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Over at TimeCato adjunct scholar Shirley Svorny offers a proposal that GOP and Democratic presidential hopefuls would be wise to endorse:

Ted Cruz won Iowa’s Republican presidential caucus promising to repeal every word of Obamacare. When pressed for details, he said he would separate insurance from employment, expand the use of health savings accounts, and allow people to purchase insurance across state lines. These are good ideas, ones we’ve heard before. There are, however, a number of other policy initiatives worthy of attention, whether the Affordable Care Act is repealed or not. There’s one simple thing Congress could do that would expand access to high-quality care, especially for patients in rural areas, without costing taxpayers a dime.

Telemedicine providers [use] telecommunication to provide health care over distances [and] have made great strides in improving access to care for rural communities. Telemedicine allows quick access to specialists, as with stroke victims where time is of the essence. Video interactions are expected to replace a sizable chunk of face-to-face office visits.

But the current system of state licensing stands in the way of interstate practice. Physicians must maintain licenses in each state in which they treat patients. Congressional action to define the location of telemedicine services as the location of the physician would allow physicians to practice with a single license in multiple states. It would allow telemedicine to achieve its full potential.

Read the whole thing. Svorny explains this proposal at greater length in a forthcoming Cato policy analysis.

The Obama administration has released the numbers from the 2016 open enrollment period for Obamacare’s health insurance exchanges. The Congressional Budget Office had already downgraded its enrollment projection for 2016 from 21 million to 13 million. The news is actually just slightly worse: only 12.7 million enrollments, a number that is likely to shrink over the course of the year. Naturally, the administration declared success because enrollments exceeded the 10 million it had predicted back in October (thereby confirming speculation it had deliberately low-balled that prediction so it could later declare victory in spite of what it knew would be terrible enrollment numbers). Yet most observers overlooked what may be the worst news of all: evidence suggesting significant adverse selection in the Exchanges.

The administration reported that 70% of those who re-enrolled for 2016 shopped for a better plan, while 43% switched plans. The administration spun this as a positive, as evidence that Obamacare is expanding choice.

In reality, those numbers mean the vast majority of enrollees were dissatisfied enough with their Obamacare coverage to look for a better option , and a near-majority were so dissatisfied with their premiums or their coverage that they switched to what they hope will be a better plan. Most importantly, such widespread plan-switching is strong evidence of the type of adverse selection that is already eroding Obamacare’s promise to the sick , and could cause the exchanges to collapse.

As architect Jonathan Gruber helpfully explained, Obamacare imposes hidden taxes on the healthy in the form of higher premiums in order to provide hidden subsidies to the sick in the form of lower premiums. Widespread plan-switching is an indication that sick enrollees are trying to maximize their subsidies, while healthy enrollees are trying to minimize their implicit tax. In pursuit of lower premiums, healthy people will gravitate toward plans that save money by using narrow networks and high-cost sharing for drugs. Sick enrollees will gravitate toward the plans that provide the most comprehensive coverage for the drugs, doctors, and hospitals they use. That’s adverse selection.

By encouraging adverse selection, Obamacare literally punishes insurers who offer the most comprehensive coverage. Those plans end up with lots of sick people, and not enough healthy enrollees to offset their claims costs. Obamacare’s architects – who knew they were creating this problem – included additional subsidies for insurers who attracted a disproportionate number of sick enrollees. They figured that if the government threw enough money at those insurers, they would not respond to the incentives Obamacare creates for them to avoid the sick by skimping on coverage. Yet those subsidy programs don’t seem to be working very well, and either way two of them expire after this year.

We can already see evidence of how such adverse selection is driving carriers out of the market and driving a race to the bottom. UnitedHealthcare has already signaled it will be leaving the Exchanges, and other carriers are also looking to the exits. A study published in the New England Journal of Medicine found evidence that Obamacare plans are offering increasingly lousy coverage to people with high-cost illnesses.

It remains to be seen whether more insurers will abandon the exchanges, or whether the exchanges will collapse entirely. But even if it limps along, yesterday’s enrollment figures show why Obamacare coverage will get worse over time.

Here is a recent Bernie Sanders tweet

We need trade policies that work for the working families of our nation and not just the CEOs of large, multi-national corporations.

I agree. And that is why Bernie Sanders and other progressives should support free trade: Current U.S. tariff and trade policy is bad for poor working families.  Economist Ed Gresser has explained that import tariffs are the most regressive of our taxes: 

… Tariffs are highest on the goods important to the poor. The trade agreements and bills of the past 25 years have sharply cut tariffs on luxury products and industrial inputs. But domestic industrial lobbies have fought hard and usually successfully to keep tariffs on cheap consumer goods high. The result of these bills is that as a percentage of total revenue, tariffs are now lower than at any time since at least the 1950s and perhaps ever; but on a few products, most of all shoes and clothes, the tariff system has changed little since the 1960s.

Therefore, shoes and clothes make up only one-fifteenth of America’s merchandise imports, but bring in almost half of America’s annual tariff revenue. In comparison to other major expenses—education, transport, entertainment, and so on—these goods are relatively small expenses for middle-class and wealthy families, but very large expenses for poor families with children.

This is why tariffs now hit maids and secretaries harder than company vice presidents—the more the tariff system raises money from shoes and clothes, therefore, the more it becomes some thing like a large excise tax on necessities especially important to the poor. Its regressive nature is especially striking in comparison to other federal taxes. …

Getting rid of these regressive taxes should be a priority for anyone truly interested in helping the poor.

The writer Lionel Shriver, best known for her novel We Need to Talk about Kevin, cites The Libertarian Mind in a New York Times column today, about the difficulty of being a “disenfranchised…socially progressive economic conservative.” Shriver writes:

Yet whether it’s “leftist” or “rightist,” my catechism is consistent. The rubric to which those positions hew — we should be free to do whatever doesn’t impinge on the rights of others — forms the conceptual backbone of the United States. The Constitution is libertarian. To the extent that the unamended Constitution was flawed, it was more rigorous application of libertarian principles that would have abolish slavery and granted women’s suffrage. Libertarians were way ahead of the pack on decriminalizing homosexuality.

We can at least thank Rand Paul for nominally refurbishing libertarianism so that it is halfway respectable. But the real mystery is why American libertarianism was ever marginalized (and why they marginalized themselves). David Boaz encapsulates the essential idea in last year’s “The Libertarian Mind”: “You learn the essence of libertarianism in kindergarten: Don’t hit other people, don’t take their stuff, and keep your promises.”

Shriver goes on to endorse seatbelt and helmet laws, a higher minimum wage, gun control, and socialized medicine, a useful reminder to us more ideological sorts that even intelligent, well-informed voters don’t always fit into neat categories. But she does complain about being “repeatedly forced to vote Democratic because the Republican social agenda is retrograde, if not lunatic — at the cost of unwillingly endorsing cumbersome high-tax solutions to this country’s problems.” And she says:

Voters like me — who believe that environmental quality, health and safety, and security needn’t be purchased at the cost of our liberty, and who defend the right to make our own mistakes as a crucial aspect of being human — deserve political representation.

