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The New York Times, in its infinite wisdom, has figured out how poor states can become rich states: simply put, they need only to increase taxes and spending. It recently publish a piece entitled “the Path to Prosperity is Blue” which suggested that the states that have maintained solid growth the last three decades largely owe that growth to high state government spending, and it suggested that the poor states follow that formula as well. 

The statistical derivation of this conclusion comes from the fact that the wealthiest states of the U.S. tend to be blue states, which have higher taxes and spending. By this logic, spending drives growth. 

While there is indeed a relationship between a state’s spending and its GDP, the causality is completely contrary to what the Times portrays. The reality is that states that become prosperous invariably spend more money. Some of that can represent more spending on public goods–Connecticut does seem to have better schools than Mississippi–but far more of it is simply captured by government interests. While California may have made have created a quality public university system in the 1950s and 1960s with its newfound wealth, the reason its taxes are so high today is because it has a ruinous public pension system it needs to finance. Their high spending isn’t doing its citizenry any good at all. 

New York City and California. two high tax regions, became prosperous in large part because they were (and remain) a hub for immigrants and ambitious, entrepreneurial Americans who helped create the industries that to this day drive the economies of each state. California’s defense and IT industry did benefit from public investment as well, of course, but it was investment from the federal government, and in each case it merely served as a catalyst for the development of industries that went far beyond the government’s initial investment. 

To tell Mississippi that it could become prosperous and pull its citizenry out of poverty if it only doubled taxes is an absurd notion that amounts to economic malpractice. What Mississippi has to do is figure out how to attract and retain talented individuals, which is easier said than done. Unfortunately, the Jacksons and Peorias of the world are not lures to the ambitious Indian engineer or Chinese IT professional, who’d rather take their chances in Silicon Valley, Los Angeles, or anywhere else where the quality of life is good and jobs are plenty.

The lesson to take away from a comparison of the economic status of the fifty states is that economies of agglomeration is a vaguely-understood but critically important phenomenon, location matters, and that it is enormously difficult for states to pivot when their main industries falter. None of these can be said to be driven by government spending.

An updated body camera scorecard highlights a disturbing state of affairs in body camera policy that lawmakers should strongly resist. A majority of the body camera policies examined by Upturn and the Leadership Conference on Civil and Human Rights received the lowest possible score when it came to officer review of footage and citizens alleging misconduct having access to footage, meaning that the departments were either silent on the issues or have policies in place that are contrary to the civil rights principles outlined in the scorecard. Such policies do not promote transparency and accountability and serve as a reminder that body cameras can only play a valuable role in criminal justice reform if they’re governed by the right policies.

Upturn and the Leadership Conference on Civil and Human Rights looked at the body camera policies in fifty departments, including all departments in major cities that have either outfitted their officers with body cameras or will do so in the near future. Other departments that were scored include departments that received at least $500,000 in body camera grants from the Department of Justice as well as Baton Rouge Police Department and the Ferguson Police Department.

Each department was given one of four possible scores in eight categories (personal privacy, officer review, biometric use, footage retention, etc.). Departments were either awarded a red ex, a yellow circle, or a green check, depending on how consistent their body camera policy is with the civil rights principles outlined in the scorecard, with a red ex indicating inconsistency or silence and a green check indicating consistency. A fourth score, the “?”, was awarded to policies that were not publicly available.

Below are the scoring criteria for officer review and footage access for citizens filing complaints:

 

 

 

Forty of the fifty departments received the lowest possible score for “Officer Review,” and not one received a green check.

When it comes to access to footage the scores are marginally better, with four departments being awarded green checks. However, thirty-nine of departments in the “Footage Access” category received the lowest score.

Thirty-five (70%) of the departments received the lowest possible score for both officer review and access to footage. Among these departments are some of the America’s largest, including the Los Angeles Police Department, the New York Police Department, the Houston Police Department, and the Philadelphia Police Department.

Regrettably, the federal government has sent body camera funds to departments with the lowest-scoring officer review and footage access policies. Eleven of the thirty-five departments that received a red ex for officer review and footage access were awarded at least $500,000 in body camera grants by the Department of Justice.

Body cameras can only be tools for increased transparency and accountability in law enforcement with the right policies in place. Unfortunately, Upturn and the Leadership Conference on Civil and Human Rights’ scorecard reveals not only that many departments have poor accountability and transparency policies but also that the Department of Justice does not review these policies as disqualifying when it comes to body camera grants. 

