause disabling Suu Kyi.

Guaranteed one-quarter of the parliamentary seats by the constitution it drafted, the Tatmadaw, as the military is known, is able to block any amendment. The armed forces also retain control of the defense, home affairs, and border affairs ministries.

Despite the NLD’s overwhelming electoral triumph and Suu Kyi’s expansive moral authority, governing will remain a cooperative process. Myanmar’s future requires Suu Kyi and the NLD to push steadily for moderate reform while winning the military’s confidence if not trust.

The challenges facing the new government are enormous. Despite enormous potential, Burma remains a desperately poor land. However, reforms have barely begun. The latest Economic Freedom of the World index placed Burma at a dismal 146 of 157 nations.

The state remains authoritarian. Last year Human Rights Watch reported that “the reform process has stalled.” Freedom House rated Burma as “Not Free” and moving backwards. The new government must liberalize free speech and assembly, media freedom, online activism, judicial process, and criminal procedure.

Myanmar remains a land aflame. Although most ethnic groups have signed ceasefires with the government, conflict continues with some. Particularly contentious is the status of the stateless Rohingya in Rakhine State, who have been targeted by Buddhist nationalists.

Complicating all these tasks are the people’s high expectations. President Htin Kyaw called for patience, but that may end up in short supply. The Burmese people voted more for The Lady, as Suu Kyi is known, than the NLD or a particular political program. It isn’t likely to take long for disappointment to arrive amid practical politics, including difficult economic, ethnic, labor, and religious disputes.

Despite all this, however, what is happening in Naypyidaw is extraordinary. As I pointed out in Forbes: “civilians have taken over most of the positions of authority in Burma. The people of Myanmar do not yet rule themselves. But they are closer to doing so than at any previous point in more than a half century.”

The U.S. and other nations should encourage the democracy process. Some U.S. economic sanctions remain. As a result, American firms are having trouble finding capable local partners and at a disadvantage compared to firms from Europe. Indeed, Suu Kyi declared last November that “With a genuinely democratic government in power, I do not see why they would need to keep sanctions on.”

While much more remains necessary to create a liberal and free society, Washington should further relax sanctions to reward progress so far. If the military continues to cooperate in Myanmar’s transformation the rest of the restrictions should be lifted in the coming months.

Burma once vied for the title of worst governed nation on earth. Today Myanmar is not yet fully democratic, but it no longer is a dictatorship. The Burmese people deserve America’s support as they seek to complete their journey to a liberal and free society.

This weekend Venezuelan President Nicolás Maduro announced a 30 percent increase in the minimum wage. This marks the twelfth increase since he took over from Hugo Chavez in 2013, and comes on the heels of a 25 percent increase March 1. The minimum wage is now up to roughly $13.50 at the black market inflation rate. That’s not an hourly minimum, but $13.50 per month.

Due to disastrous economic policies and the recent fall in the price of oil, Venezuela’s economy, already teetering on the brink of a crisis, has plunged into full-fledged collapse in recent weeks. Venezuelans face dire shortages in everything from food to soap to toilet paper.  Rampant inflation makes it hard to find the basic necessities they need to survive even when they spend hours in lines hoping to buy them.

Venezuela, once one of the richer countries in the Americas due to its oil, has had the ignominy of topping the Misery Index, a project from Cato’s Steve Hanke which scores countries on unemployment, inflation, lending rate and change in real GDP per capita.

There does not seem to be an end in sight to these troubles. The International Monetary Fund (IMF) forecasts an economic contraction of eight percent this year after the economy shrank 10 percent last year. Inflation shows no signs of abating either, as the IMF expects it to surge even further to 720 percent this year.

Instead of pursuing economic liberalization or structural reform, Maduro is doubling down on the same kinds of government interventions and price controls that led to the country’s current predicament.

Without appearing to recognize the irony of his statement, Venezuelan President Maduro lauded the minimum wage increase in an address on state television, saying “Only a president like Nicolas Maduro, son of Hugo Chavez (could achieve this).”

Aggrieved Venezuelans might agree, though not in the way Maduro would hope. The Washington Post reported that yesterday the opposition turned in a petition with 1.8 million signatures seeking a nationwide referendum to remove him from office, in what would be a final repudiation of the economic policies of his administration. 