Exactly. And that’s a point we’ve been making here at the Cato Institute since our 1981 paper on liberal, conservative, libertarian, and populist perspectives right up through our recent work on “the libertarian vote.” It’s gratifying to see this additional confirmation that there are many voters out there who are “socially progressive economic conservatives,” or “fiscally conservative and socially liberal,” or indeed broadly libertarian.

Think the end of the No Child Left Behind Act means the end of federal micromanagement? You may have to think again.

As I’ve laid out before, the Every Student Succeeds Act (ESSA) has several ambiguities that seem to keep the door open for continued federal control over state standards, tests, and accountability mechanisms, even as the law has some provisions that seem to prohibit federal intervention. What, for instance, constitutes “challenging” state standards, and who determines that? Or who decides what the right mix of academic and non-academic factors is in school accountability schemes? It certainly seems that because this is federal law, and it includes required federal approval of state plans, there will be federal control.

A report on comments from numerous interest and advocacy groups as the U.S. Department of Education prepares to write ESSA regulations – frankly, where law is really made – only bolsters the fear of continued federal domination. While some groups are certainly calling for a light federal touch, others clearly want continued force. As the Connecticut Coalition for Achievement Now – hardly just a player in the Nutmeg State – wrote:

As you establish rules and regulations around the ESSA, we urge you to maintain challenging and high standards for all students, ensure high-quality, valid and reliable annual statewide assessments, and implement comprehensive and robust school and district accountability and performance systems that help identify and improve our highest need schools and districts.

Sound like a light federal touch? Not to me, either.

Thankfully, rules and regs haven’t been written yet, and there is still time to address what appear to be very real threats of continued federal control both specifically in the law, and ultimately in regulation. And address them we shall on February 16, when Cato will host a debate between experts who see the ESSA as returning power to states and districts, and those who see that as a very uncertain proposition. Or maybe you think the law goes too far removing influence from DC. Well we’ll tackle that, too, especially if you join us – either in-person or online, and using #FedsLeaveEd on Twitter – and ask our panel about it.

Does the ESSA really relinquish federal power? That remains an open question, and lots of people – including at Cato – will be debating what the answer should be.

Sartre famously wrote, “L’enfer, c’est les autres” (“Hell is other people”).  In his recent speech, Fed Vice Chairman Stanley Fischer, assisted, as he says, by William English of the Board’s staff, supplies an example of hell being the “other policy.”

The last substantive paragraph of Fischer’s speech includes the following summary of current FOMC policy:

The Committee has indicated that the Federal Reserve will, in the longer run, hold no more securities than necessary to implement monetary policy efficiently and effectively.  But that statement leaves open the question of when we should begin to reduce the size of our balance sheet.  Because the tools I mentioned earlier — the payment of interest on reserve balances and the overnight reverse repurchase facility — can be used to raise the federal funds rate independent of the size of the balance sheet, we have the flexibility to adjust the size of our balance sheet at the appropriate time.  With the federal funds rate still quite low and expected to rise only gradually, I think there is some benefit to maintaining a larger balance sheet for a time.  Doing so should help support accommodative financial conditions and so reduce the downside risks to the economic outlook in the event of a future adverse shock to the economy.  Consistent with this view, the Committee has decided to continue to reinvest principal payments from its securities portfolio until normalization of the federal funds rate is well under way.  The decision about when to cease or begin phasing out reinvestment will depend on how economic and financial conditions and the economic outlook evolve.

From this statement one gathers a number of facts.

First, the Fed remains determined to stay on an interest rate-raising path, as circumstances allow.  The question here is, just what are the circumstances presently pointing to the desirability of further raising interest rates?

Second, the Fed plans to maintain its bloated Fed balance sheet, including reinvesting maturing asset balances, for the indefinite future, instead of looking hard for a chance to reduce it, as it has long promised to do.

Third, we’re still going to pay increased interest rates on excess reserve balances (a subsidy) and maintain the raised rate on the already subsidized reverse repo transactions (principally for nonbanks).  One wonders what would happen in the market to those rates if the Fed allowed the balance sheet to shrink, even short of outright asset sales, by simply allowing maturing assets to roll off and stopping the implicit subsidy of reverse repos.  Has anyone on the Board’s or FRBNY’s staff done such a study?  If not, isn’t the absence of such a study a hallmark of willful indifference to “data-driven policy”?  If such a study exists, shouldn’t the transparent Fed release it so that we might see it?

Finally (a case of omission), Fischer’s speech says not a word, either in his summary or in the rest of his speech, about negative rates.  If the Fed (which created a generation’s worth of new reserves in recent years) stopped intervening in the Federal funds market, one wonders where market rates would go.  I think they would go negative, at least briefly, before eventually recovering with normal economic activity.

A negative rates environment might be a powerful incentive to bankers, encouraged if need be by bank examiners and discount window officers, finally to restructure legacy (that is, pre-2009) debt at the household and firm level (the one very big thing that was done in the 1930s that was not done after 2008).  The payoffs for such restructuring would be resumption of natural economic growth as debt burdens are eased, with positive (but significantly lower than present) interest rates on the restructured debt.  In my tax practice, I still encounter too many households paying 8 or 9 percent interest on legacy mortgage, car loan, and student loan debt.  It won’t do to say that credit scoring requires such outrageous spreads; credit scoring is rotten to the core, and bankers know it (or should know it).  The scores are low because the debt is not restructured.  Also, the insurance industry now sets rates using credit scoring; no one at the Fed appears to be concerned about this expansion of the use of credit scoring.  This bankers’ and insurers’ sword is not what was intended when credit scoring was invented as a shield for use in the banking industry in judging patterns of racial discrimination in mortgage lending in the 1980s and 1990s.  Congress and the Fed gave bankers a shield and they turned it into a sword.

In short, it looks as though the Fed is persuaded that economic growth will resume and increase once the prices of oil and other commodities stop falling.  If there is a historical or an econometric policy model supporting the Fed’s current policy mix, I’d like to know what it is.  The data so far, and the Japanese experience since the 1990s, seem to suggest that maintenance of Fed-managed low interest rates to stimulate economic growth against a backdrop of elevated excess reserve levels tends, if anything, to depress economic activity.  (Japan finally took its official rates into negative territory last week, by the way.)  What Vice Chairman Fischer describes is but a procrustean attempt to make the Fed’s model fit the data.  One wonders what economy, shorn of its limbs, will emerge from the other side of the Fed’s latest, indefinite policy commitment.

I’m not suggesting that negative rates are a cure for all that ails us.  The Swiss experience indicates that negative rates merely stop the bleeding (in this case, adverse domestic economic effects of high foreign exchange value of the dollar), giving the patient a respite during which natural healing forces might take over.  In any case, Fed tolerance of temporarily negative rates cannot possibly have worse cumulative economic effects than the bloated balance sheet policy that actually has been followed, with no exit in sight.