 

Last Thursday, a Chicago police officer shot unarmed 18-year-old Paul O’Neal in the back, killing him. O’Neal reportedly crashed a stolen car into a police vehicle during a chase and then fled on foot. Two officers then fired at O’Neal. This is the kind of incident where body camera footage would be very helpful to investigators. The officer who shot O’Neal was outfitted with a body camera. Unfortunately, the camera wasn’t on during the shooting, raising difficult questions about the rules governing non-compliance with body camera policy. While there is undoubtedly a learning curve associated with body cameras officers who fail to have them on during use-of-force incidents should face harsh consequences.

Body camera footage of O’Neal’s shooting would make the legality of the killing easier to determine. The Supreme Court ruled in Tennessee v. Garner (1985) that a police officer cannot use lethal force on a fleeing suspect unless “the officer has probable cause to believe that the suspect poses a significant threat of death or serious physical injury to the officer or others.” The Chicago Police Department’s own use-of-force guidelines allow officers to use a range of tools (pepper spray, canines, Tasers) to deal with unarmed fleeing suspects under some circumstances, but the firearm is not one of them.

O’Neal’s shooting would be legal if the officer who shot him had probable cause to believe that he posed a threat of death or serious injury to members of the public or police officers. Given the information available, perhaps most significantly the fact that O’Neal was unarmed, it looks likely that O’Neal’s died as a result of unjustified use of lethal force.

So far, the Chicago Police Department has stripped three officers involved in the chase and shooting of police powers, with Superintendent Eddie Johnson saying that the officers violated department policy. O’Neal’s mother has filed a federal civil rights lawsuit, alleging that her son was killed “without legal justification.”

O’Neal’s shooting is clearly the kind of incident police body cameras should film. There are important debates related to body cameras capturing footage of living rooms, children, or victims of sexual assault. But O’Neal’s death is the kind of incident that body camera advocates have consistently wanted on record. The shooting was outside (thereby posing few privacy considerations) and involved lethal use-of-force. Indeed, Chicago’s own body camera policy states that incidents such as O’Neal’s shooting should be filmed.

Investigators reportedly don’t think that the body camera was intentionally disabled, with the officer’s inexperience with the camera or the crash playing a role in the camera not filming the shooting. This can be handled by better training, but lawmakers should consider policies that harshly punish officers who don’t have their body cameras on when they should.

The American Civil Liberties Union (ACLU) proposed one such policy.  Under the ACLU’s body camera policy, if an officer fails to activate his camera or interferes with the footage the following policies kick in:

1. Direct disciplinary action against the individual officer.

2. The adoption of rebuttable evidentiary presumptions in favor of criminal defendants who claim exculpatory evidence was not captured or was destroyed.

3. The adoption of rebuttable evidentiary presumptions on behalf of civil plaintiffs suing the government, police department and/or officers for damages based on police misconduct. The presumptions should be rebuttable by other, contrary evidence or by proof of exigent circumstances that made compliance impossible.

The third policy recommendation is of note in the O’Neal shooting given that O’Neal’s mother has filed a civil federal lawsuit. If the ACLU’s body camera policy were in place the evidentiary presumption would be on behalf of O’Neal’s mother, not the Chicago Police Department. However, the ACLU’s policy doesn’t make it clear how a judge would oversee this shift in evidentiary presumption in such cases.

It’s unrealistic for criminal justice reform advocates to expect that body cameras will be a police misconduct panacea. We shouldn’t be surprised if reports of cameras not being on when they should have been emerge as more and more police departments issue body cameras. Lawmakers should anticipate body camera growing pains, but they should also consider policies that ensure failure to comply with body camera policies results in harsh consequences.

On July 25, Miami-Dade Florida circuit judge Teresa Pooler dismissed money-laundering charges against Michell Espinoza, a local bitcoin seller. The decision is a welcome pause on the road to financial serfdom. It is a small setback for authorities who want to fight crime (victimless or otherwise) by criminalizing and tracking the “laundering” of the proceeds, and who unreasonably want to do the tracking by eliminating citizens’ financial privacy, that is, by unrestricted tracking of their subjects’ financial accounts and activities. The US Treasury’s Financial Crimes Enforcement Network (FinCEN) is today the headquarters of such efforts.