“Helicopter money” started out as, and long remained, nothing more than a heuristic device — and a brazenly counterfactual one at that — employed by monetary economists as a means for gaining a better theoretical understanding of the consequences of changes in the stock of money.  “Suppose,” the analysis went, that instead of increasing the monetary base by buying bonds in the open market, central banks dropped new supplies of currency from helicopters, thereby instantly increasing everyone’s money balances.  What would that do to spending and, eventually, to prices?

Lately, however, helicopter money has made its way from the inner recesses of economics textbooks to the financial pages of major newspapers and magazines, where a debate has been joined concerning its merits, not as an abstract analytical tool, but as an actual policy tool for relieving Japan, and perhaps some other economies, of their deflationary woes.  Look, for some examples, here, here, and here.  And see as well this recent blog post by our dear friend Jerry Jordan, written for the Atlas Foundation’s Sound Money Project.

Yet for all the controversy surrounding the suggestion that Japan should actually try dropping money from helicopters (or something close to that), my own response to it consisted, not of either surprise or dismay, but of a strong sense of déja vu.  For I myself wrote an op-ed proposing helicopter money for Japan in the spring of 1997, that is, almost exactly 19 years ago.  I never tried to publish it, in part because I myself couldn’t quite decide just how firmly my tongue was poking my cheek as I wrote it, and because I had then as I do still an abiding dislike of  “clevernomics,” which is the sort of stuff economists write to show just how clever they they can be, rather than because they are seriously trying to help the world along.  Worried that I was myself lapsing into that sort of thing, I stuffed the essay into a file cabinet, where it has been buried ever since.

All the recent writing on the subject has, however, emboldened me to resurrect my dusty old essay and to publish it hereunder its original title.  I don’t pretend that it adds anything to what recent commentators have had to say on the topic.  Consider it a bagatelle, if you like: you’ll get no argument from me.


They said it was like “pushing on a string.”  It was the middle of the 1930s, and the U.S. and much of the rest of the world were in the midst of an unparalleled deflationary crisis.  Normally the way out of such a crisis would have been for central banks, including the Federal Reserve, to inject more reserves into their banking systems by buying securities in the open market and paying for them with central bank credits.  That policy would do provided banks put the new reserves to work by lending them out, thereby stimulating an increase in demand for investment or consumer goods.  But in the U.S. interest rates on loans and securities had fallen so low, the Fed claimed, that adding to bank reserves no longer helped: the new reserves “pushed” into commercial banks would simply pile-up there, instead of causing the banks to extend more private credit.  Hence, “pushing on a string.”  Economists, following John Maynard Keynes, referred to the conundrum in question as a “liquidity trap.”

Whether the U.S. economy was really stuck in a liquidity trap during the Great Depression remains controversial.  For several decades afterwards, however, the issue was moot, as inflation replaced deflation throughout the world’s economies.  Only recently it has again taken on practical significance, with economists and Japanese monetary authorities pointing to Japan today as another instance of an economy faced with an insatiable demand for liquidity.  Japanese consumer and producer spending has been shrinking for months, causing wholesale prices to decline and inventories to accumulate.  The overnight call loan rate has hit zero, and short-term lending rates are at historically low levels.  Although the Bank of Japan has been pumping reserves into the banking system, bank lending remains sluggish.  The banks have more reserves than ever, but seem to lack any incentive for putting them to use.

Japan’s dilemma has at least one Federal Reserve official worried that the same thing might happen again (or, as some would have it, for the first time) in the United States.  Marvin Goodfriend, a Vice-President of the Richmond Fed, proposes in a recent paper that, in the event that we should fall into a liquidity trap, Congress should grant the Fed authority to tax bank reserves, causing them, in effect, to earn a negative return.  Since even a zero interest rate on loans beats a negative return on reserves, the banks would have reason to lend even at zero rates.  For good measure, Goodfriend recommends that public currency holdings be taxed as well, so as to discourage hoarding by the public.

Goodfriend’s proposed taxes are meant to be emergency measures only, which would be removed in good times.  Still, one shudders to think what might happen should the government decide to take advantage of the new measures’ capacity for enhancing its share of the profits from the Fed’s money monopoly.

