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America’s Bank, Roger Lowenstein’s 2015 book on the founding of the Fed, is, as I said in reviewing it for Barron’s, both well-written and well-researched.  Few pertinent details of the story appear to have escaped Lowenstein’s notice. However, in assembling and interpreting these details, Lowenstein appears not to have entertained the slightest doubt that the Federal Reserve Act, for all the political maneuvering that led to it, was the best of all possible means for ending this nation’s periodic financial crises.

Instead of turning a critical eye toward the 1913 Act, Lowenstein writes as if history itself were a reliable judge.  What it has condemned he condemns as well; and what it has favored he favors.  Consequently he treats all those persons who contributed to the Federal Reserve Act’s passage as right-thinking progressives, while regarding those who favored other solutions to the nation’s currency and banking ills as so many reactionary bumpkins.

That some strains of triumphalism should have found their way into Lowenstein’s account of the Fed’s origins is hardly surprising.  Though research by economic historians and others supplies precious little support for it, the view that the Fed has been a smashing success is, after all, a well-established element of conventional wisdom, and one that Fed officials themselves never cease to promote.  Nor have those officials ever devoted more effort to doing so than in the course of celebrating the Fed’s recent centennial.  Even a much more hard-bitten journalist than Lowenstein could hardly have been expected to resist setting considerable store by an institution so universally (if undeservedly) hallowed.

Still, one might have expected a note of skepticism, if no more than that, to have found its way into America’s Bank.  Lowenstein was, after all, writing about an institution that was supposed to end U.S. financial crises once and for all, and doing so in the wake of a crisis at least as bad, in many respects, as those that inspired its creation.  (Those who suppose that the Fed did all it could and should have done to combat the recent cataclysm are encouraged to read this, this, this, and this.)  He had, furthermore, encountered the many arguments — and most were far from being plainly idiotic — of pre-1913 experts who favored other reforms, as well as those of some of the pending Federal Reserve Act’s critics, who predicted, correctly, that it wouldn’t be long before its results would acutely disappoint those of its champions who sincerely yearned for financial and economic stability.

Perhaps most importantly, Lowenstein knew very well that Nelson (“Admit nothing.  Explain nothing”) Aldrich, whom he (following Elmus Wicker) rightly regards as the man most responsible for clearing the way for the Fed’s establishment, was the  outstanding crony capitalist politician in an epoch when such politicians were thicker on the ground than ever before or since.  Although Aldrich presented the plan known by his name, much of which ended up being incorporated into the Federal Reserve Act, as a product of the collective efforts of the National Monetary Commission’s 16 members, the plan was actually one he himself drafted, with the help of several Wall Street bankers, in secret at Jekyll Island. The commission’s other members contributed nothing save their rubber stamp.

It’s wise to view Lowenstein’s assessment of Aldrich’s contribution in light of what other journalists have had to say about the long-serving Rhode Island Senator.  Consider, for starters, Lincoln Steffens’ opinion, as expressed by him in a 1908 letter to Teddy Roosevelt.  “What I really object to in him,” Steffens wrote, “is something he probably does honestly, out of general conviction. … He represents Wall Street; corrupt and corrupting business; men and Trusts that are forever seeking help, subsidies, privileges from government.”

Bad as this sounds, it’s nothing compared to the portrait muckraking journalist David Graham Phillips drew of Aldrich in The Treason of the Senate, his sulphurous 1906 exposé of an upper-house rife with corruption:

Various senators represent various divisions and subdivisions of this colossus.  But Aldrich, rich through franchise grabbing, the intimate of Wall Street’s great robber barons, the father-in-law of the only son of the Rockefeller — Aldrich represents the colossus.  Your first impression of many and conflicting interests has disappeared.  You now see a single interest, with a single agent-in-chief to execute its single purpose — getting rich at the expense of the labor and the independence of the American people.

“Aldrich’s real work,” Phillips went on to write, consisted of “getting the wishes of his principals, directly or through their lawyers, and putting these wishes into proper form if they are orders for legislation or into the proper channels if they are orders to kill or emasculate legislation.”  The work was “all done, of course, behind the scenes.”  As chairman of the Senate Finance Committee Aldrich labored to “concoct and sugar-coat the bitter doses for the people — the loot measures and the suffocating of the measures in restraint of loot.”

Although the opinions of Steffens and Phillips might be dismissed as yellow journalism, the same cannot be said for similar verdicts reached by academic historians, including that of Jerome Sternstein, in his article “Corruption in the Gilded Age Senate: Nelson W. Aldrich and the Sugar Trust.”  According to Sternstein, “far from insulating the legislative process from big business and reducing the incentives for corruption, the concentration of institutional authority in the hands of senators like Nelson W. Aldrich had precisely the opposite effect”:

Aldrich was wedded ardently to the concept that legislation affecting businessmen should be drawn up in close collaboration with businessmen. … America’s productive economy was not the work of politicians and theorists, but of innovative businessmen making business decisions in a most practical, efficient way.  Members of Congress, therefore, had an obligation to clear appropriate legislation with them.  Effective lawmaking, he held, especially that required to carry out the Republican gospel of prosperity and economic growth through vigorous state action in the form of protective tariffs and subsidies, was next to impossible otherwise. …

Thanks to his success in achieving the legislative goals of his corporate clients, Aldrich “found money and favors flowing to him.  Businessmen did not bribe him, they did not dominate him — they simply rewarded and supported him.”  In return for his efforts to shunt monetary reform onto a spur favoring the big Wall Street banks, for instance, Aldrich earned a token of gratitude from Henry P. Davison, a partner in J. P. Morgan & Company, who arranged and took part in the Jekyll Island meeting:

The enclosed [Davison wrote to Aldrich] refers to the stock of the Bankers Trust Company, of which you have been allotted one hundred shares.  You will be called upon for payment of $40,000… It will be a pleasure for me to arrange this for you if you would like to have me do so.

I am particularly pleased to have you have this stock, as I believe it will give a good account of itself. I t is selling today on the basis of a little more than $500 a share.  I hope, however, you will see fit to put it away, as it should improve with seasoning.  Do not bother to read through the enclosed, unless you desire to do so.  Just sign your name and return to me.

In view of Aldrich’s notoriety, Lowenstein might have suspected that, whatever its merits, the Aldrich Plan was bound to be compromised by its authors’ desire to look after Wall Street’s interests.  He might therefore have entertained the possibility that neither it nor the Federal Reserve Act that drew so heavily from it was ideally suited to putting a stop to financial crises.  But rather than proffer a revised (and not-so-triumphant) view of the Fed’s origins, Lowenstein elected instead to revise the record concerning Aldrich himself, turning him into his story’s unlikely hero.  Just as some bolting horses supposedly turned Pascal into a religious mystic, the Panic of 1907 “jolted” Aldrich sufficiently, according to Lowenstein, to inspire his conversion, from Wall Street’s Man in Washington to high-minded proponent of monetary reform.

But did it?  The facts suggest otherwise.  Of the many shortcomings of the pre-Fed currency and banking system, none struck sincere reform proponents of all kinds as being in more dire need of correction than the tendency of the nation’s bank reserves to flow into the coffers of a handful of New York banks during seasons apart from the harvest, combined with the annual (and occasionally mad) harvest-time scramble for those same reserves.  That ebb and flow of reserves from countryside to New York City and back again was the sine qua non of the crises that periodically rocked the U.S. economy.  Unfortunately, that same ebb and flow was, so far as New York’s major banks themselves were concerned, good business, for it was the source of funds they lent on call to stock investors, by which they made a tidy profit.  Any reform that might undermine their status as the ultimate custodians, for most of the year, of the nations’ bank reserves was, so far as they were concerned, anathema.