As an Atlanta Fed primer reminds us, the authorities’ efforts are built upon the Banking Secrecy Act (BSA) of 1970. (A franker label would be the Banking Anti-Secrecy Act). The Act has been supplemented and amended many times by Congress, particularly by Title III of the USA PATRIOT Act of 2001, and expanded by diktats of the Federal Reserve and FinCEN. The laws and regulations on the books today have “established requirements for recordkeeping and reporting of specific transactions, including the identity of an individual engaged in the transaction by banks and other FIs [financial institutions].”  These requirements are collectively known as Anti-Money-Laundering (AML) rules.

In particular, banks and other financial institutions are required to obey “Customer Identification Program” (CIP) protocols (aka “know your customer”), which require them to verify and record identity documents for all customers, and to “flag suspicious customers’ accounts.” Banks and financial institutions must submit “Currency Transaction Reports” (CTRs) on any customers’ deposits, withdrawals, or transfers of $10,000 or more. To foreclose the possibility of people using unmonitored non-banks to make transfers, FinCEN today requires non-depository “money service businesses” (MSBs) – which FinCEN defines to include “money transmitters” like Western Union and issuers of prepaid cards like Visa – also to know their customers. Banks and MSBs must file “Suspicious Activity Reports (SARs)” on transactions above $5000 that may be associated with money-laundering or other criminal activity. Individuals must also file reports. Carrying $10,000 or more into or out of the US triggers a “Currency or Monetary Instrument Report” (CMIR).” Any US citizen who has $10,000 or more in foreign financial accounts, even if it never moves, must annually file “Foreign Bank and Financial Accounts Reports (FBARs).”

In addition, state governments license money transmitters and impose various rules on their licensees.

When most of these rules were enacted, before 2009, there were basically only three convenient (non-barter) conduits for making a large-value payment. If Smith wanted to transfer $10,000 to Jones, he could do so in person using cash, which would typically involve a large withdrawal followed by a large deposit, triggering CTRs. He could make the transfer remotely using deposit transfer through the banking system, triggering CTRs or SARs if suspicious. Or he could use a service like Western Union or Moneygram, again potentially triggering SARs. For the time being, the authorities had the field pretty well covered.

Now come Bitcoin and other cryptocurrencies. Cash is of course still a face-to-face option. But today if Smith wants to transfer $10,000 remotely to Jones, he need not go to a bank or Western Union office. He can accomplish the task by (a) purchasing $10,000 in Bitcoin, (b) transferring the BTC online to Jones, and (c) letting Jones sell them for dollars (or not).  The authorities would of course like to plug this “loophole.” But the internet, unlike the interbank clearing system, is not a limited-access conduit whose users can be commandeered to track and report on its traffic. No financial institution is involved in a peer-to-peer bitcoin transfer. Granted, Smith will have a hard time purchasing $10,000 worth of Bitcoins without using a bank deposit transfer to pay for them, which pings the authorities, but in principle he could quietly buy them in person with cash.

In the recent legal case, it appears that this possibility for unmonitored transfers was noticed by Detective Ricardo Arias of the Miami Beach Police Department, who “became intrigued” and presumably alarmed upon learning about Bitcoin at a meeting with the US Secret Service’s Miami Electronic Crimes Task Force. Detective Arias and Special Agent Gregory Ponzi decided to investigate cash-for-Bitcoin sales in South Florida. (I take details about the case from Judge Pooler’s decision in State of Florida v. Michell Abner Espinoza (2016).) Arias and Ponzi went to localbitcoins.com to find a seller willing to make a cash sale face-to-face. Acting undercover, Arias contacted one Michell Espinoza, apparently chosen because his hours were flexible. Arias purchased $500 worth of Bitcoin at their first meeting in a Miami Beach coffee shop, and later purchased $1000 worth at a meeting in a Haagen-Daaz ice cream shop in Miami. Arias tried to make a third purchase for $30,000 in a hotel room where surveillance cameras had been set up, but Espinoza rightly suspected that the currency offered was counterfeit, and refused it. At that meeting, immediately after the failed purchase, Espinoza was arrested. He was charged with one count of unlawfully operating a money services business without a State of Florida license, and two counts of money laundering under Florida law.