Fortunately, central banks don’t need new taxing powers to free their economies from liquidity traps.  All they need to do is to supply new money directly to the public, instead of trying to get it to them indirectly by first adding it to bank reserves.  Individual citizens, unlike commercial banks and other financial firms, do not have to decide either to hoard money or to lend it at some trivial rate of interest.  They have a third, more tempting, option, namely, that of spending unwanted money balances directly on goods and services.  Central banks, on the other hand, don’t have to issue new money in exchange for securities or collateral owned by private financial firms: they can simply give it away to citizens, avoiding the middlemen.

In Japan today, the strategy could work as follows: the Bank of Japan could announce its intention of giving away, say Y5000 (roughly $50 U.S.) to every Japanese citizen each month until private spending picks up, bringing Japan’s deflationary crisis to an end.  The giveaway could be engineered in a manner similar to that employed during the 1990 German monetary unification, when the Bundesbank supplied East German citizens with limited quantities of Deutsche marks in exchange for Ostmarks.  The policy would assure Japan’s citizen’s that, one way or another, their money earnings were about to permanently increase, giving them ample reason to consume more.  Given Japan’s population, the promised rate of new money creation would increase Japan’s monetary base by around ten percent after a year — a substantial rate, but not large compared to recent annual figures.  Moreover, the mere announcement of the policy might suffice to revive spending quickly, allowing the policy to expire in relatively short order.

Critics of the monetary giveaway proposed here might fear that it would ultimately trigger inflation.  The same sort of thinking led the Federal Reserve, in the mid 1930s, to actually raise bank reserve requirements out of fear that banks might change their minds any minute and begin lending their hoards of cash.  The Fed’s fears turned out to be exaggerated, to put it charitably: its decision actually helped to keep the U.S. depression going for several more years.  Of course, if spending had actually revived on its own, surpassing the level necessary to revive the economy, the Fed could have dealt with the “problem” easily enough, by reabsorbing excess money by means of bond sales.

Keynes had a good quip about Fed officials who worried, in 1936, about inflation: they “professed to fear that for which they dared not hope.”  Let’s hope that the Bank of Japan won’t harbor such misplaced fears, and that it doesn’t otherwise allow the liquidity-trap bogey to keep it from doing all it can to revive Japan’s economy.

[Cross-posted from]

I met with a group of House Republicans last week to talk about tax reform. Ways and Means chairman Kevin Brady is laying the groundwork for a major tax restructuring next year, and so GOP members are boning up on reform ideas. I discussed income tax reforms with the members, including the creation of Universal Savings Accounts. And, on payroll taxes, I proposed reviving the Right-to-Know National Payroll Act, a bill that passed the House back in 2000 but died in the Senate.

The federal payroll (or FICA) tax that funds Social Security and part of Medicare imposes a huge burden on workers and the self-employed. Liberals are right when they note that the 15.3 percent tax costs moderate-income people far more than the income tax does. In addition to the large burden, the problem with the payroll tax is that half of it (7.65 percent) is collected from employers and hidden from citizens because it does not appear on worker paystubs or annual IRS W-2 forms.

Economists agree that the “employer” half of the payroll tax actually falls on employees in the form of lower wages. Thus the tax reduces wages of American workers by $550 billion a year without them even knowing it. For transparency in taxation, Congress should change the administration of the payroll tax so that the full 15.3 percent is clearly visible on worker paystubs and W-2 forms.

The House passed the Right-to-Know National Payroll Act in 2000, which would have required W-2s to report the full amount of payroll tax. Even better would be to make the full payroll tax visible on weekly or biweekly worker paystubs. Full disclosure of this burden is needed more than ever given the huge expected cost growth in Social Security and Medicare.

Raising worker awareness of the full costs of these retirement programs would help open their eyes to the need for restructuring. The current chairman of Ways and Means was a co-sponsor of the 2000 bill, so this reform idea may have legs in 2017.

A broader right-to-know proposal from the Mackinac Center is here.

An overview of federal tax reform options is here.

Rising powers tend to be cocky and pushy. They believe their time has arrived and they want their just deserts—now. So it is with China.