Until the Panic of 1907, Aldrich was able to satisfy his Wall Street clients simply by blocking — with the help of fellow standpatters — every monetary reform measure that came his committee’s way. The panic changed things, not by convincing Aldrich to clean up his act, but by forcing him to change his tactics.  Realizing that reform could no longer be held off, he resolved to assume control of the reform movement, and to have it result in changes that, however sweeping, would nonetheless preserve, and even enhance, both the dangerous “pyramiding” of reserves in New York and his Wall Street chums’ bottom lines.

Just how Aldrich managed to achieve this goal — and to do so despite the rejection of his own plan in favor of a Democratic alternative — is a story too long to be told here.  Interested readers will find it, and many other details besides, in my recent Cato Policy Analysis, “New York’s Bank: The National Monetary Commission and the Founding of the Fed.”  The information there will, I hope, allow them to conclude that, to gain a proper understanding of Aldrich’s part in the Fed’s establishment, one needn’t alter a single brushstroke in muckrakers’ portraits of him.

The United States’ immigration system favors family reunification – even in the so-called employment-based categories.  The family members of immigrant workers must use employment-based green cards to enter the United States.  Instead of a separate green card category for spouses and children, they get a green card that would otherwise go to a worker. 

In 2014, 56 percent of all supposed employment-based green cards went to the family members of workers (Chart 1).  The other 44 percent went to the workers themselves.  Some of those family members are workers, but they should have a separate green card category or be exempted from the employment green card quota altogether. 

Chart 1

Employment Based Green Cards by Recipient Types

 

Source: 2014 Yearbook of Immigration Statistics, Author’s Calculations

If family members were exempted from the quota or there was a separate green card category for them, an additional 84,089 highly skilled immigrant workers could have entered in 2014 without increasing the quota.

Of the 151,596 green card beneficiaries in 2014, 86 percent were already legally living in the United States (Chart 2).  They were able to adjust their immigration status from another type of visa, like an H-1B or F visa, to an employment-based green card.  Exempting some or all of the adjustments of status from the green card cap would almost double the number of highly skilled workers who could enter.  Here are some other exemption options:

Chart 2

Adjustment of Status vs. New Arrivals

 

Source: 2014 Yearbook of Immigration Statistics, Author’s Calculations

  • Workers could be exempted from the cap if they have a higher level of education, like a graduate degree or a PhD.
  • A certain number of workers who adjust their status could be exempted in the way the H-1B visa exempts 20,000 graduates of American universities from the cap.
  • Workers could be exempted if they show five or more years of legal employment in the United States prior to obtaining their green card.
  • Workers could be exempted based on the occupation they intend to enter.  This is a problem because in involves the government choosing which occupations are deserving, but so long as it leads to a general increase in the potential numbers of skilled immigrant workers without decreasing them elsewhere, the benefits will outweigh the harms.

2014 Employment Based   Green Cards

  EB 1 EB 2 EB 3^ EB 4^ EB 5~   All EB Percent Workers`

16,913

23,694

20,746

2,211

3,922

 

67,486

44.52% Workers Adjusted`

16,274

23,076

18,258

1,780

700

 

60,088

  Workers New Arrivals`

639

618

2,488

431

3,222

 

7,398

  Family

23,641

25,107

22,410

6,143

6,788

 

84,089

55.47% Family Adjusted

22,539

23,796

17,330

5,150

739

 

69,554

  Family New Arrival

1,102

1,311

5,080

993

6,049

 

14,535

  Adjustment of Status

38,813

46,872

35,588

6,933

1,439

 

129,645

85.52% New Arrival

1,741

1,929

7,568

1,429

9,284

 

21,951

14.48%        

 

        Total

40,554

48,801

43,156

8,362

10,723

 

151,596

         

 

          EB 1 EB 2 EB 3^

EB 4^

EB 5~       Workers Adjusted 96.22% 97.39% 88.01% 80.51% 17.85%       Worker New Arrivals

3.78%

2.61%

11.99%

19.49%

82.15%                         Family Adjusted 95.34% 94.78% 77.33% 83.84% 10.89%       Family New Arrival

4.66%

5.22%

22.67%

16.16%

89.11%

      *Some data on spouses and children withheld.           ^Some data on spouses, children, and workers withheld.         `Investors for the EB-5.               ~Some data on spouses, children, and investors withheld.         Source: 2014 Yearbook of Immigration Statistics          

At The Health Care Blog, Jeff Goldsmith and Bruce Henderson of Navigant Healthcare offer a grim assessment of ObamaCare’s performance that is worth quoting at length:

The historic health reform law passed by Congress and signed by President Obama in March, 2010 was widely expected to catalyze a shift in healthcare payment from “volume to value” through multiple policy changes. The Affordable Care Act’s new health exchanges were going to double or triple the individual health insurance market, channeling tens of millions of new lives into new “narrow network” insurance products expected to evolve rapidly into full risk contracts.

In addition, the Medicare Accountable Care Organization (ACO) program created by ACA would succeed in reducing costs and quickly scale up to cover the entire non-Medicare Advantage population of beneficiaries (currently about 70% of current enrollees) and transition provider payment from one-sided to global/population based risk. Finally, seeking to avoid the looming “Cadillac tax” created by ACA, larger employers would convert their group health plans to defined contribution models to cap their health cost liability, and channel tens of millions of their employees into private exchanges which would, in turn, push them into at-risk narrow networks organized around specific provider systems. 

Three Surprising Developments
Well, guess what? It is entirely possible that none of these things may actually come to pass or at least not to the degree and pace predicted. At the end of 2015, a grand total of 8.8 million people had actually paid the premiums for public exchange products, far short of the expected 21 million lives for 2016. As few as half this number may have been previously uninsured. It remains to be seen how many of the 12.7 million who enrolled in 2016’s enrollment cycle will actually pay their premiums, but the likely answer is around ten million. Public exchange enrollment has been a disappointment thus far, largely because the plans have been unattractive to those not eligible for federal subsidy. 

Moreover, even though insurers obtained deep discounts from frightened providers for the new narrow network exchange products (70% of exchange products were narrow networks), the discounts weren’t deep enough to cover the higher costs of the expensive new enrollees who signed up. Both newly launched CO-OP plans created by ACA and experienced large carriers like United and Anthem were swamped in poor insurance risks, and lost hundreds of millions on their exchange lives. As for the shifting of risk, it looks like 90% plus of these new contracts were one-sided risk only, shadowing and paying providers on the basis of fee-for-service, with bonuses for those who cut costs below spending targets. Only 10% actually penalized providers for overspending their targets.

The Medicare Accountable Care Organization/Medicare Shared Savings Program, advertised as a bold departure from conventional Medicare payment policy, has been the biggest disappointment among the raft of CMS Innovation Center initiatives. ACO/MSSP enrollment appears to have topped out at 8.3 million of Medicare’s 55 million beneficiaries. The first wave, the Pioneer ACOs, lost three-fourths of their 32 original participating organizations, including successful managed care players like HealthCare Partners, Sharp Healthcare, and Presbyterian Healthcare of New Mexico and others. The second, much larger wave of regular MSSP ACO participants lost one third of their renewal cohort. Only about one-quarter of ACO/MSSP participants generated bonuses, and those bonuses were highly concentrated in a relative handful of successful participants. 