Judge Pooler threw out all three charges. Evaluating her arguments as a monetary economist, I find that some are insightful, while others are beside the point or confused. On the charge that Espinoza illegally operated an unlicensed money services business, she correctly noted that Bitcoin is not widely accepted in exchange for goods and thus “has a long way to go before it is the equivalent of money.” Accordingly, “attempting to fit the sale of Bitcoin into a statutory scheme regulating money services businesses is like fitting a square peg in a round hole.” However she also offered less compelling reasons for concluding that Bitcoin is not money, namely that it is not “backed by anything” and is “certainly not tangible wealth and cannot be hidden under a mattress like cash and gold bars.” Federal Reserve notes are money without being backed by anything, and bank deposits are money despite being intangible. Gold bars are today not money (commonly accepted as a medium of exchange).

Judge Pooler further correctly noted that Espinoza did not receive currency for the purpose of transmitting it (or its value) to any third party on his customer’s behalf, as Western Union does. He received cash only as a seller of Bitcoin. Nor, she held, does Bitcoin fall into any of the categories under Florida’s statutory definition of a “payment instrument,” so Espinoza was not operating a money services business as defined by the statute. Bitcoin is indeed not a payment instrument as defined by the statue because it is not a fixed sum of “monetary value” in dollars like the categories of instruments that are listed by the statute. It is an asset with a floating dollar price, like a share of stock.

Here Judge Pooler accepted a key defense argument (basically, “the defendant was not transmitting money, but only selling a good for money”) that was rejected by Judge Collyer in U.S. v. E-Gold (2008). In the e-gold system, Smith could purchase and readily transfer to Jones claims to units of gold held at e-gold’s warehouse. Federal officials successfully busted e-gold for “transmitting money” without the proper licenses. Judge Collyer accepted the prosecution’s argument that selling gold to Smith, providing a vehicle for him to transfer it to Jones, and buying it back from Jones is tantamount to transmitting money from Smith to Jones. Of course the Espinoza case is different in that Espinoza did not provide a vehicle for transmitting Bitcoin to a third party, nor did he buy Bitcoin from any third party.

On the charge of money laundering, Judge Pooler found that there was no evidence that Espinoza acted with the intent to promote illicit activity or disguise its proceeds. Further, Florida law is too vague to know whether it applies to Bitcoin transactions. Thus: “This court is unwilling to punish a man for selling his property to another, when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning.”

I expect that FinCEN will now want to work with the State of Florida, and other states, to rewrite their statutory definitions of money services businesses and money laundering to reinforce their 2013 directive according to which Bitcoin exchanges must register as MSBs and so submit to “know your customer” and “file reports on your customer” rules. If even casual individual Bitcoin sellers like Espinoza must also register as MSBs, that will spell the end to legal local Bitcoin-for-cash trades.

[Cross-posted from Alt-M.org]

Last Friday, President Obama quietly signed legislation requiring special labeling for commercial foods containing genetically modified organisms (GMOs)—plants and animals with desirable genetic traits that were directly implanted in a laboratory. Gene modification typically yields plants and animals that take less time to reach maturity, have greater resistance to drought or disease, or have other desirable traits like sweeter corn or meatier livestock. Yet some people oppose these scientific advances, for reasons that aren’t all that clear.

Most of the foods that humans and animals have consumed for millennia have been genetically modified. Usually this was done through the unpredictable, haphazard technique of cross-fertilization, a technique whose development marked the dawn of agriculture. Yet the new law targets only the highly precise gene manipulations done in laboratories. The labeling requirement comes in spite of the fact that countless scientific organizations—including the American Association for the Advancement of Science, the National Academy of Sciences, the World Health Organization, the American Medical Association, and the British Royal Society—have concluded that GMOs pose no more threat to human health than new organisms developed through traditional methods.

Accordingly, some Obama critics have responded to his bill-signing by sarcastically quoting his earlier vows to rely on science when policymaking. The cleverer critics have even asked what comes next: dihydrogen monoxide warnings? Labels that foods contain no fairies or gremlins?

The critics overlook the incredible weakness of the new law, which can be satisfied with something as unobtrusive as a nondescript QR code linking to a GMO notice. In fact, anti-GMO activists oppose the new law because it preempts more rigorous regulation. And that’s exactly what President Obama and Congress intended to do.