Alas, there’s a downside, which Beijing has discovered. Rising powers don’t make many friends.

If you listen to the debate on the U.S. presidential campaign trail—not recommended for the faint-hearted!—you’d think America was a helpless Third World state, besieged by enemies deploying vast armies and armadas. The truth is, the United States dominates the globe. Among its advantages is being allied with every major industrialized state, save China and Russia, and is friendly with many other states as well.

The latter point underscores America’s extraordinary global reach. There are many reasons Washington has so much international clout. Much of this has is because U.S. policy has emphasized making friends and acquiring allies.

There are downsides to this approach. Nevertheless, overall the United States is stronger because it has a cooperative relationship with so many other countries.

In contrast, let’s look at the international response to Beijing’s so-called peaceful rise.

The People’s Republic of China is essentially friendless. Its one ally of sorts, North Korea, is a frenemy at best.

China has a solid relationship with Pakistan, though that offers only modest benefits, given the latter’s weakness and the PRC’s lack of nearby military operations requiring support. The South Korea has become disillusioned by China’s unwillingness to do more to punish the North.

Until recently, Beijing was close to Burma–too close, it seems. One reason the latter’s military stepped into the background and welcomed the relaxation of Western sanctions was to gain breathing room.

China recently moved closer to Thailand, but mostly as a result of Bangkok’s estrangement from Washington over the Thai military’s seizure of power. The PRC is far from forging a long-term, enduring relationship. Beyond Asia, China has gained clout because of its economic prowess, but “winning” in such pariah states as Sudan and Zimbabwe is a dubious accomplishment. In Zambia, perceived Chinese arrogance became a political issue.

While the PRC has made economic and political gains elsewhere in Africa, they remain limited. During the Cold War, Washington made a substantial investment in many of the same nations, with little lasting benefit.

Beijing’s most important relationship may be with Russia. But the two nations are, at most, “strategic partners” and only because the United States foolishly pushed them together. Once the West’s sanctions end, Moscow is likely to shift its gaze again.

As I pointed out on China-US Focus, “while China can count on few friends, it has accumulated numerous adversaries. Japan is arming itself. The Philippines is pushing for a closer military relationship with Washington. Even Vietnam, which fought a long war against America with the PRC’s support, is looking toward the U.S. for aid against China.”

Indonesia, the world’s most populous Muslim nation, has confronted China over illegal fishing. Malaysia’s defense minister talked of “pushback” by Southeast Asian states against the PRC. Australia has grown increasingly wary of Beijing despite strong bilateral economic ties. India’s relationship with the PRC remains strained because of a territorial conflict running back a half century.

This is an appalling record for Beijing. China’s behavior would make U.S.-style alliances difficult for any nation.

The PRC is not an attractive partner for countries which matter. Although Chinese officials complain that the United States is embarked on a policy of “containment,” Beijing is doing much to contain itself.

Given its international ambitions, the PRC needs friends if not formal military allies. But China already is discovering that money does not guarantee love.

If Beijing wants to compete with America globally, the former must follow Washington’s lead and build a network of mutually cooperative states. Until now, however, the PRC has been pushing countries away.

China’s obnoxious behavior looks likely to continue. If Beijing can’t find a way to win favor from at least some of its neighbors and other influential nations around the globe, it may remain a modest geopolitical player.

The Syrian Civil War has produced about 5.8 million Syrians seeking refuge or asylum elsewhere–a scale of population displacement unseen since World War II. Although the flow into Europe dominates the news, most of the registered Syrian refugees remain in the Middle East. Lebanon, Turkey, and Jordan are the main recipients of the immigration wave, receiving roughly 1.1 million, 2.7 million, and 640,000 Syrians, respectively. The Gulf States are hosting about 1.2 million Syrians on work visas but they are not legally considered refugees or asylum seekers because those nations are not signatories to the UNHCR commission that created the modern refugee system. Regardless, the humanitarian benefit of Syrians working and residing there is tremendous.

The movement of so many Syrians over such a short period of time should result in significant economic and fiscal effects in their destination countries. Below is a summary of recent economic research on how the Syrians have affected the economies and budgets for Lebanon, Turkey, Jordan, and Europe. 