[Cross-posted from Alt-M.org]

Great news from the Peach State, where a superior court judge dismissed a constitutional challenge to Georgia’s scholarship tax credit (STC) law. The Institute for Justice intervened to defend the law on behalf of five tax-credit scholarship recipients. Currently, more than 13,000 Georgia students receive tax-credit scholarships to attend the schools of their choice.

School choice opponents alleged that the STC violated the state constitution’s historically anti-Catholic Blaine Amendment, which prohibits the state from publicly funding religious schools, among other provisions. However, citing precedent from the U.S. Supreme Court and several state supreme courts, Judge Kimberly M. Esmond Adams held that tax-credit eligible donations constitute private funds, not public expenditures:

Courts that have already considered whether a tax credit is an expenditure of public revenue have answered this question in the negative. Of particular importance is Arizona Christian Sch. Tuition Org. v. Winn, 131 S. Ct. 1436 (2011), where the United States Supreme Court found that taxpayers lacked standing to challenge a scholarship tax credit program under the Establishment Clause of the United States Constitution that was almost identical to the Program at issue here. Like Georgia’s Program, the Arizona program provided that taxpayers could receive a credit for donations made to independent scholarship organizations which then provided scholarships for students to attend private schools. […] Plaintiffs have not presented any arguments for why this Court should not follow this persuasive authority.

The fact that tax-credit eligible donations are private funds is the primary reason that STC laws have a perfect track record in the state courts thus far. It’s also why tax credits are the most liberty-friendly means of financing educational choice, as the late, great Andrew J. Coulson never tired of reminding us. In response to the U.S. Supreme Court’s similar ruling five years ago, Andrew wrote:

The rationale underlying the Court’s ruling highlights a unique advantage that tax credits have over other ways of funding education: they expand both freedom of choice for parents and freedom of conscience for taxpayers.

Plaintiffs had argued that cutting a person’s taxes is equivalent to spending government money, and so taxpayers were being compelled to support religion when credits were used for donations to religious [scholarship organizations]. The Court said, “that is incorrect.”

Unlike the funding of public schools, which is compulsory for all taxpayers, participation in [a] tax credit program is voluntary. If an individual chooses not to donate to [a scholarship organization], his taxes are collected just as they have always been, and those dollars cannot be used for any sectarian purpose. Furthermore, if a taxpayer does choose to make a donation, he is free to select the STO most consistent with his own values. […]

There are other ways of funding universal choice in education, but only tax credits (either for parent’s own education expenses or for donations to [scholarship organizations]) respect the freedom of conscience of taxpayers as well as the freedom of choice of parents. If we truly wish our schools to help build strong, harmonious communities, there is no better way than to adopt such programs at the state level on a grand scale.

The opponents of educational choice are likely to appeal the judge’s decision. Let us hope their appeal meets the same fate as all of its predecessors. 

New York is far denser than any other large American city, with an average of 27,000 people per square mile compared with 2,500 to 4,000 for most American cities. Although the city is criss-crossed by an extensive subway system, there are still some neighborhoods that are more than half a mile from a subway station.

So naturally, what those neighborhoods need is an ultra-low-capacity, high-cost form of urban transit: a streetcar. At least, that’s what Mayor Bill de Blasio thinks: last week, he proposed to spend $2.5 billion building a 16-mile streetcar line connecting Brooklyn with Queens.

This is such a dumb idea that even transit advocates oppose it. Streetsblog observes that the proposed streetcar route doesn’t easily connect with subway stations that would give riders access to Manhattan. It also argues that bus-rapid transit  (which New York calls “select bus service”) makes a lot more sense than streetcars.

TransitCenter advocate and Brooklyn resident John Orcutt argues that “the American streetcar ‘renaissance’ of the past 15 years has mainly turned out turkeys”: slow (“Reporters for The Oregonian, CharlotteFive and Atlanta magazine have all laced up sneakers and outraced their local streetcars on foot”), expensive (“L.A.’s streetcar has seen its initial cost estimate more than double”), and underperforming (“ridership on Salt Lake City’s S-Line is less than half of planning projections”).

TransitCenter head David Bragdon, who previously was president of Portland’s Metro Council, agrees. “Most streetcar projects in the U.S. provide slow, unreliable service that does not serve many people,” Bragdon noted, urging New York not to “repeat the mistakes of other places and spend $2.5 billion if the result is not useful transportation for riders.”

While Portland often claims its streetcar is a great success, it has inflated ridership numbers by at least 19 percent and gained most of the ridership it by offering free rides to most passengers for the first dozen years of operation. Even though it supposedly started collecting fares from all riders in 2012, average fare revenues in 2014 were still just 4 cent per trip, showing that no one is enforcing the fare.

TransitCenter also questions de Blasio’s claim that streetcars will generate enough new development to pay for themselves. “Much of the property adjacent to the route is undergoing large-scale development without the spur of a new transit proposal,” says a TransitCenter blog post. “Would more value be realized by supporting transit projects of proven effectiveness in other parts of the city?” In fact, as I’ve repeatedly pointed out, streetcars don’t generate any economic development unless that development gets additional subsidies. Even Portland’s city auditor agrees.

Few of the critics have commented on the high cost of de Blasio’s proposal. Portland spent just under $150 million on its 3.3-mile Eastside streetcar line, which it said somewhat proudly was the most expensive streetcar line ever built. De Blasio’s line would cost more than $150 million per mile. Labor costs in New York may be somewhat higher than in Portland, but I don’t know of any inherent reason why construction costs should be more than three times as much as elsewhere.

Nor does anyone raise the capacity issue. For safety reasons, a single streetcar line can only support about 20 cars per hour. When jammed full, with most people standing and packed together more closely than most Americans are willing to accept, a streetcar is rated to hold about 134 people, for a throughput of 2,680 people per hour in each direction. By comparison, New York City’s subways can move close to 50,000 people per hour, and buses on city streets with a dedicated lane and parking strip can easily move more than 10,000 people per hour (and nearly double that on double-decker buses), most of them comfortably seated. Plus, if a bus breaks down, others can go around it while if a streetcar breaks down most of the line must shut down as they are built with few passing tracks.

Also little noted is the conflict between bicycles and in-street rails. New York has seen a quintupling in bicycle commuting since 2000, and streetcar tracks are a major hazard to these cyclists. A survey of 1,520 Portland cyclists revealed that two-thirds “have experienced a bike crash on tracks.”

The real purpose of the streetcar is to give the owners of housing projects that are currently under construction along its proposed route a Disneyland-like ride they can use to distinguish their projects from others in the city. They won’t get it very soon, however: de Blasio’s plan calls for construction to begin no sooner than 2019 and completion in 2024. For a lot less money, the city could start a locally branded bus service in a few months that wouldn’t cause as much congestion and wouldn’t create a street hazard for cyclists.