The immediate reason for the new legislation is a more onerous 2014 Vermont law that would have affected the food supply chain, raising consumer prices nationally. Similar requirements were percolating in other states, advanced by anti-GMO activists (and agribusiness groups that don’t want competition from GMO products). With a stroke of the pen, President Obama and federal lawmakers have used a bad but meager requirement to counteract those far worse state laws.

This is not the only time the Obama White House has helped consumers and advanced science, to the frustration of the anti-GMO crowd. His administration previously approved the AquAdvantage salmon that had languished in bureaucratic review hell for decades.

Cato’s Regulation has covered GMOs and the broader biotech controversy for decades. You can see a couple of those articles if you click on the last two links above. Case Western Reserve law professor Jonathan Adler will have an article on the new labeling law in the magazine’s fall issue.

This summer, the United Nations High Commissioner for Refugees (UNHCR) announced that the worldwide refugee crisis, the worst in absolute terms since World War II, had reached a new record high. Recognizing that the refugee crisis is beyond what governments alone can handle, UNHCR has urged nations to create “privately sponsored admission schemes,” allowing the private sector to shoulder the burden of resettlement.

Many governments have heeded this call, but despite the strong philanthropic traditions among Americans, the United States has still not created such a program. There are many questions that need to be answered before the government can move forward. The most pressing is how to select the refugees for resettlement. Here are several different models for sponsorship that policymakers should consider:

1) Use the current system without an option for sponsors to select specific refugees. Except in a few rare cases (see #3 below), the State Department, UNHCR, or one of UNHCR’s non-governmental partner organizations identifies refugees in need of resettlement. While sponsors would not select the refugees that they wished to sponsor under this model, the government could, as it does when placing refugees with the nonprofits that coordinate all resettlement today, match refugees with sponsors that it felt were best suited to meet their needs. This method’s primary virtue is that it would be the simplest to administer and implement because it requires no further changes to the system.

2) Sponsors choose from a pool of refugees selected under the current system. In this version, sponsors would choose from refugees already identified under the normal refugee vetting and identification process who are designated for resettlement, based on information that the State Department already collects. This was how American sponsors selected refugees under the Reagan-era private refugee sponsorship program. Depending on the sponsorship model, this could impose new administrative costs on the agency to provide oversight of sponsors and protect against trafficking, but would create a much stronger incentive for sponsors who are interested in aiding a particular group of refugees to step forward and actually sponsor them.

3) Expand family sponsorship under the current system. The Priority 3 (P-3) family reunification program provides for a very narrow group of refugees to be “sponsored,” albeit without the financial commitment that the UNHCR model proposes. P-3 allows U.S. residents to ask the State Department to allow their family members abroad to apply directly to the U.S. refugee program. P-3 is rarely used because it is limited to certain nationalities, it applies only to U.S. residents who entered as refugees, and accepts only their immediate family members—minor children and spouses.

Removing these restrictions and opening it up to extended family members, as was done for Bosnians in the 1990s under the P-4 and P-5 programs, could provide a basis for a large private sponsorship program. P-3 “sponsors” are also not required to take financial responsibility for the family member. In order for private sponsorship to build on the total number of refugees admitted, these sponsors would either need to compensate the government for its expenses or provide services that the government currently provides on its behalf.

The benefit of family sponsorship is that DNA testing can accurately verify a familial relationship, alleviating concerns about human trafficking and other potential security issues. While DNA testing can be expensive and time-consuming, family sponsorship would provide a powerful incentive for Americans to sponsor refugees.

4) Allow sponsors to select any refugee that they choose. While simplest to state, this method would be the most difficult and costly to administer. A person who submits a sponsorship application would need to be thoroughly vetted to guard against trafficking, an entirely new procedure that the agency would need to develop. If the refugee had not already been identified by UNHCR, an NGO, or the State Department, a new evaluation would have to be conducted to verify their claims. Homeland Security officials would also need to interview the refugee (under the current process, they set up in a camp and identify refugees for resettlement on site.)

Nevertheless, these issues are worth overcoming. Canada, which has the most successful private sponsorship model in the world, has an open sponsorship model that allows sponsors to name any specific person who meets the definition of a refugee. Sponsors select refugees both with and without family relationships—though family-linked cases dominate the program—and more than 225,000 refugees have been privately sponsored since 1979 under the Canadian model.