Syrian refugees are 24 percent of Lebanon’s population–the highest Syrian refugee to population ratio in the world. However, neither the Lebanese government nor the United Nations has established official refugee camps in the country and registration of new Syrian refugees stopped in May 2015. International NGOs provide humanitarian aid that benefits over 126,000 destitute Syrians, but significant funding shortages have left some Syrians living on less than half a dollar per day. To more efficiently provide aid, the United Nations High Commissioner for Refugees has divided the country into four areas: Mount Lebanon and Beirut, North Lebanon, Bekaa Valley, and South Lebanon. Most refugees have settled in the underdeveloped areas of the Bekaa Valley and North Lebanon because the Lebanese in these areas share many family ties with Syrians. Locals in these areas are struggling to accommodate Syrian refugees despite the family ties.

Many Syrians, especially those with more wealth and greater skills, are responding to the poor economic conditions in North Lebanon and Bekaa by moving to South Lebanon and Beirut where there are more job opportunities, higher wages, cheaper rents, and safer communities. Syrian entrepreneurs are also welcomed in these regions of the country.

Lebanon’s real GDP grew 2.5 percent in 2015, the best growth rate since the turn of the decade, despite losses of investment and tourism due to the Syrian civil war. Furthermore, a World Bank report noted that a 1 percent increase in the population of Syrian refugees increases Lebanese service exports by 1.5 percent, due in part to the so-called market size effect. In the Bekaa Valley and North Lebanon, the influx of Syrians has led to 60 percent reduction in wages because low-skilled Syrian and Lebanese workers are substitutes. Lebanese entrepreneurs are not hiring many Syrian refugees and prefer to blame Syrian-operated businesses for regional economic problems and sluggish growth. The Lebanese government responded in the Bekaa region by closing down Syrian businesses, worsening the employment situation.

In response to the constant inflow of Syrians, the Lebanese government established a new visa system for students, businessmen, and those sponsored by Lebanese citizens. Missing from their visa reforms, however, is a humanitarian visa.

The refugee crisis could have a less negative or maybe even a net-positive effect on Lebanon’s economy after more policy changes. While it is undeniable that wages have fallen in certain areas of Lebanon, there are many Lebanese government policies that have exacerbated that effect.  Here are some suggested reforms:

  • Immediately grant legal work permits to all Syrian refugees. Most Syrian refugees are informal workers because the government has generally restricted legal work permits. As a result, 92 percent of them do not have a contract and black market employees are especially vulnerable to abuses and wage reductions. If the government allowed Syrians to work legally, they would become more competitive, have more of an incentive to invest in Lebanon-specific human capital, and face an improved bargaining position–all reactions that would help to increase their productivity and likely offset some of the downward pressure on wages.
  • Stop restricting Syrian entrepreneurship. Local Lebanese governments, especially in North Lebanon and Bekaa, have limited or shut down Syrian-owned businesses. Syrian entrepreneurship will help alleviate unemployment and wage stagnation problem. The Lebanese government should immediately stop punishing Syrian entrepreneurs. 


The influx of Syrian refugees into Jordan is equal to about 8 percent of that country’s population. Refugees are not evenly dispersed in Jordan with about 90 percent residing in the governates in the north of the country. Despite the significant population shock, unemployment rates are lower in these governorates than the rest of the country and they have been declining since the start of the Syrian Civil War. On the other hand, labor force participation rates in these governorates are also slightly lower. Overall, Syrian refugees have not had a significant effect on the labor markets in Jordan.

This better labor market outcome could stem from the Jordanian government deregulating the labor market in the face of the refugee surge. Since March 2016, Jordanian authorities have expanded work permit access to refugees using Jordanian Ministry of the Interior identity cards and UNHCR-issued asylum seeker cards, allowing many more Syrian refugees to work in the legal market. About 99 percent of Syrians worked in the underground economy prior to these reforms. This new policy is projected to expand work permit access to 78,000 Syrians in the short term and thousands more in the future. The Jordanian government has a long history of these types of labor laws as their constitution and guest worker laws attest.  