Of the 477 Medicare ACO’s, a grand total of 52, or 11%, have downside risk, crudely analogous to capitation. As of last fall, CMS acknowledged that factoring in the 40% of ACO/MSSP members who exceeded their spending targets and the costs of the bonuses paid to the ACOs who met them, the ACO/MSSP programs have yet to generate black ink for the federal budget. And this does not count the billions care systems have spent in setting up and running their ACOs. It is extremely unlikely that the Medicare ACO program will be made mandatory, or voluntarily grow to replace DRGs and the Medicare Part B fee schedule. 

And the Cadillac Tax, that 40% tax imposed by ACA on high cost employee benefit plans, a potentially transformative event in the large group health insurance market, which was scheduled to be levied in 2018, was “postponed” for two years (to 2020) by an overwhelming Congressional vote. In the Senate, a 90-10 bipartisan majority actually voted to kill the tax outright, strongly suggesting that strong opposition from unions and large employers will prevent the tax from ever being levied. Presumptive Democratic nominee Hillary Clinton has announced her support for killing the tax. So the expected transformative event in the large group market has proven too heavy a lift for the political system. 

As a result, the enrollment of large group workers in private health exchanges, the intended off-ramp for employers with Cadillac tax problems, has arrested at about 8 million, one-fifth of a recent forecast of 40 million lives by 2018. Thus, the conversion of the enormous large group market members to narrow network products seems unlikely to happen. As a recent New York Times investigation revealed, the reports of the demise of traditional group health insurance coverage (based on broad network PPO models) have been greatly exaggerated.

At the end of this week, leaders from the United States and Europe will convene in Warsaw, Poland, for a NATO summit. The meeting – only the second summit since Russia’s 2014 invasion of Ukraine – will include high level strategic discussions, and will likely see the announcement of an increased NATO troop presence in the Baltic States to counter potential Russian aggression there.

The biggest question leaders intend to address in Warsaw is how to deter Russian aggression towards NATO members in Eastern Europe following its seizure of Crimea and involvement in the conflict in Eastern Ukraine. In effect, leaders will try to find a compromise solution which reassures NATO’s eastern members, provides additional deterrence, but does not provoke further military buildup and distrust from Russia. They will almost certainly fail in this endeavor.

In fact, the expected announcement of the deployment of 4 battalions of additional troops to the Baltics has already produced heated rhetoric from Russia. These deployments will likely lead to a Russian response, ratcheting up tensions and increasing the risk for inadvertent conflict in the region. In other words, they will contribute to a classic security spiral of mistrust and overreaction. The irony is that such deployments are largely symbolic, not strategic. Even four battalions will not change the fact that Russia could likely conquer the Baltics quickly if it so chose. And even though some would argue that their deterrent value is largely as a ‘tripwire,’ it isn’t clear why the existing Article V guarantee is insufficient for that purpose.

To be frank, in the focus on how to defend the Baltics, leaders have largely overlooked the low likelihood of a conflict in that region. For one thing, there is a qualitative difference between attacking Ukraine and attacking a NATO treaty member; Vladimir Putin certainly knows this. For another, Russia’s force posture simply doesn’t indicate that it has any intentions on the Baltics.

But while leaders at the Warsaw summit focus on these issues, they continue to ignore larger strategic questions about the alliance’s mission and future. My colleague Brad Stapleton raises one of these questions today in an article at War on the Rocks. He questions why NATO – faced with a Russian threat in Europe - is still so committed to building its capacity for ‘out-of-area’ missions, such as the NATO contribution to Afghanistan. Unlike the 1990s, he notes, NATO “does not need that mission to justify its continued existence.” The Warsaw summit would be an ideal place to raise this discussion.

A bigger question is the issue of NATO expansion, which will probably take a back burner at the summit. Nonetheless, various officials have called for NATO to demonstrate that the alliance’s door remains open to countries like Bosnia, Ukraine and Georgia. But as I argued in an article several weeks ago, such arguments only serve to highlight the alliance’s fundamental identity crisis. NATO cannot simultaneously act as a defensive alliance and a tool for spreading western values; the two missions have become contradictory. As NATO’s open door policy ratchets up tensions with Russia, it serves to undermine existing members’ security. Yet there is little expectation that leaders will address this challenging question at the Warsaw Summit.

The full articles on NATO’s ‘out-of-area’ follies and on NATO’s identity crisis can be found here and here. Sadly, leaders in Warsaw are likely only to address the unimportant questions, while leaving key ones like these unanswered, kicking the can on decisions about NATO’s future down the road again.

In the early morning hours of last Tuesday police officers in Baton Rouge, Louisiana shot and killed Alton Sterling, a 37-year-old black man who was reportedly selling CDs outside a convenience store. The shooting was filmed by at least two citizens. The two officers involved in the shooting, who were wearing body cameras, are on administrative leave, and the Department of Justice has launched an investigation. The shooting raises a range of questions concerning police use-of-force, body cameras, and police procedure.

According to an unnamed senior law enforcement official, Sterling presented a gun to a homeless man, who then called 911. During the scuffle between Sterling and the officers, which ended with Sterling on his back and both officers on top of him, one of the officers yelled “He’s got a gun!” Shortly afterwards Sterling was shot numerous times at point blank range. Footage shows that Sterling did not have a gun in his hand when he was shot. 

Cato research associate Jonathan Blanks wrote about the shooting at Policemisconduct.net, highlighting (among other things) the “cooling off” period granted to many officers after they are involved in a shooting and before they answer questions.  

Today, I discussed the shooting with Caleb O. Brown, the Cato Institute’s multimedia director. 

It’s the 50th anniversary of the legendary Coleman Report, as George Will discusses today in the Washington Post. Will summarizes what experts in 1966 believed about education, and what additional experience revealed:

The consensus then was that the best predictor of a school’s performance was the amount of money spent on it: Increase financial inputs, and cognitive outputs would increase proportionately. As the postwar baby boom moved through public schools like a pig through a python, almost everything improved — school buildings, teachers’ salaries, class sizes, per-pupil expenditures — except outcomes measured by standardized tests.

Andrew Coulson put that key fact in a handy chart:

Politicians, experts, and the education establishment still aren’t willing to accept the lesson demonstrated by this chart.

But if money doesn’t work, what does? Coleman emphasized cultural factors, notably strong families. Coulson believed that schools could improve, and that competition could help us discover best educational practices. This fall, public television stations will broadcast his documentary asking why educational innovations are so rarely tested and replicated.

Papayas are spherical or pear-shaped fruits known for their delicious taste and sunlit color of the tropics. Upon his arrival to the New World, Christopher Columbus apparently could not get enough of this exotic fruit, reportedly referring to it as the “the fruit of angels.” And the fruit of angels it may indeed be, as modern science has confirmed its value as a rich source of important vitamins, antioxidants and other health-promoting substances to the consumer.

Papaya production has increased significantly over the past few years to the point that it is now ranked fourth in total tropical fruit production after bananas, oranges and mango. It is an important export in many developing countries and provides a livelihood for thousands of people. It should come as no surprise, therefore, that scientists have become interested in how this important food crop might respond to increasing levels of atmospheric CO2 that are predicted for the future.