The irony is that de Blasio campaigned for office on the claim that, unlike his predecessors, he wouldn’t cowtow to developers. Now, when the city has far higher transportation priorities elsewhere, he wants to blow $2.5 billion on a toy train that, at best, will slightly enhance the value of developments that are being built anyway and at worst add to congestion and make streets more dangerous for cyclists.

It is always refreshing to see journalists draw attention to the incredible decline in world poverty. An article that did just that appeared yesterday in the Christian Science Monitor. The piece shines a spotlight on three heartening facts in particular. 

First, poverty is decreasing. Not only have poverty rates fallen, but the total number of people in poverty has decreased. This is incredible when one considers population growth—there are more people alive today who aren’t in poverty than ever before. The Brookings Institution projects poverty will be practically eliminated by 2030. 

Second, average incomes are rising. World per capita GDP, adjusted for inflation and differences in the cost of living, has never been higher. And average income growth is not limited to developing countries: the average American has more disposable income left after basic expenses

Finally, humanity is healthier. Globally, average life expectancy is at an all-time high, largely due to plummeting infant mortality rates. More people have enough to eat and enjoy access to clean drinking water and improved sanitation facilities. The developed world has also seen health gains, with cancer death rates falling for both men and women in the OECD countries. 

The article attributes improvements in well-being to three main factors: the fall of communism, the rise of trade and globalization, and the courage of those who stood up against tyranny. 

While the CSM article gives some credit to international aid programs, it is important to recognize that aid is not a good driver of economic development. Even vocal aid-proponent Bono acknowledges that international aid and charity pale in comparison to the prosperity-creating power of people engaging in market exchange. 

When given the freedom to do so, it is truly remarkable what ordinary people can achieve. Consider the utter transformation of Singapore from poverty to riches – that is the power of economic freedom!

On Friday, a federal appellate court issued an opinion in Stamps v. Town of Framingham, holding that a SWAT team officer who points and accidentally fires a loaded semi-automatic weapon at a subdued 68-year-old grandfather is not immune from facing a lawsuit for using excessive force in violation of the Fourth Amendment.

Eurie Stamps was the stepfather of Joseph Bushfan, whom the police suspected of dealing crack. Effectuating a search warrant on Stamps’s apartment, the SWAT team raided the apartment at midnight on January 5, 2011.  Stamps—whose presence the SWAT team was aware of and who was not suspected of any wrongdoing—lay prostrate and motionless on the ground with his hands out while Officer Duncan guarded him. During the time that Duncan was guarding him, Duncan moved his finger to the trigger and accidentally fired, killing Stamps.

The real story is how this seemingly obvious outcome—that juries should be able to decide whether officers who finger the trigger of loaded guns pointed at non-threatening individuals use excessive force—even became an issue. At the district court, Officer Paul Duncan claimed that his actions aren’t subject to scrutiny because of a doctrine entitled qualified immunity. As I wrote in September:

Under the doctrine of “qualified immunity,” government officials—including police officers—are immune from suit if their actions don’t violate a “clearly established” constitutional right. The crux of Duncan’s argument is that when his weapon discharged, he became immune from suit even if pointing an assault rifle at Stamps was an unconstitutional act by itself—because there’s no clearly established right against accidental death.

The district court rightly rejected that argument, which Cato categorized as both “dangerous and bizarre” in our brief. The U.S. Court of Appeals for the First Circuit was plain in its rejection well: “The defendants’ proposed rule has the perverse effect of immunizing risky behavior only when the foreseeable harm of that behavior comes to pass.” It seems that the court agreed with Cato’s position that “foreseeable accidents don’t remove liability from the harming actor . . . immunizing an officer from liability for the foreseeable result of his intentional actions [is improper].” Indeed, the court noted the “widespread agreement” of other federal courts in rejecting exactly that sort of argument.

Thus, because Officer Duncan’s actions were not immunized, the case goes back to the jury to determine whether he is liable for his actions, and what the damages should be. (In all likelihood, Duncan will now settle the case because it’s hard to imagine that a jury won’t rule for Stamps’s family here.)

This decision comes at a time when SWAT raids across the country creates pressing issues on the proper use of government force in effectuating criminal arrests. In a militarization case with nearly identical facts, Kane v. Lewis, Cato filed a brief noting that “SWAT team deployments have increased more than 1,400% since the 1980s … .  SWAT teams and tactical units were originally created to address high-risk situations, such as terrorist attacks and hostage crises. Today, however, these extreme situations account for only a small fraction of SWAT deployments; they’re used primarily to serve low-level drug-search warrants.”

Federal courts should continue to reign in the use of militarized SWAT teams – and indeed government officials abusing their powers in all contexts – improving respect for law enforcement officers as well as protecting arrestees and innocent bystanders.

The Virginia legislature is moving forward with so-called “proffer” reform.  Proffers are local amenities such as parks, computers for schools, architectural changes and other benefits provided by housing developers to local governments in exchange for a relaxation of zoning restrictions on new housing development.  A bill to restrict these deals has passed the state’s House of Representatives and is moving through its Senate. While this prohibition on a “gray market” may appear to be good policy reform, the result will likely be less development and higher housing prices.  The reform seeks to ban all proffers that do not address “an impact that is specifically attributable to a proposed new residential development…”.

Local groups are famously resistant to housing development. This makes sense to some extent, because new development can impose external costs on existing residents in the form of traffic congestion and overutilized municipal infrastructure.  An ideal resolution of such external costs would be an explicit market for zoning change.  Such a market would allow developers to explicitly negotiate with relevant community groups and homeowners associations.  The consent of existing residents for new denser more urban development would be obtained in exchange for cash and/or home buyouts.  The payments would compensate existing residents for change.

Given that such explicit markets for zoning change do not exist, how should municipalities negotiate with housing developers? Some, such as Steve Teles from Johns Hopkins University and Jonathan Rauch from the Brookings Institution have argued that allowing a broad scope of for negotiation with less transparency can yield better political outcomes. Inability to accept community demands for ancillary benefits can prevent new developments from ever getting off the ground. Similarly, William Fischel of Dartmouth has long argued that allowing highly-specific tradeoffs for community support can make sense in many cases.

The Virginia bill would restrict local powers to negotiate highly specific development agreements without adding any mechanism that facilitates either an explicit or an alternative “gray” market to ensure that restrictions would encourage development. While it may seem sleazy to allow communities to demand computers for schools in exchange for denser development, if cash were exchanged for denser development, the cash recipients might very well use the cash for computers rather than a park or wider roads.  While the gray market is imperfect, putting more restrictions on it will make development less rather than more likely.

This blog post was coauthored with Cato research assistant Nick Zaiac.

Public oversight of government and internal managment could both improve dramatically with an authoritative, machine-readable representation of what the federal government is. Right now, there isn’t a list of all of the federal government’s agencies, bureaus, programs, and projects. That’s a big part of why the government is run so badly and so impervious to change. The government is illegible, even to many insiders.

What the President Should Do: Transparent Government

Happily, the Obama Administration recently promised to produce a machine-readable federal government organization chart. And it promised to do so in a matter of months. That’s something the administration can do to leave a lasting legacy and fulfill an important part of his promise of more transparent government, something we touted here in a 2008 policy forum, Just Give Us the Data!