These new work permits are better than unlawful employment but they often come with restrictions such as employer sponsorship and minor fees that make them difficult to obtain for some workers.  Fortunately, the pace of reform is increasing so hopefully those guest-worker permit barriers are further pared down. Syrian workers who entered the country legally and were not residents of a refugee camp could apply for work permits–a big policy shift for the 83 percent of refugees who are not in camps.

The Jordanian housing market has suffered the greatest shock as rents and prices have climbed in response to the refugees. According to one projection, those rents have grown by 7.73 percent since the beginning of the Syrian crisis–an estimated 5 percentage points higher than if the refugees had not arrived. This effect is unsurprising as the housing market is more affected by immigrant inflows than any other market.  Refugees aside, the Syrian Civil War and Arab Spring have dampened Jordan’s tourist and trade markets, likely slowing export growth.

The fiscal effects of the Syrian refugee crisis are acute. The Jordanian government supplies a substantial amount of social services and welfare benefits to the Syrians. They consumed an estimated 8.8 percent of the government budget through healthcare, education, and security services. While that number is slightly higher than the Syrian percentage of the population, this estimate was also made in 2014 before the changes in work permit policies.

There are additional policy steps the Jordanian government can take to maximize the benefits from welcoming refugees while minimizing the costs:

  • Eliminate or at least reduce fees, remove employer sponsorship requirements, and repeal other restrictions on the granting of work permits to Syrians. By removing restrictions on work permits they can bring Syrians out of the informal market, lower the fiscal costs of supporting the refugees, and allows complementary task specialization to occur in the broader Jordanian labor market. 
  • Ask the United States to further reduce the trade and regulatory barriers that remain after the passage of the Free Trade Agreement. This will make up for the decline in regional economic activity and provide more employment opportunities in export-oriented industries. If possible, American relaxation of these remaining trade barriers should be accompanied by further Jordanian labor market deregulation and the granting of work permits to all Syrian refugees without fees or restrictions.


Turkey is currently hosting 2.7 million Syrian refugees, more than any country in the world. Unlike Jordan and Lebanon, however, Turkey has a much larger population base and a more robust and developed economy. While there are established refugee camps, 85 percent of the Syrian refugees in Turkey have left the camps and found work in the formal and informal markets.

Lower-skilled Syrian workers in the informal market have displaced similarly skilled Turks and increased unemployment in areas where they are concentrated by about 2 percentage points. The government’s restrictive work permit policy likely led to that negative effect. The Turkish government issued regional permits allowing refugees to work only in the refugee community,which concentrated the increase in the supply of labor rather than letting the workers fan out into the Turkish economy. Refugees not employed in the community either had to seek informal employment or rely on state aid. As a result, the government had to spend an additional $5 billion for the refugees.

Since January 2016, Turkey has taken steps to allow Syrians to work legally. Syrian workers are now allowed to comprise a maximum of 10 percent of the employees in any firm and are subject to minimum wage requirements. While the full effects of this new policy have yet to be measured, some Turkish politicians have recognized the economic benefits of Syrian entrepreneurship and a growing labor market. Legalizing Syrian workers will likely ensure the further decline of the informal market, which has shrunk almost 7 percentage points between 2011 and 2014.

Overall, the Syrian refugees have had a modestly positive impact on Turkey’s economy. Turks have responded to the population shock through occupational upgrading, as the expanded consumer base has created new opportunities for higher wage formal jobs

Turks have also responded to increased labor market competition by seeking skill upgrades to make themselves complementary to the new Syrian workers. The percentage of Turks in higher education increased from 20 percent to 23 percent from 2011 to 2014.  School attendance has increased for Turkish women as well,  though those effects may have occurred as a result of other changes in government policy. Turks who directly compete with low-skilled Syrians and don’t change occupation do face some job displacement and wage declines, but the average wage increases as they shift to higher wage jobs. Furthermore, as more Syrians participate in the market, consumer prices have dropped an average of 2.5 percent since 2011 because of increased competition at the lower end of the labor market has made goods more affordable for every Turkish consumer.