Such interest was the focus of a recent paper published in the scientific journal Scientia Horticulturae by Cruz et al. (2016). Therein, the team of five researchers examined “the effect of the elevated CO2 levels and its interaction with Nitrogen (N) on the growth, gas exchange, and N use efficiency (NUE) of papaya seedlings,” as they note there are no publications examining such for this species to date. To accomplish their objective, Cruz et al. grew Tainung #1 F1 Hybrid papaya seeds in 3.5 L plastic pots in a climate-controlled greenhouse at the USDA-ARS Crops Research Laboratory in Fort Collins, Colorado under two different CO2 concentrations (390 or 750 parts per million) and two separate N levels (8 mM NO3- or 3 mM NO3-). CO2 fumigation was performed for only 12 hours per day (during the day, 06:00 h to 18:00 h) and N treatments were applied to the pots weekly as a nutrient solution to reach the desired N levels. The experiment concluded 62 days after treatment initiation.

In discussing their findings, Cruz et al. report that compared to ambient levels of CO2, elevated CO2 increased photosynthesis by 24 and 31 percent in the low and high N treatments, respectively. Plant height, stem diameter and leaf area in the high N treatment were also enhanced by 15.4, 14.0 and 26.8 percent, respectively, and by similar amounts for the height and stem diameter in the low N treatment. Elevated CO2 also increased the biomass of leaf, stem plus petiole, and root dry mass of papaya plants regardless of N treatment, leading to total dry mass enhancements of 56.6 percent in the high N treatments and 64.1 percent in the low N treatments (see figure below).

Figure 1. Total dry mass of papaya plants grown in controlled chambers at two different CO2 concentrations (High and Low; 750 and 390 ppm) and two different N treatments (High and Low; 8 mM NO3- or 3 mM NO3-). Adapted from Cruz et al. (2016).

 

Cruz et al. also report that “significant, but minor, differences were observed in total N content (leaf plus stem + petiole plus roots) between plants grown at different CO2 concentrations, but the same N levels.” Consequently, plant Nitrogen Use Efficiency (NUE) – the amount of carbon fixed per N unit – was around 40 percent greater in the CO2-enriched environments, regardless of the N level in the soil.

Commenting on their findings, Cruz et al. write that contrary to some other studies, which have suggested that low N reduces plant responses to increased CO2 levels, they found no such decline. In fact, their data indicate that elevated CO2 “alleviated the effect of low N on dry matter accumulation in papaya,” which they surmised is at least partially explained by a larger leaf area and higher rate of photosynthesis per leaf area unit observed under elevated CO2.

In light of all of the above, Cruz et al. conclude that “an increase in the atmospheric CO2 concentration [is] beneficial for dry mass production of papaya and alleviate[s] the negative effects of N reduction in the substrate on papaya growth.” Thus, in the future, those who cultivate this fruit of angels should find an angel in the ongoing rise in atmospheric CO2.

 

Reference

Cruz, J.L., Alves, A.A.C., LeCain, D.R., Ellis, D.D. and Morgan, J.A. 2016. Interactive effects between nitrogen fertilization and elevated CO2 on growth and gas exchange of papaya seedlings. Scientia Horticulturae 202: 32-40.

Numerous media stories have reported the first fatality in a self-driving car. The most important thing to know is that the Tesla that was involved in the crash was not a self-driving car, that is, a car that “performs all safety-critical functions for the entire trip” or even a car in which “the driver can fully cede control of all safety-critical functions in certain conditions” (otherwise known as “level 4” and “level 3” cars in the National Highway Traffic Safety Administration’s classification of automated cars). 

Instead, the Tesla was equipped with an Advanced Driver Assistance System (ADAS) that performs some steering and speed functions but still requires continuous driver monitoring. In the NHTSA’s classification, it was a “level 2” car, meaning it automated “at least two primary control functions,” in this case, adaptive cruise control (controlling speeds to avoid hitting vehicles in front) and lane centering (steering within the stripes). BMW, Mercedes, and other manufacturers also offer cars with these functions, the difference being that the other cars do not allow drivers to take their hands off the wheel for more than a few seconds while the Tesla does. This may have given some Tesla drivers the impression that their car was a level 3 vehicle that could fully take over “all safety-critical functions in certain conditions.”

The next most important thing to know about the crash is that the Florida Highway Patrol’s initial accident report blamed the accident on the truck driver’s failure to yield the right-of-way to the Tesla. When making a left turn from the eastbound lanes of the highway, the truck should have yielded to the westbound Tesla. Still, it is possible if not likely that the accident would not have happened if the vehicle’s driver had been paying full attention to the road.

Mobileye, the company that made the radar system used in the Tesla, says that its system is designed only to prevent a car from rear-ending slower-moving vehicles, not to keep them from hitting vehicles laterally crossing the car’s path. Even if the sensors had detected the truck, automatic braking systems typically can come to a full stop only if the vehicle is traveling no more than 30 miles per hour faster than the object. Since the road in question is marked for 65 miles per hour, the system could not have stopped the Tesla.

Thus, the Tesla driver who was killed in the accident, Joshua Brown, probably should have been paying more attention. There are conflicting reports about whether Brown was speeding or was watching a movie at the the time of the accident. Neither were mentioned in the preliminary accident report, but even if true it doesn’t change the fact that the Tesla had the right of way over the truck.

Just two months before the accident, Duke University roboticist Missy Cummings presciently testified before Congress that auto companies were “rushing to market” before self-driving cars are ready, and “someone is going to die.” She didn’t mention Tesla by name, but since that is so far the only car company that allows American drivers to take their hands off the wheel for more than a few seconds, she may have had it in mind.

Tesla’s autopilot system relies on two forward-facing sensors: a non-stereo camera and radar. Tests by a Tesla owner have shown that the system using these sensors will not always stop a vehicle from hitting obstacles in the road. By comparison, the Mercedes and BMW systems use a stereo camera (which can more quickly detect approaching obstacles) and five radar sensors (which can detect different kinds of obstacles over a wider range). Thus, in allowing drivers to take hands off the steering wheel, Tesla may have oversold its cars’ capabilities.

The day before information about the Tesla accident became publicly known, the National Association of City Transportation Officials issued a policy statement about self-driving cars urging, among other things, that drivers not be allowed to use “partially automated vehicles” except on limited access freeways because “such vehicles have been shown to encourage unsafe driving behavior.” While this would have prevented the Tesla crash, it ignores the possibility that partial automation might have net safety benefits overall.

A few days after the accident became publicly known, NHTSA announced that traffic fatalities had increased by 7.7 percent in 2015, the largest increase in many years. As Tesla CEO Elon Musk somewhat defensively pointed out, partial automation can probably cut fatalities in half, and full automation is likely to cut them in half again. State and federal regulators should not allow one accident in an ADAS-equipped car to color their judgments about true self-driving cars that are still under development.

Trump’s call for a wall along the border reflects a common desire to control that supposedly lawless frontier.  As far as unauthorized immigration goes, the border is coming under increasing control.  337,117 total unauthorized immigrants were apprehended by Border Patrol in 2015, the lowest number since 1971 (Chart 1).  That number will likely rise this year but will still remain low.  

Chart 1

Border Patrol Apprehensions

 

Source: Customs and Border Protection.

Like the rest of government, Border Patrol has grown considerably over the decades despite the fall in apprehensions.  In 2015 there were just over 20,000 Border Patrol agents, double the number in 2002 and 6.3 times as many as were employed in 1986 (Chart 2). 

Chart 2

Border Patrol Officers

 

Source: Customs and Border Protection.