The U.S. plans on filling Eastern Europe with thousands of troops along with vehicles and weapons to equip an armored combat brigade. That will require a special budget request of $3.4 billion for next year.

An unnamed administration official told the New York Times, that the step “fulfills promises we’ve made to NATO” and “also shows our commitment and resolve.” Moreover, said another anonymous aide: “This reflects a new situation, where Russia has become a more difficult actor.”

However, the basic question remains unanswered: Why is the U.S. defending Europe? The need for America to play an overwhelming role disappeared as the continent recovered and the Cold War ended.

Today NATO involves collective defense, but “their,” not “our,” defense. Although the Europeans sometimes join America in “out of area” activities, for which no alliance is necessary, they have never come to, and are unlikely to ever come to, America’s actual defense. Applying Article 5 after 9/11 was a nice act of solidarity, but European support was never necessary to strike al-Qaeda and oust the Taliban.

Nor is there any serious military threat to Europe. Russia may be “a more difficult actor,” but it is not a suicidal aggressor. Russia has gone from Soviet Union back to Russian Empire.

Vladimir Putin’s Russia cares about border security. It wants to be respected and have its interests protected. It doesn’t act precipitously, but it does act.

Moscow responded to what it perceived as Western provocations in Ukraine. That didn’t justify Russia’s support for Ukrainian separatists, but it was far different than a Hitleresque Blitzkrieg across Ukraine. Indeed, Putin wanted to weaken rather than swallow his neighbor, which would be indigestible.

Moreover, if this really is a “new situation” and “changed security environment,” why don’t the Europeans act like they believe that? The countries theoretically most at risk, the Europeans, continue to cut their military outlays and capabilities. As always, NATO stands for “North America and the Others.”

According to the alliance’s latest annual report, total NATO Europe expenditures went from $275 billion in 2010 to $253 billion last year. As percentage of GDP outlays have slipped from 1.64 to 1.43.

A majority of European countries have cut their spending. Overall, U.S. expenditures ran a bit more than 2.6 times those of Europe in 2010. The disparity had increased to almost 2.8 times in 2015.

Although NATO aspires to devote two percent of its members’ GDP to the military, NATO Europe managed just 1.43 percent overall. Only Estonia, Greece, Poland, and the United Kingdom hit the two percent level. Several of the alliance’s most important members fell below even this mediocre average.

On defense expenditures per capita the numbers are particularly striking. Last year the U.S. devoted $1865 per person to the military. NATO Europe spent $446 per person. Several European countries barely broke the $100 level.

The Eastern Europeans are theoretically at the greatest risk but do not impress with their efforts. They put little effort into their defense.

But NATO Secretary General Jens Stoltenberg proudly announced that the Europeans cut military outlays only a little last year. That’s his good news.

U.S. expenditures are down as well, but mainly because the U.S. no longer is so intensely fighting so many wars. The Obama administration is merely reducing the massive Bush build-up. And as a percentage of GDP America’s outlays are more than double those of the Europeans. Even though the U.S. faces even fewer serious military threats than does Europe.

World War II ended long ago. If the Europeans feel endangered, they should take action.

 After all, as I wrote for Forbes: “the U.S. is very busy in the world. Moreover, the U.S. government is effectively bankrupt. Washington no longer can afford to garrison the globe.”

The world is changing. So should America’s national security priorities. Europe should take over its own defense.

When I give speeches in favor of tax reform, I argue for policies such as the flat tax on the basis of both ethics and economics.

The ethical argument is about the desire for a fair system that neither punishes people for being productive nor rewards them for being politically powerful. As is etched above the entrance to the Supreme Court, the law should treat everyone equally.

The economic argument is about lowering tax rates, eliminating double taxation, and getting rid of distorting tax preferences.

Today, let’s focus on the importance of low tax rates and Cam Newton of the Carolina Panthers is going to be our poster child. But before we get to his story, let’s look at why it’s important to have a low marginal tax rate, which is the rate that applies when people earn more income.

Here’s the example I sometimes use: Imagine a taxpayer who earns $50,000 and pays $10,000 in tax.

With that information, we know the taxpayer’s average tax rate is 20 percent. But this information tells us nothing about incentives to earn more income because we don’t know the marginal tax rate that would apply if the taxpayer was more productive and earned another $5,000.

Consider these three simple scenarios with wildly different marginal tax rates.

  1. The tax system imposes a $10,000 annual charge on all taxpayers (sometimes referred to as a “head tax”). Under this system, our taxpayer turns over the first $10,000 of his or her income to the IRS, which means the average tax rate on $50,000 of income is 20 percent. But the marginal tax rate would be zero on the additional $5,000 of income. In this system, the tax system does not discourage additional economic activity.
  2. The tax system imposes a flat rate of 20 percent on every dollar of income. Under this system, our taxpayer pays that tax on every dollar of income, which means the average tax rate on $50,000 of income is 20 percent. And the marginal tax rate would also be 20 percent on the additional $5,000 of income. In this system, the tax system imposes a modest penalty on additional economic activity.
  3. The tax system has a $40,000 personal exemption and then a 100 percent tax rate on all income about that level. Under this system, our taxpayer pays $10,000 of tax on $50,000 of income, which means an average tax rate of 20 percent. But the marginal tax rate on another $5,000 of income would be 100 percent. In this system, the tax system would destroy incentives for any additional economic activity.

These examples are very simplified, of course, but they accurately show how systems with identical average tax rates can have very different marginal tax rates. And from an economic perspective, it’s the marginal tax rate that matters.

Remember, economic growth only occurs if people decide to increase the quantity and/or quality of labor and capital they provide to the economy. And those decisions obviously are influenced by marginal tax rates rather than average tax rates.

This is why President Obama’s class-warfare tax policies are so destructive. This is why America’s punitive corporate tax system is so anti-competitive, even if the average tax rate on companies is sometimes relatively low.

And this is why economists seem fixated on lowering top tax rates. It’s not that we lose any sleep about the average tax rate of successful people. We just don’t want to discourage highly productive investors, entrepreneurs, and small business owners from doing additional things that result in more growth and prosperity for the rest of us.

We’d rather have the benign tax system of Hong Kong instead of the punitive tax system of France. Now let’s look at the real-world (though very unusual) example of Cam Newton.

Writing for Forbes, a Certified Public Accountant explains why the quarterback for the Carolina Panthers lost twice at the Super Bowl.

Remember when Peyton Manning paid New Jersey nearly $47,000 in taxes two years ago on his Super Bowl earnings of $46,000? …Newton is looking at a tax bill more than twice as much, which will swallow up his entire Super Bowl paycheck, win or lose, thanks to California’s tops-in-the-nation tax rate of 13.3%.

You may be wondering why California is pillaging Cam Newton since he plays for a team from North Carolina, but there is a legitimate “nexus” for tax since the Super Bowl was played in California.