Turkey has handled the Syrian refugee surge better than any other neighboring country. Endogenous factors such Turkey’s larger population and more developed economy deserve enormous credit, but Turkey’s recent labor market liberalizations also helped. Turkish occupational upgrading, made possible by a larger labor market, is the best possible result. There are some policy changes the Turkish government can make to further increase the benefits and diminish the costs of the Syrian refugee crisis:

  • Increase or remove entirely the 10 percent cap on Syrian employment in firms. The Turkish government could phase-out this cap with increases announced months in advance to allow Turks to adjust or shift occupations in response. 
  • Eliminate the minimum wages for the refugees and normalize wage regulations for all workers, hopefully with fewer restrictions. This will further diminish the size of the informal labor market and draw more lower-skilled Syrians into jobs. 
  • Turkey should ask the European Union and the United States to further remove trade barriers on Turkish exports. In exchange, Turkey should take further steps to integrate Syrians into their economy, provide universal work permits, and eliminate the two-tiered labor market regulation system. This will make Turkey a more attractive place for Syrian refugees to stay. The first step in this should be the United States dropping its dumping complaints against Turkish steel firms. A growing export sector in the Turkish economy could help absorb many Syrians.    


There have been 972,012 Syrian asylum applications in Europe between April 2011 to February 2016. Sixty-one percent of them are hosted by Serbia, Kosovo, and Germany, while 27 percent are hosted by Sweden, Hungary, Austria, the Netherlands, and Denmark. 

European governments have responded to this influx by increasing fiscal expenditures to accommodate the refugees and provide humanitarian assistance. Increased social expenditures are likely to continue even if optimistic estimates find that 10-15 years are necessary before refugees begin to be fiscally positive. For 2015-2016, the European Commission allocated additional funding of 9.2 billion euros in order to address the refugee crisis. The scale of the funding could be decreased and the time until fiscal balance could be diminished drastically through better labor market integration.

Optimistic projections of refugee integration assume they will have a labor force participation rate 5 percent lower than similarly skilled natives. The refugee unemployment rate is currently 30 percent and well above 50 percent for asylum seekers in Germany, Britain, and France. Unemployment for these groups is even higher in non-EU European countries.

Long-term gaps in immigrant versus native employment vary considerably across European countries (Chart 1). The positive figures in Chart 1 show a gap where immigrant unemployment is greater than native unemployment. The negative figures show when immigrant unemployment is less than it is for natives. There is an especially wide gap in the refugee destinations of Sweden, the Netherlands, Denmark, and Germany.

Chart 1

Long-Term Unemployment Rate Gap between Natives and Immigrants, Aged 15-64 in 2012-2013


Source: OECD

These negative results stem from significant and costly European labor market regulations that prevent non-EU immigrants from economically integrating. The fear of immigrant labor market competition is misplaced as most of them are complementary to European workers, not substitutable. These labor market regulations are even more onerous for Syrians. Labor market policies directly at refugees and asylum seekers are:

  • Work bans. There are significant prohibitions on employment after a refugee or asylum seeker enters a country (Chart 2). These bans make the Syrians completely dependent on charity and government aid while delaying their labor market integration. 
  • Shortage occupation lists. These lists allow immigrants to be hired to fill the gaps in industries that are supposedly suffering labor shortages. These prevent immigrants from working in many sectors of the economy. Shortage occupation lists in Germany, for example, delay employment even for high-skilled refugees such as university graduates and apprenticeship diploma holders.
  • Priority checks. These regulations ensure that businesses guarantee there are no suitable unemployed natives before hiring refugees. The German priority check system places the priority check bar on refugees for 15 months. During this time, if the refugee is interested in a job, the business must ensure not only that no German is qualified to fill this role, but also that no EU citizens of associated countries are qualified and available as well. By placing refugees at the end of the labor line, European nations effectively deny refugees employment options.
  • Self-employment bans. These prevent refugees from creating businesses or otherwise employing themselves. In the United Kingdom, France, and Germany, for instance, asylum seekers and refugees are not allowed to start businesses in any case. This is simultaneously harmful to both sides of the labor market, as refugee entrepreneurs would expand European labor demand and help to accommodate fellow refugees as well as European workers.
  • Temporary employment bans. These prevent refugees from taking temporary employment. In place in the United Kingdom and Germany, temporary employment bans further limit options for refugees to find work.