The increase in the size of Border Patrol has likely decreased unauthorized immigration, although the precise amount is up for debate (read this excellent report for more information).  On the opposite side, there is consistent evidence that border security does not affect the number of illegal entries but can dissuade migrants from leaving once they make it in.  Although the effect of Border Patrol and security on illegal entries is not entirely clear, it is obvious that the average Border Patrol officer is apprehending fewer unauthorized immigrants than at any time in decades with the exception of 2011 (Chart 3).

Chart 3

Apprehensions Per Border Patrol Agent

Source: Customs and Border Protection.

There is already too much corruption in Customs and Border Protection, exacerbated by rapid expansions in the size of their force.  New hiring binges will likely increase the struggles with corruption still more.  Problems with agency corruption and a low period in unlawful immigration are superb arguments against expanding and perhaps to even shrink the Border Patrol back to a reasonable size.

Hillary Clinton will be introducing a plan today that would enable students from families eventually making up to $125,000 not to have to pay tuition at in-state colleges or universities. This is a jump in college subsidization from her previously announced plan, which focused on debt-free tuition, and more in line with what Bernie Sanders has proposed. Presmably, it is going to be paid for by the federal government offering states more money for higher education in exchange for states saying they’ll increase their own spending, to a point of making tuition largely free.

We’ve been over how costly “free” college really is–massive overconsumption, credential inflation, big opportunity costs for taxpayers, etc.–which you can read about here and here. I won’t rehash it all now. But the political calculus hasn’t changed: People like getting things for free, especially when the ultimate costs are hidden. And the more people who think they’ll benefit–the estimate is 8 out of 10 for Ms. Clinton’s new proposal–the better.

At just about the same time FBI Director James Comey was discussing how “extremely careless” Hillary Clinton was with classified information during her time as Secretary of State, the president of the National Education Association, the nation’s largest teachers union, was tweeting this:

She fearlessly speaks truth to power, but I support @HillaryClinton because she delivers! #ImWithHer #NEARA16

— Lily Eskelsen García (@Lily_NEA) July 5, 2016

And this:

Intelligent, courageous, compassionate & the next president of the US! #imwithher #NEARA16 @HillaryClinton pic.twitter.com/Vi7TP44pNK

— Lily Eskelsen García (@Lily_NEA) July 5, 2016

And doing this:

Standing strong for public education (and our grandkids) #neara16 @HillaryClinton #1u pic.twitter.com/FIaCZY93sP

— Lily Eskelsen García (@Lily_NEA) July 5, 2016

All of this, by the way, took place at the NEA’s national convention.

Now, is there anything wrong with a union endorsing and campaigning for a presidential candidate? Heck no! But there is a huge problem when teachers, as a condition of working at government schools, are required to furnish funds for those unions.

I know the response: The “agency fees” teachers in many states are compelled to supply only cover collective bargaining, which is not political. Of course, such bargaining is absolutely political—negotiating with government entities is inherently political—and somtimes coming in at 65 percent or more of full dues, a lot of agency fee money is almost certainly going to more than just collective bargaining and administrative stuff. And money is fungible. Dollars that free payers supply for collective bargaining ultimately frees up other bucks for, I don’t know, maybe straight-out politicking!

Sadly, as you probably know, the U.S. Supreme Court tied up on this 4-4 earlier this year, maintaining a lower court ruling that agency fees are not a violation of constitutional speech and association rights. But just because the Supreme Court stumbled doesn’t mean the political branches of government can’t act to end forced union funding. And from I saw on Twitter yesterday, justice requires that compelled support of unions end.

Since the financial crisis of 2007-09, and especially in recent months, Europe and the United States have seen zero and even slightly negative short-term nominal interest rates, and sub-zero risk-free real interest rates.  In June I participated in a conference on “Zero Interest Rate Policy and Economic Order” at the University of Leipzig, organized by Gunther Schnabl (U Leipzig), Ansgar Belke (U Duisburg-Essen), and Thomas Mayer(Fossback von Storch Research Institute).  The topic faced participants with the need to make a key judgment call: Are ultralow rates the new normal, i.e. are they long-run equilibrium rates determined by market fundamentals, or are they so low because of ultra-easy monetary policies and other policies?  In Wicksell’s terminology, is the real “natural rate” currently below zero, or are central banks holding market rates below the current natural rate? We cannot directly observe the natural rate, but we can look for indirect indicators.

In Wicksell’s famous and now-standard analysis, a central bank can drive (or hold) the market rate of interest below the natural rate by injecting money, which shifts the supply of loanable funds curve to the right, increasing the quantity of loanable funds and lowering the interest rate (the “liquidity effect”).  As the new money circulates it drives up prices and nominal incomes, however, which shifts the nominal demand for loanable funds curve to the right, raising the market interest rate (the “nominal income effect”).  If the central bank wants to keep the market rate low in the face of the nominal income effect, it must accelerate the money injection.  Short-term real rates have been negative, and nominal rates near zero, for eight years now with little sign of accelerating broad money growth or a rising inflation rate.  Thus the Wicksellian cumulative-process scenario does not seem to be a viable candidate for explaining why current rates have remained so low since 2008.

Lukasz Rachel and Thomas D Smith, in a widely cited Bank of England working paper, spell out the market-fundamentals view: “The co-movement in rates across both advanced and emerging economies suggests a common driver: the global neutral real rate may have fallen.”  They try to quantify changes over the last 30 years in the various factors shifting the supply of loanable funds rightward (population bulge nearing retirement, larger income share of the well-to-do, the “glut” of “precautionary saving by emerging markets”) and the demand leftward (depressed investment, higher risk premia) for loanable funds.  Larry Summers, particularly in his Homer Jones lecture at the St. Louis Fed in April, has proposed that the demand for loanable funds curve has shifted leftward due to “secular stagnation.”

Several participants at the Leipzig conference offered an alternative view, particularly William R. White (formerly of the Bank for International Settlements, now at the OECD, and a member of the CMFA academic advisory board) and Andrew Filardo (BIS).  Their view is spelled out in the new (unsigned) BIS Annual Report released on 26 June, just days after the conference.  The Report argues that zero rates are not the permanent new normal, but are the lingering aftermath of the financial boom-bust cycle that developed economies have gone through.  To quote (p. 14): “unchecked credit booms can be part of the problem and leave a long shadow after the bust, sapping productivity growth.  In addition, debt overhangs depress investment, which weakens productivity further.”  In a passage that bears quoting at length, the Report (p. 14) contrasts its view with the view that secular stagnation is the main force keeping interest rates low.  The secular stagnation view fails to square with the fact that a credit boom preceded the bust:

[Our] interpretation of the post-crisis global growth slowdown differs in key respects from one that has been gaining currency – secular stagnation.  It suggests rather that the world is better regarded as having suffered a series of financial booms gone wrong.  Consider, admittedly in a very stylised form, the main differences in the two views.  The most popular variant of the secular stagnation hypothesis posits that the world has been haunted by a structural deficiency in aggregate demand.  This deficiency predates the crisis and is driven by a range of deep-seated factors, including population ageing, unequal income distribution and technological advances.  In this view, the pre-crisis financial boom was the price to pay for having the economy run at potential.  The key symptom of the malaise is the decline in real interest rates, short and long, which points to endemic disinflationary pressures.  In the hypothesis proposed here, the world has been haunted by an inability to restrain financial booms that, once gone wrong, cause long-lasting damage. The outsize and unsustainable financial boom that preceded the crisis masked and exacerbated the decline in productivity growth.  And rather than being the price to pay for satisfactory economic performance, the boom contributed, at least in part, to its deterioration, both directly and owing to the subsequent policy response.