But it’s the marginal impact of the tax that matters. More specifically, the tax-addicted California politicians impose taxes on out-of-state athletes based on how many days they spend in the Golden State.

Before we get into the numbers, let’s do a quick review of the jock tax rules… States tax a player based on their calendar-year income. They apply a duty day calculation which takes the ratio of duty days within the state over total duty days for the year.

Now let’s look at the tax implication for Cam Newton.

If the Panthers win the Super Bowl, Newton will earn another $102,000 in playoff bonuses, but if they lose he will only net another $51,000. The Panthers will have about 206 total duty days during 2016, including the playoffs, preseason, regular season and organized team activities (OTAs), which Newton must attend or lose $500,000. Seven of those duty days will be in California for the Super Bowl… To determine what Newton will pay California on his Super Bowl winnings alone, …looking at the seven days Newton will spend in California this week for Super Bowl 50, he will pay the state $101,600 on $102,000 of income should the Panthers be victorious or $101,360 on $51,000 should they lose.

So what was Cam’s marginal tax rate for playing yesterday?

Losing means his effective tax rate will be a whopping 198.8%. Oh yeah, he will also pay the IRS 40.5% on his earnings.

In other words, Cam Newton will pay a Barack Obama-style flat tax. The rules are very simple. The government simply takes all your money.

Or, in this case, more than all your money. So it’s akin to a French-style flat tax.

Some of you may be thinking this analysis is unfair because California isn’t imposing a 198.8 percent tax on his Super Bowl earnings. Instead, the state is taxing his entire annual income based on the number of days he’s working in the state.

But that’s not the economically relevant issue. What matters if that he’ll be paying about $101,000 of extra tax simply because the game took place in California.

However, if the Super Bowl was in a city like Dallas and Miami, there would have been no additional tax.

The good news, at least for football fans, is that Cam Newton has a contract that prevented him from staying home and skipping the game. So he didn’t have any ability to respond to the confiscatory tax rate.

Many successful taxpayers, by contrast, do have flexibility and they are the job creators and investors who help decide whether states grow faster and stagnate. So while California has the ability to pillage Cam Newton, the state is basically following a suicidal fiscal policy because other people can choose to stay away.

Prof. Ricardo Hausmann, a native of Venezuela and professor at Harvard, concluded in a Financial Times op-ed last week that Venezuela will go down the tubes. Indeed, Hausmann wrote that “It is probably too late to avoid a Venezuelan catastrophe altogether. But to reduce its length and intensity, the country needs to adopt a sound economic plan that can garner ample international financial support. This is unlikely to happen while Mr. Maduro remains in power.”

The nub of Hausmann’s diagnosis of the infirmed patient is clear:

As bad as these numbers are, 2016 looks dramatically worse. Imports, which had already been compressed by 20 percent in 2015 to $37bn, would have to fall by over 40 percent, even if the country stopped servicing its debt. Why? If oil prices remain at January’s average levels, exports in 2016 will be less than $18bn, while servicing the debt will cost over $10bn. This leaves less than $8bn of current income to pay for imports, a fraction of the $37bn imported in 2015. Net reserves are less than $10bn and the country, trading as the riskiest in the world, has no access to financial markets.

There’s no doubt that Hausmann’s arithmetic is correct. Add to that the fact that Venezuela’s implied monthly inflation rate is 21%, according to my estimates, and its implied annual inflation rate is 442%. Not a pretty picture.

And that’s not all. As I observe the socialist destruction of Venezuela that has ensued under the reign of Hugo Chavez and now Nicolas Maduro, it is clear that Maduro has no economic strategy. Indeed, I doubt if Maduro knows what the word “strategy” means.

Venezuela is going down the tubes.

For most of Obama’s years as president, he has opposed raising the gas tax. Now, in his last, lame-duck year, he is proposing a $10 per barrel tax on oil. Since a 42-gallon barrel of oil produces about 45 gallons of gasoline, Diesel, jet fuel, and other products, this is roughly equal to a 22 cent per gallon gas tax, well above the current 18.4 cent tax.

The distinction between Obama’s oil tax and a gas tax is that the oil tax wouldn’t go into the Highway Trust Fund, where up to 80 percent goes for roads and 20 percent goes for transit. Instead, he proposes to spend $20 billion per year on alternatives to autos, including urban transit, high-speed rail, and mag-lev. Another $10 billion per year would be given to the states for programs that would supposedly reduce carbon emissions such as “better land-use planning, clean fuel infrastructure, and public transportation.” Finally, $3 billion would go for self-driving vehicle infrastructure that is both unnecessary and intrusive.

Obama proposes that the oil tax be phased in over five years, so that $33 billion is the average of the first five years; when fully phased in, the tax would bring in nearly $60 billion a year. This would be a huge slush fund for all kinds of social engineering programs.

The Republicans who run Congress plan to ignore Obama’s plan. The president’s “proposals are not serious, and this is another one which is dead on arrival,” says Senate Environment & Public Works Committee Chair James Inhofe (R-OK). Still, it’s worth looking at the plan as a preview of what might be proposed by the next president if that president happens to be a Democrat.

The first thing to note is that the White House no longer makes any pretense that taxes should be raised to fix supposedly crumbling highway infrastructure. As I’ve noted before, the claim that highways are falling apart is just a fiction used to generate support for more funding for rail lines and other boondoggles. None of the money raised under Obama’s new proposal would be used to repair or maintain roads, and–since maintenance doesn’t reduce greenhouse gas emissions–probably none would be used to repair or maintain rail transit lines that, unlike roads, truly are crumbling.

Second, anyone who agrees with Obama’s claim that there is no “greater threat to future generations than climate change” should wonder why his plan proposes no tests to insure that funds would cost-effectively reduce greenhouse gas emissions. Urban transit uses as much energy and emits as many grams of carbon per passenger mile as driving. High-speed rail could actually be worse than driving, especially when the energy costs of building the infrastructure are counted. It would be more cost-effective to spend that $33 billion per year buying 1.4 million Priuses and trading them to owners of existing gas guzzlers.

Third, the land-use planning that Obama proposes to fund would no doubt follow the example of California’s SB 375, which aims to coerce more people into living in apartments rather than single-family homes on the pretext that higher densities lead people to drive less. This claim has been disproven by research and the experience of the San Francisco Bay Area, whose two-thirds increase in population density since 1980 was accompanied by a one-third reduction in per capita transit trips and an increase in per capita driving.

Fourth, Obama’s plan would significantly increase the cost of living. On one hand, Obama’s political calculus is that raising taxes is easier when oil prices are low. On the other hand, at today’s prices, a $10 per barrel tax increases fuel costs by nearly a third. Though the administration claims that the $10 tax would be “paid by oil companies,” those companies would, of course, pass the cost to consumers. As Americans consume about 2.5 gallons of oil per person per day, the tax would impose costs of about $200 per person per year.