Chart 2

Waiting Periods for Asylum Seeker Access to Labor Markets, in Months


Source: OECD….

Egregious labor policies in the European Union are the roadblock to refugee integration. As such, there are many reforms European nations should undertake to lessen this problem:

  • Remove the working bans on new refugees and asylum seekers. Incentivize them to work immediately. 
  • Remove the other labor market regulations listed above, at least for refugees and asylum seekers. 
  • Remove minimum wage requirements for the refugees and asylum seekers or give them a temporary reprieve until they gain some labor market experience. Given that a consensus of literature has found minimal effects of low-skill immigration on native wages, the minimum wage only decreases the opportunity for refugees to find work in their host country.


The Middle Eastern countries with substantial Syrian refugees have all responded with similar reforms, to different extents. Turkey and Jordan have done the most to integrate Syrians while Lebanon has done the least. Lessening government barriers to legal employment and entrepreneurship have made the situations better in those destinations. Europe is still struggling, and their sclerotic labor market regulations do not bode well for successful integration unless some serious reforms are undertaken.  

The Fourteenth Amendment guarantees that no state shall “deny to any person within its jurisdiction the equal protection of the laws.” Among lawyers, the buzzword we looking for in an equal protection case is “strict scrutiny,” because chances are that once the court has said that standard applies, the government will lose. Nevertheless, there are plenty of cases—including last term’s Obergefell decision on gay marriage—in which a government action has transgressed even less rigorous levels of scrutiny.

After all, the Constitution doesn’t guarantee the “equal protection of the laws” only to people who fit within certain categories. Instead, it guarantees that governments – federal or state – will not make arbitrary distinctions among the people subject to their laws. For instance, the Supreme Court has said that the government cannot refuse food stamps to people living in a household where not everyone is related (U.S. Dep’t of Agr. v. Moreno). Nor may the government require a special-use permit for the operation of a group home for mentally disabled people (City of Cleburne, TX v. Cleburne Living Center, Inc.). Nor may a state restrict access to its public schools to legal residents, thereby preventing illegal-immigrant children from receiving an education (Plyler v. Doe).

Now there’s a new lawsuit in federal court in California, Garcia v. Harris, that challenges the way that state has structured its Gun-Free School Zones Act. Until last year, state law contained an exemption for people who had obtained a California license to carry a concealed weapon (“CCW”). Due to pressure from the anti-gun lobby, however, the state legislature removed that exemption, nevertheless leaving in place the exemption for “an honorably retired peace officer authorized to carry a concealed or loaded firearm.”

However much the anti-gun lobby wants to tout this as a commonsense exemption, or a bone to throw to the law-enforcement community, it leads to ridiculous outcomes. As an initial matter, retired police who ever carried a firearm during their service are eligible to carry a firearm afterward as a matter of course. They are exempt from the Act even though they haven’t gone through anything near the rigors of the CCW application process, which requires showing “good moral character,” completing a firearms training course, and establishing “good cause.” (We’ll set aside for now the issue of why someone needs to show “good cause” to be able to exercise a constitutional right; the Supreme Court has repeatedly declined to take up cases that would explore the scope of the right to bear arms outside the home.)

But the exemption is even broader than that: It allows people whose work had nothing to do with firearms to carry them simply because they worked for the government. For example, the law exempts retired employees of the California Department of Fish and Game. It also exempts retired marshals who “ke[pt] order and preserve[d] peace at the California Exposition and State Fair.”

And perhaps most absurdly, the law exempts retirees from “any federal law enforcement agency.” So while the law does not give an exemption to a Marine Corps vet who served in Afghanistan and is an expert marksman, it would exempt an IRS retiree who spent his career at a desk computing tax penalties far away from the field of combat.

These inane rules giving preferential treatment to former government employees cannot withstand even the so-called “rational basis test” under the Equal Protection Clause. As the Court said in Cleburne, equal protection “is essentially a direction that all persons similarly situated should be treated alike.”

There is simply no reason that an emergency room doctor who received threats against his family cannot carry a firearm when he drops his children off at school but a retired tax collector can. Working for the government already carries enough benefits: Special treatment under gun-control laws should not, and under the Equal Protection Clause cannot, be one of them.