The BIS, whose clients are the worlds’ central banks, does not directly blame central banks’ easy credit policies for fueling financial booms.  But the reader is free to read the argument that way. When it comes to policy recommendations, the Report (p. 20) does call for tighter monetary policy (that is, tighter than inflation targeting suggests) to avoid feeding incipient booms: “monetary frameworks should allow for the possibility of tightening policy even if near-term inflation appears under control.”  Rather than describe this as “using monetary policy to lean against financial imbalances” of unspecified origin as the Report does, I would characterize such an approach as using indicators other than only consumer prices (namely asset prices and/or nominal GDP) as indicators to judge when monetary policy is too loose.  Rather than describing the practical policy-making task as developing guidelines to help central banks “more effectively tackle the financial booms and busts,” I would say that we need guidelines to stop central banks from fueling financial booms and busts.  Thus the BIS Report supports the case for nominal GDP as a less hazardous central bank target than the CPI or other inflation index, since an NGDP level target does not call for expansionary monetary policy to offset the benign price-lowering effects of productivity improvements.

The BIS Report deserves our serious attention.  Its approach is more promising, to be sure, than the secular stagnation approach of Summers, who judges the last eight years of economic performance sub-par by reference to the extrapolated bubble path (aka the CBO’s 2007-estimated path of real potential output).  His diagnosis: chronically insufficient nominal aggregate demand.  This diagnosis implies that the price level has failed to approach its equilibrium level in the seven to eight years since the 2008-09 velocity shock, which violates our standard understanding about how long the price level takes to adjust to nominal shocks.  It approaches incoherence to suppose that real interest rates have approximately reached long-run equilibrium in intertemporal markets, and simultaneously that the level of prices has not yet approximately reached long-run equilibrium in the spot market where money balances exchange against goods.

Global 10-year real government bond rates

Source: Summers (2015, p. 100)

[Cross-posted from Alt-M.org]

It should surprise no one that the government isn’t particularly good at respecting property rights. Still, the Constitution requires that property owners be provided with “due process of law” against arbitrary and unjustified deprivation of their right to put their property to beneficial use. According to several federal appellate courts, however, landowners lack such protections unless they show that they have a statutory “entitlement” to use their land.

This is circular Humpty Dumpty logic. Indeed, that approach impermissibly presumes the legitimacy of restrictions, without considering whether they are lawfully applied.

Most recently, the New York-based U.S. Court of Appeals for the Second Circuit employed the “entitlement” theory to deprive a small developer of its right to upgrade run-down apartment buildings. The NYC Landmarks Commission deprived Stahl York Avenue Company of its property rights by designating these nondescript buildings as landmarks—this despite a previous ruling that these exact buildings lacked any architectural or cultural merit worth preserving.

Courts across the country are deeply split over landowners due-process rights, so Cato and the National Federation of Independent Business have filed an amicus brief urging the Supreme Court to take up Stahl’s case.

The “entitlement” theory itself contradicts longstanding Supreme Court precedent. “Long before the original States adopted the Constitution, the common law protected an owner’s right to decide how best to use his property,” wrote Justice John Paul Stevens in Moore v. City of East Cleveland (1977). Against that common-law background, the Court in Euclid v. Ambler Realty (1926) held that an infringement on property rights “must find [its] justification in some aspect of the police power, asserted for the public welfare.”

Indeed, 60 years later the Court reaffirmed that such infringements must “substantially advance legitimate state interests.” Agins v. City of Tiburon (1980). That due-process test—whether a proposed land-use regulation substantially advances legitimate state interests—is turned on its head when the regulation is presumed to be valid unless the owner can point to a specific statutory “entitlement” (permission from the legislature to use the land in that particular way).

In addition, regulator-friendly historical-preservation rules have lead to various interests in cities that follow the entitlement approach to over-preserve buildings across the nation. In Manhattan and Baltimore—two major cities within “entitlement” jurisdictions—nearly a third of the city mass is landmarked. Yet in places with different legal rules, like Philadelphia, Chicago, and San Francisco—pretty historic burgs!—only 1-5 percent of the city is landmarked. (See pages 13-19 of our brief for details, including a nifty map of Manhattan that shows more preservation in wealthier, politically more powerful neighborhhods.)

NIMBY (“not in my backyard”) interests abuse preservation powers in permissive jurisdictions to prevent development like Stahl’s. But over-preservation isn’t economically harmless: it imposes significant negative effects on property values, tax revenues, affordable housing, and the environment. It also chills new residential construction and drives up the price of housing and rents, including in surrounding areas. Moreover, it foists highly expensive maintenance costs onto landlords who are required to keep everything appropriately “historic.” The character of cities changes over time, while over-preservation freezes a city in time and ensures that economic redevelopment cannot occur.

In Stahl York Avenue Co. v. City of New York, the Supreme Court should take up this important question regarding a disturbing national trend, and ensure that property rights aren’t subject to the whims of clerks and municipal bureaucrats.

Unable to legislate new restrictions on what kind of arms can be sold, the government has embarked on a long-term effort of adding an untold number of Americans to “no buy” lists—based on the unfounded conjecture that they pose a “danger” to others—and deprive them of a fundamental constitutional right. The Gun Control Act of 1968 and NICS Improvement Amendments Act of 2007 requires that agencies with pertinent records on who is or is not “a mental defective” disclose those records to the attorney general so those people can be excluded from purchasing arms through the National Instant Criminal Background Check System (NICS).

The Social Security Administration (SSA) has proposed a new regulation that would create a process for transferring the records of those who seek a “representative payee” (legal proxy) under Social Security disability benefits programs to NICS, so that they may be considered a “mental defective” and thus lose their Second Amendment rights. The proposed SSA rule is arbitrary—there’s no evidence that someone who needs help with SSA paperwork can’t be trusted with a gun—and inconsistent with the regulatory and statutory scheme, not to mention blatantly unconstitutional.

Accordingly, for the first time ever, Cato’s Center for Constitutional Studies, with the help of law professors Josh Blackman and Gregory Wallace, has filed a public comment objecting to the rule on 10 different grounds. No one disputes that the government has an interest in keeping guns out of the hands of those who could harm themselves or others, but depriving a constitutional right requires due process of law. Under existing law, the root requirement of the Fifth Amendment’s Due Process Clause is that an individual receive a hearing before she is deprived of a constitutional right by a federal agency, one where the government must justify its restriction.

Here, the process entails an SSA bureaucrat making the determination without the expertise necessary to tell if the applicant is a danger to herself or others and without necessarily having the benefit of medical evidence. Indeed, the criterion evaluated—whether a person is “a mental defective”—is the same unscientific and unspecific standard that the Supreme Court approved in 1927 when legalizing the sterilization of the mentally ill and other eugenic treatments. The term is antiquated and vague.

Moreover, it is unconstitutional to condition the receipt of benefits on the sacrifice of rights. The “condition” here could not be more clear: to gain or maintain a representative payee, needy disabled persons must submit to being placed on the NICS list and foregoing their Second Amendment rights. The government is not allowed to foist that Catch-22 onto those who qualify for Social Security disability but need help administering their benefits.

On a more practical level, the SSA is not the agency that should be making this sweeping policy. Determining whether someone satisfies the criteria for obtaining a representative payee is perfectly within SSA’s expertise, but determining who among its recipients is capable of responsible firearm ownership is far, far afield of the SSA’s area of expertise. The SSA’s job is to administer social-insurance benefits, not to implement gun-safety regulations. The agency is simply not staffed with the medical and gun-policy experts necessary to make such determinations on a regular basis.