The White House argues that its plan “builds on the success the country has seen as a result of the American Recovery and Re-investment Act of 2009.” What success? The transportation share of that trillion-dollar boondoggle built a few streetcar lines (one of the least energy-efficient forms of urban travel), increased speeds on a few intercity rail lines by a few miles per hour, and otherwise disappeared into a black hole of pork-barrel spending. Did it reduce greenhouse gas emissions or create any jobs that wouldn’t have been created without it? Probably not.

In short, as one budget analyst confided to me, Obama’s plan is “Premeditated coercion and higher costs of living masquerading as environmentally friendly, job-creating transportation ‘investments.’” Republicans will be right to reject it, but they will be wrong to dismiss it as a similar plan is likely to appear next year if a Democrat wins the White House.

Early yesterday morning, after a fifteen month battle with brain cancer, Senior Fellow in Education Policy Andrew Coulson passed away. He is survived by his beloved wife Kay. Andrew was 48 years old.

Andrew’s death is very sad news for everyone at Cato, but especially those of us at the Center for Educational Freedom, where Andrew was the director—and an almost impossibly sunny colleague—for more than a decade. Coming from a computer engineering background, Andrew seized on education reform—and the need for educational freedom—not because he had spent a career in education, but because he saw a system that was illogical, that was hurting society and children, and that needed to be fixed.

And when Andrew wanted to fix something, he went to work.

Andrew hit the radars of everyone involved in education reform—especially school choice—with his 1999 book Market Education: The Unknown History, which captured exactly what he wanted everyone to know about education. For much of history, Andrew made clear, education was grounded in the free and voluntary interactions of teachers, students, and families—and when it was, it worked better for everyone than the rigid, moribund, government-dominated model we have today.

Andrew was not in the reform vanguard just in laying out the historical, logical, and empirical case for truly free-market education, but also in determining how, practically, to do that. Andrew was perhaps the earliest and clearest voice calling for tax-credit funded choice in preference to publicly funded voucher programs, which are themselves infinitely preferable to being assigned to a school based simply on your home address. Tax credit programs, he argued, would be more attractive—except to those who would lard regulations onto schools – by breaking the connection between state money and school choices. People would choose whether to donate to scholarships, and even to which organizations or schools such donations would go, rather than have the state hand out funds from all taxpayers.

Today, the wisdom of this choice mechanism has been borne out, with tax-credit-based programs starting later than vouchers, but now exceeding total enrollment by about 53,000 students. And enrollment through private educational choice programs of all types—vouchers, tax credits, and education savings accounts—has ballooned since 1999, when Market Education was published, from just a few thousand children to nearly 400,000.

That is tremendous progress. But as Andrew would be the first to proclaim, it is not nearly enough. Indeed, with an eye to pushing choice much further, before he died Andrew was putting the finishing touches on a documentary series vividly and humorously illustrating why we need educational freedom, and the great benefits even limited freedom in education has produced. We hope Andrew’s labor of love will be appearing on television sets across the country in the coming months.

Andrew Coulson is no longer with us. Thankfully, his ideas remain, and they will always illuminate the pathway forward. 

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

If you read only one thing this week that falls within the realm of human-caused climate change, we strongly suggest this one—Dr. John Christy’s written testimony before the U.S. House of Representatives Committee on Science, Space & Technology.

In it, he produces clear, strong evidence that the climate models are producing too much warming from greenhouse gas emissions and that there exists a concerted effort to try to downplay this fact to policymakers and the general public.

Christy’s Feb. 2nd testimony is an expansion of his earlier testimony Dec. 8th before the Senate’s Commerce, Science & Transportation’s Subcommittee on Space, Science and Competitiveness.

The central element of his December testimony was that climate models are failing miserably at simulating the actual temperature rise in the earth’s lower atmosphere. The models produce about 2.5 times as much warming from human greenhouse gas emissions than has actually been observed by satellites and weather-balloons.

This fact caught Senator (and current presidential hopeful) Ted Cruz’s fancy and he included it in several post-hearing communications on the topic of human-caused global warming—which of course got the global warming alarmist fanbase in a tizzy. So much so that they went so far as to produce a snazzy video aimed to shoot down Christy’s satellite observations as unreliable and untrustworthy.

In his testimony this week, Christy shoots back—with a big gun.

Here are some of his zingers.

“It is a bold strategy in my view to actively promote the output of theoretical climate models while attacking the multiple lines of evidence from observations.”

“Investigations of us by congress and the media are spurred by the idea that anyone who disagrees with the climate establishment’s view of dangerous climate change must be on the payroll of scurrilous organizations or otherwise mentally deficient.”

“[T]hese models failed at the simple test of telling us ‘what’ has already happened, and thus would not be in a position to give us a confident answer to ‘what’ may happen in the future and ‘why.’”

“The information in this figure provides clear evidence that the models have a strong tendency to over-warm the atmosphere relative to actual observations.  On average the models warm the global atmosphere at a rate 2.5 times that of the real world.” 

“Because this result challenges the current theory of greenhouse warming in relatively straightforward fashion, there have been several well-funded attacks on those of us who build and use such datasets and on the datasets themselves.  As a climate scientist I’ve found myself, along with fellow like-minded colleagues, tossed into a world more closely associated with character assassination and misdirection, found in Washington politics for example, rather than objective, dispassionate discourse commonly assumed for the scientific endeavor.”

And, these are just the tip of the iceberg, you really ought to have a look at Dr. Christy’s entire testimony in which he touches on topics that, in addition to the abject failure of climate models, include deficiencies in surface temperature compilations, problems with sea surface temperature observations, and the (non) impact of the Paris Climate Accord.

A highly informative, enlightening, and entertaining read!

In environmental policy, the precautionary principle states that a new product, method, or proposal whose effects are disputed or unknown should not be introduced if it is harmful.  The burden of proving that it is harmless falls on its backers – virtually guaranteeing that it won’t be produced.  In contrast, a cost-benefit analysis that compares the probability of harm with the expected magnitude of the benefits is a better method. 

The methods of the precautionary principle are implicitly applied by many opposing the resettlement of Syrian refugees because they deem any risk of terrorism as too great.  The precautionary principle is as improper a standard for determining refugee policy as it is for guiding environmental policy. 

Arguments derived from the precautionary principles are often emotionally driven.  Senator Shelby (R-AL) made such an appeal  when he stated, “We don’t know much about these people. They haven’t really been vetted. They come from an area where there’s a lot of turmoil, a lot of terrorists come from. We don’t need one more terrorist; we got enough right now.”

Senator Shelby is correct that we don’t need another terrorist, but he didn’t explain that the risk of a terrorist coming through the refugee system is low. 

3,252,493 refugees were admitted to the United States from 1975-2015.  During that time period, 20 of those individuals attempted to carry out a terrorist attack or succeeded in doing so inside of the United States.  That is a single terrorist for every 162,625 refugees admitted or one every two years since 1975. 

Although there were only 20 refugee terrorists admitted since 1975, they have only succeeded in murdering three Americans.  Each one of those murders is a tragedy but the chance that an American would be successfully killed by a refugee terrorist was one in 3.6 billion.  Each year an American had a 0.000000028 percent chance of being murdered by a refugee terrorist (for those with poor eyesight, that’s seven zeros to the right of the decimal point).  That’s a small risk.

But, as the implicit proponents of the precautionary principle claim, the costs of refugees in the future could be greater.  Letting them in today could set up a whole raft of unforeseeable future problems unlike those of the past.  That is true.  So even if the rate of murder for future refugees is 100 times greater than the 1975-2015 period, the chance of an American being murdered each year would riseto one in 36.4 million annually or 0.0000028 percent.

Anything could change in the future.  The precautionary principle always rigs the outcome in favor of immigration restriction because it’s impossible to prove that all refugees will be harmless just like it is impossible to prove than any of us will be harmless.  If the precautionary principle is a starting point for debate then those favoring refugees will always fail.  No debate should be stacked this way.        

Perhaps the victims of terrorism from refugees should be very heavily weighted than other deaths in any risk calculation.  Perhaps the threat from ISIS or Syrian refugees is unlike any ever faced and more caution is warranted (highly, highly unlikely).  Perhaps our social, political, economic institutions are more fragile than they appear and could be easily undone by a few refugee terrorists.  Any of those factors being true could tilt the cost-benefits scales against admitting Syrian refugee but such dire predictions are currently unwarranted and must be weighed against the costs of not admitting Syrian refugees. 

Unforeseen Costs of Barring Refugees

There are costs to current Americans of not granting entry to some Syrian refugees.  Barring their admission could create a greater security risk in the future.  Refugees who languish in refugee camps for years or decades are more likely to be radicalized and become terrorists.  Under such a situation, allowing them to resettle in the United States could drain the swamp and decrease the fecundity of terrorist breeding grounds.

Refugees going to other countries, like Sweden, often settle in horrid welfare-subsidized situations in over-regulated labor markets where their LFPRs are initially less than half those of natives – producing another fertile breeding ground for violence.  Their LFPRs do increase over time but do not converge with natives.  Allowing many of those refugees to instead settle in the United States where they are about as active in the labor market as native born Americans and usually build themselves out of poverty without much welfare would also decrease the long term global terrorism risk. 

Syrian refugees could also be valuable foreign intelligence assets, just like many Hungarian, Vietnamese, and Cuban refugees were during the Cold War.  As my colleague Patrick Eddington noted, refugees should be especially motivated to help contain ISIS.  More accurate intelligence decreases the risks of future terrorist attacks, all else being equal.

Other Policy Changes to Further Reduce the Risks

If the refugee gate is widened, other policy changes can reduce the risk of violent extremism now and in the future as well as the short-term fiscal costs that turn net-positive after 10 to 15 years.  Cutting off government welfare benefits for refugees will decrease the public expense and incentivize economic self-sufficiency, self-confidence, and decrease alienation – all character-attributes correlated with terrorism.  Allowing private sponsorship of refugees is another way to decrease the public risk by outsourcing the monitoring of refugee integration to committed NGOs and individuals spending their own money.  Canada has successfully used this strategy and some Senators are now interested.      

Not overreacting to small terrorism risks would aid in the assimilation of immigrants with the same religious background. 

Conclusion

The precautionary principle emphasizes the “better safe than sorry” mentality but shelters us from the reality that nothing is absolutely safe.  Risk is on a spectrum, it is not binary.  The fear of high risks and uncertainty should not stop the resettlement of Syrian refugees here, only if a realistic projection that the long term harms would exceed the long term benefits should convince the government to further block Syrian refugees.  A cold, hard look at the risks and benefits of allowing more Syrian refugees favors a more open policy.

The National Conference of State Legislatures recently held a briefing on REAL ID, the U.S. national ID law, for state legislators that is both fascinating and strange. It is fascinating to see Department of Homeland Security officials prevaricate so openly before state officials about what this national ID law does. And it is strange to see the National Conference of State Legislatures, a group that nominally represents the interests of states, working with the federal government to erode state power.

DHS officials evidently see it as a priority to avoid the impression that REAL ID compliance creates a national identification system. DHS’s PowerPoint presentation to NCSL, echoed in the oral briefing, insists that REAL ID “[d]oes not create a national ID card, a Federal database of driver information, or new Federal access to state data.”

It’s true that the REAL ID law doesn’t require states to hand driver data over to the federal government in bulk. (The E-Verify RIDE program is for that.) But states will probably not be able to refuse a bulk information sharing requirement if and when the DHS creates a policy giving itself access. But score that part of this statement as accurate for now.

The question of a national database I addressed a few weeks ago in response to an inaccurate DHS “rumor control” web page. There is absolutely a national database system, equivalent to a single, centralized database, and it is required by the REAL ID law. Perhaps DHS’s briefers used the word “federal” to mislead the NCSL audience. The database system that REAL ID demands of states would be operated by states and the American Association of Motor Vehicle Administrators at the federal government’s behest. That’s not a “federal” database, technically, because it is owned and managed by states and the umbrella organization for departments of motor vehicles. But is surely a database run for the federal government and federal purposes. It’s clever phrasing that would tend to mislead the NCSL audience on this topic.

Finally, there’s the question of a national ID card. I know of no argument—much less a good one—that REAL ID doesn’t create a national ID. There is only bald insistence. As I’ve noted many times before, having written the book on the matter, a national ID card or system has three elements: First, it is national. That is, it is intended to be used throughout the country, and to be nationally uniform in its key elements. REAL ID is exactly that. Second, its possession or use is either practically or legally required. In fairness, for most people, a driver’s license or state-issued ID is practically required. And finally, it is used for identification. Case closed.

But DHS insists that REAL ID is not a national ID.

Now to the strange part. NCSL—the National Conference of State Legislatures—calls itself “the champion of state legislatures.” But REAL ID compliance means as a practical matter that states sign off forever on their authority over driver licensing. Once DHS locks states in, they are not going to get out.

You would think that reducing state government power is something NCSL would resist, but here they are, helping the DHS coax states into abandoning yet more authority to the federal government. I don’t know if state legislators value administering federal programs, or if they generally feel like that is what they seek office to do. I suspect they don’t. But here is a group purporting to represent them feeding them information that makes them less powerful and less important.

Yes, there’s a prevarification available to the DHS in this area, too. The law allow states a choice as to whether to comply with REAL ID. It merely threatens to deprive their residents of the right to travel by refusing their IDs at airports. That is the same choice offered by a mugger: Your money or your life. It’s not the kind of choice a “champion” of state legislatures should probably subject them to.

NCSL’s REAL ID web page could make clear to state legislators that by hanging together, they can back the Department of Homeland Security down. As it has recently done again, DHS will back down every time one of its manufactured deadlines arrives, if states decline to comply. The long game DHS is playing—successfully—is to frighten state legislators every few years to get a little more compliance in a few more places. Thanks, but no thanks, NCSL, for helping the federal government undercut state power and implement a national ID system.

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