Finally, the proposed rule treats the entire category of people who express a misgiving about their mental abilities as per se deprived of their right to armed self-defense. Surely the landmark case District of Columbia v. Heller (2008), which confirmed the individual right to keep and bear arms, did not mean to sweep every hypochondriac, arachnophobiac (spiders), coulrophobiac (clowns), or lepidopterophobiac (butterflies) into the federal mental-health gun-prohibition.

The SSA should abandon this ill-devised rule. 

In a prominent article about Islamic State in the Washington Post over the weekend, Carol Morell and Jody Warrick suggest that, by massacring people in various locales, the group was growing in appeal—or “allure” in the words of the headline writer. How this remarkable process comes about is not explained, nor is evidence given to back it up. It is said to be a conclusion reached by “experts,” but only one of these is quoted in the article, and none of the quotes from him seems to fit, much less support, the article’s conclusion.

There is certainly evidence, much of it noted in other articles in the Post, to suggest that the appeal (or allure) of the vicious group actually is, like the scope of the territory it holds in Syria and Iraq, in severe decline. By 2016, the flow of foreign fighters going to join the group may have dropped by 90 percent over the previous year even as opposition to the group among Arab teens and young adults rose from 60 percent to 80 percent. Any allure the group may have in Iraq certainly fails to register on a poll conducted there in January 2016 in which 99 percent of Shiites and 95 percent of Sunnis express opposition to it. And, according to the FBI, the trend for Americans seeking to join Islamic State is decidedly downward.

Indeed, overall, the Islamic State has followed policies and military approaches that have repeatedly proven to be counterproductive in the extreme in enhancing its “appeal” and/or “allure.” High among these was the utterly mindless webcast beheadings of American hostages in 2014 that turned the United States almost overnight from a wary spectator into a dedicated military opponent.

A considerable amount of academic work strongly suggests that the group is following a self-destructive approach. Thus, in her analysis of civil wars, Virginia Page Fortna concludes that insurgencies that employ “a systematic campaign of indiscriminate violence against public civilian targets to influence a wider audience” pretty much never win. Similarly, Max Abrahms finds that the targeting of civilians by terrorists is “highly correlated with political failure.”

The Post article also notes the suggestion of Secretary of State John Kerry that terrorist attacks like those Turkey, Iraq, and Bangladesh are a sign of the group’s desperation as it is pushed back in Iraq and Syria. Yet the article seeks to refute this plausible hypothesis by irrelevantly noting that the group has recently issued its own currency in the territory it controls.

And it gravely relays the grandiloquent ravings of Islamic State forefather Abu Musab al-Zarqawi (who was killed in 2006), that “We fight here, while our goal is Rome.” More recent Islamic State spoutings include its warnings to Russia that “We will make your wives concubines and make your children our slaves…The Kremlin will be ours,” and to the United States, “Know, oh Obama, that we…will cut off your head in the White House and transform America into a Muslim province.” To take such drivel seriously is to exacerbate fear and to play to the monster group’s childish self-infatuation.

A year ago, the Post published a thoughtful analytic perspective on Islamic State by the prominent Middle East specialist, Marc Lynch. He concluded that the group seemed to him to be “a fairly ordinary insurgency that has been unduly mystified and exoticized in the public discourse.”

Lynch’s column generated three comments. The Morello/Warrick article has thus far generated 881. For editors anxious to entice readers, it is clear which perspective has the most allure. Like fear, mystery and the exotic sell.

As Americans enjoy the Fourth of July holiday, I hope we take a few minutes to remember what the Fourth of July is: America’s Independence Day, celebrating our Declaration of Independence, in which we declared ourselves, in Lincoln’s words, “a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal.”

The fireworks would be today if John Adams had his way. It was on July 2, 1776, that the Continental Congress voted to declare independence from Great Britain. On July 4 Congress approved the final text of the Declaration. As Adams predicted in a letter to his wife Abigail:

The second day of July, 1776, will be the most memorable epoch in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bells, bonfires, and illuminations, from one end of this continent to the other, from this time forward forever more.

The Declaration of Independence, written by Thomas Jefferson, is the most eloquent libertarian essay in history, especially its philosophical core:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Jefferson moved smoothly from our natural rights to the right of revolution:

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. 

The ideas of the Declaration, given legal form in the Constitution, took the United States of America from a small frontier outpost on the edge of the developed world to the richest country in the world in scarcely a century. The country failed in many ways to live up to the vision of the Declaration, notably in the institution of chattel slavery. But over the next two centuries that vision inspired Americans to extend the promises of the Declaration — life, liberty, and the pursuit of happiness — to more and more people. That process continues to the present day, as with the Supreme Court’s ruling for equal marriage freedom last year.

At the very least this weekend, if you’ve never seen the wonderful film 1776, watch it late on July 4 (actually 1:00 am EDT on July 5) on TCM.

Must come down. Of course, we’re referring to lower atmospheric temperatures measured by satellites.

For months we have been saying that, once they started dropping, the satellite temperatures—our only truly global measure—were going to go down with a vengeance, which is what usually happens after a strong El Niño event spikes a fever. El Niño is a dramatic slowdown (or even a reversal) in the trade winds that diverge surface water away from the South American coast, “upwelling” much colder subsurface waters. When that stops, global temperatures rocket upwards, but that also builds up more and more cold water to be unleashed when the trade winds resume.

If the 1998 El Niño is any guide, global temperatures are going to be back in (or near) “pause” mode by by the turn of the year.

According to University of Alabama-Huntsville’s Roy Spencer, who publishes the satellite data, the drop in the last two months was the second-largest in the entire record, missing the record by only 0.01⁰C. That record was set—not surprisingly—in the decline after the slightly bigger 1997-8 El Niño. In the tropics, where El Niño is most expressed, the drop was the largest in the entire 37-year record. 

For what it’s worth, no one knows what the ultimate cause of an El Niño is. While they are the largest secular oscillation in global surface temperatures,  computer models for global warming can’t simulate them realistically, and even short-term (year in advance) forecasting models are pretty lousy when it comes to initiating one.

Despite the recent peak, the satellite data never lost the “pause” that began in 1996. As far as the surface temperatures go, recent adjustments that “disappeared” that pause are looking more and more suspect as other independent data (like the satellites) do not corroborate them. Stay tuned for more, as we have just submitted an article on this problem.

Donald Trump’s campaign has undoubtedly given protectionist rhetoric a new energy in American politics.  China, he says, is “killing us on trade” and the Trans-Pacific Partnership is “a rape of our country.”  Early on, he got attention for calling for a 45% tariff on all goods from China and for saying we should impose tariffs of 35% on imports from companies that invest overseas. 

On Tuesday, he delivered a highly publicized trade policy speech where he doubled down on his belligerent, mercantilist rhetoric.  He also offered some more detailed and thought-out policy proposals.  Here are the seven proposals he laid out:

  1. “Withdraw the United States from the Trans-Pacific Partnership.”
  2. “Appoint the toughest and smartest trade negotiators.”
  3. “Identify every violation of trade agreements a foreign country is currently using to harm our workers … [and] use every tool under American and international law to end these abuses.
  4. Renegotiate or withdraw from NAFTA
  5. “Label China a currency manipulator.”
  6. “Bring trade cases against China, both in this country and at the WTO.”
  7. “Use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.”

Despite the outlandish nature of Trump’s rhetoric, there’s actually nothing new or radical about these proposals.  They are, in fact, just what trade-skeptic Democrats have been demanding consistently for over a decade.

 Many Democrats in Congress think our existing trade agreements are harmful.  They oppose new agreements and think we should negotiate them differently.  They support aggressive use of domestic trade remedy laws.  They think accusations of foreign currency manipulation justify increased tariffs.  And, they want to “enforce” existing agreements more aggressively through international dispute settlement.

An economic policy advisor to the Clinton campaign immediately responded to Trump’s speech by noting that the seven proposals almost perfectly mirror Hillary Clinton’s own trade policy plan.  Other responses from the Clinton campaign and from organized labor have criticized Trump for being hypocritical or insincere.  They have not argued against his proposals.

It’s also worth noting what’s not on the list.  Trump is not proposing large tariff increases across the board (even though such action would be consistent with his general stance on trade).  Trump also hasn’t said that the United States should leave the World Trade Organization. 

The Republican-led House of Representatives actually voted on whether to leave the WTO in 2000 and 2005.  The votes were largely for show and they predictably failed, but slightly more than 15% of Republicans in the House supported the bill each time.  I doubt most of Trump’s supporters would balk at the idea today.

A possible reason that Trump hasn’t taken issue with the WTO is that he’s constantly accusing our trade partners of “cheating.”  You can’t cheat if there aren’t any rules, and those rules exist because of the WTO.  Trump needs the WTO if he’s going to bring trade cases and “enforce” the rules.

One major difference between his original calls for higher tariffs and his seven new trade policy proposals is that the former were themselves clearly in violation of under WTO rules (and also an unconstitutional abuse of executive power).  He’s still calling for higher tariffs—that’s what each of his proposals will lead to.  He’s just twisting that goal to fit better into an existing framework.

Trump hasn’t changed his economically backwards rhetoric about trade at all, but his new proposals are at least potentially compatible with existing law and international commitments. 

They remain, however, the worst possible policies to pursue within those limits.  The fact that Donald Trump and Hillary Clinton are arguing over who believes in those policies most sincerely bodes ill for the future of the U.S. trade agenda.

Overlawyered reaches the end of its 17th year of publication today. I launched it on July 1, 1999, and it’s regularly described as the oldest law blog; at least, no one seems to be able to name one that’s older that’s been continually published for as long in blog form. Cato has published it since 2013, which has greatly helped in keeping it up-to-date on the technical side and running smoothly.

Some recent stories and items at the site: 

You can get more Overlawyered in your social media diet by liking us on Facebook here (and don’t forget to like the Cato Institute too) and following us on Twitter (ditto).

How did people around the world react to the American Declaration of Independence?

On Tuesday, July 9, 1776, the German printer Henrich Miller published the first translation of the Declaration, just four days after the English text was first published by John Dunlop whose printing shop was a few doors away in Philadelphia.

Many French people were eager to see the Declaration, but until 1778, when the French government announced its alliance with the rebels, producing a translation was a dangerous thing to do in France. Alleged translations were anonymous. The earliest-known French translation was published in the Netherlands.

Abroad, the Declaration had the greatest impact on debates leading up to the French Revolution (1789). The French referred frequently not only to the Declaration but also to the Virginia Bill of Rights, state constitutions and bills of rights and the U.S. Constitution. These documents, scholars Elise Marienstras and Naomi Wulf wrote, “acted as an indispensable guide or foil in the conception of their own principles.”

In London, the Russian chargé d’affairs Vasilii Grigor’evich Lizakevich learned the news about the Declaration and on August 13 wrote a dispatch to the first minister of the College of Foreign Affairs, Count Nikita Ivanovich Panin, making clear the significance of the Declaration: “The publication of this document as well as the proclamation of a formal declaration of war against Great Britain offer evidence of the courage of the leadership there.”

Russian newspapers published much information from America, but the actual text of the Declaration was suppressed there for eight decades. Meanwhile, the American Revolution inspired the Russian poet Aleksandr Nikolaievich Radishchev who wrote an ode called “Vol’nost” (Liberty). Apparently Empress Catherine wasn’t pleased, and Radishchev was exiled to Siberia. In December 1825, Russian army officers led the Decembrist Revolt against the autocrat Nicholas I, and they were hanged. Not until 1863, after czar Alexander II implemented some important reforms – notably the abolition of serfdom – was it safe to publish a translation of the American Declaration of Independence in Russia.

Although Spain provided some money to help Americans fight Britain in the Revolutionary War, this was because of the rivalry between those great powers. Spanish monarchs, like the French King Louis XVI who provided crucial assistance for the Americans, wasn’t interested in promoting democracy.

The first Spanish translation of the Declaration doesn’t seem to have been published until about 1868, more than nine decades after the Declaration, when Spain had its own Glorious Revolution. It involved the overthrow of Queen Isabella II and, two years later, resulted in the Spanish Republic. But royalists fought back, and in 1875 the monarchy was restored with Isabella’s son crowned King Alfonso XII.

Scholar Joaquim Olra reflected, “That the Declaration of Independence was so seldom translated into Spanish may be due to various causes. One might be Jefferson’s inclusion of the ‘pursuit of Happiness’ among the ‘certain unalienable rights,’ which goes against the Spanish understanding of the Catholic teaching on happiness, since this was always understood as attainable only in the other world.” Olra added that during the Glorious Revolution, many Spaniards talked about “derechos ilegislables [unalienable rights], an expression that was then completely new in the Spanish political vocabulary and that probably has never been used since.”

The first Japanese translation of the Declaration was in 1854, the year the United States and Japan signed a treaty in Yokohama, after more two centuries of isolation from the outside world. But that translation was based on an American history book written in Chinese.

Fukuzawa Yukichi, a great admirer of Benjamin Franklin’s enterprising spirit, was the first to produce a Japanese translation of the Declaration and the Constitution directly from English. This was a daunting task, because there weren’t any good English-Japanese dictionaries. According to Tadashi Aruga, a Japanese scholar, “There were no readily available Japanese words for such key Western concepts as freedom, equality and right. At first Japanese scholars were able to refer to Chinese translations of Western books. Increasingly, however, Japanese translators had to invent for themselves appropriate Japanese words. They found Japanese words of Chinese origin that could be redefined to convey Western concepts, rediscovered rarely used Chinese words, or created new words by making new combinations of Chinese characters.”

The Chinese translation of the Declaration of Independence wasn’t published until 1901. It appeared in Guomin Bao, a monthly journal published by Chinese students in Tokyo. “The concept of natural rights has been consistently alien to the Chinese mind,” explained translator Frank Li. “Natural and civil rights were terms that could not be found in the vast sea of Chinese political, social, philosophical and literary writing. Yet, on rare occasions, the word ‘freedom’ (ziyou) was used in poetry and other literary works to denote an unconstrained atmosphere. The word had no political or philosophical connotation.”

Since the time of the American Declaration of Independence, dozens of societies – including some communist regimes like Ho Chi Minh’s Vietnam (1945) – have issued declarations of independence. While independence is generally important for a free society, it isn’t enough. Among the many essential elements are popular support for the doctrine of natural rights, secure private property, freedom of association, freedom of contract, freedom of trade, freedom of speech, freedom of the press, freedom of religion, representative assemblies, term limits, a separation of church and state, a separation of powers with checks & balances, and other measures to limit government power. The more of these a society has, the more likely it will be free.

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