No matter what model the agency chooses to go with, the American private sector could do quite a lot to alleviate the refugee crisis. Many businesses are already contributing millions of dollars to aid refugees overseas, and major U.S. philanthropists have said that they want to see a private refugee program created in the United States. It is time that the government allowed Americans to save refugees on their own.

Earlier this month, the U.S. Court of Appeals for the D.C. Circuit (CADC) ruled that the U.S. Department of Justice Federal Criminal Discovery Blue Book for prosecutions were exempt from Freedom of Information Act (FOIA) requests. The National Association of Criminal Defense Lawyers (NACDL) filed the suit to make the book public, and for good reason.   For background, criminal discovery is the process by which a prosecutor’s office turns over evidence to the defense team that is relevant to the criminal case before trial. Particularly, evidence that might be helpful or exculpatory to a criminal defendant must be turned over under Brady v. Maryland (1963) and subsequent cases. For example, if investigators independently found an eyewitness that supports a defendant’s alibi, or discovers that a witness or police officer has a history of dishonesty, that information must be turned over to the defense counsel in the furtherance of justice. Such evidence is known as “Brady material.”    The origin of NACDL’s case dates back to the bungled prosecution of the late Sen. Ted Stevens (R-AK). A federal judge threw out Stevens’ 2008 conviction for corruption because the DOJ hid evidence from the defense team, including contradictory statements by a star witness that were crucial to proving Stevens’ alleged criminal intent. Furthermore, the judge ordered an independent inquiry into the handling of the case that resulted in a damning 514-page report that faulted the DOJ for its mismanagement and “egregious misconduct” in the case.

 The prosecution and conviction ended the career of a long-serving United States Senator. If the DOJ could do that to him, they may do (and probably have done) that to people much less powerful. Consequently, Congress held hearings to consider whether or not to pass new legislation to ensure discovery would be properly handled within the Department of Justice. But as NACDL wrote in their 2014 complaint: DOJ asserted that federal legislation was unnecessary to prevent future discovery abuses because it had instituted various internal reforms.  During the hearings, DOJ asserted it had implemented “rigorous enhanced training” to ensure that “prosecutors and agents [have] a full appreciation of their responsibilities” under federal law. As part of this effort, DOJ stated that it had created a “Federal Criminal Discovery Bluebook” that “comprehensively covers the law, policy, and practice of prosecutors’ disclosure obligations” under Brady v. Maryland, 373 U.S. 83 (1963), Giglio v. United States, 405 U.S. 150 (1972), and their progeny. According to DOJ, the Blue Book was “distributed to prosecutors nationwide in 2011” and “is now electronically available on the desktop of every federal prosecutor and paralegal.” [internal citations omitted] In short, the Blue Book should assure everyone that DOJ prosecutors will play by the rules…but everyone will just have to take the DOJ at their word on that because the Blue Book is off-limits to the public.   Although the CADC agreed with the lower court ruling and the DOJ’s interpretation of current precedent, Senior Judge David Sentelle wrote a concurrence to the opinion, joined by Senior Judge Harry Edwards, that read:  It is often said that justice must not only be done, it must be seen to be done. Likewise, the conduct with the U.S. Attorney must not only be above board, it must be seen to be above board. If the people cannot see it at all, then they cannot see it to be appropriate, or more is the pity, to be inappropriate. I hope that we shall, in spite of Schiller, someday see the day when the people can see the operations of their Department of Justice.    In short, I join the judgment of the majority, not because I want to, but because I have to.

Such a concurrence signals that the guiding precedent in Schiller should be re-examined and such information vital to the public interest should be made public. “Just trust us” is not a reasonable guarantee of governmental and prosecutorial accountability.

The NACDL released a statement that they will file for an en banc hearing at CADC. You can read the opinion and concurrence here. Judge Sentelle delivered the B. Kenneth Simon Lecture on Constitutional Thought at Cato on Constitution Day 2013 that you can read here.

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.

With the end of Convention season mercifully upon us, we thought we ought to have a look at what the party platforms have to say about energy and the environment, with an eye on climate change policies in particular.

We’ll start out with the Democratic Party Platform.

The Democrats are of the mind that human-caused climate change is one of the major problems facing the country/world today, describing it as “an urgent threat and a defining challenge of our time.”

It’s unclear that the voters feel that way… although part of the Democrats strategy for this election seems to be to try to persuade them otherwise.

The Democratic platform is chock full of government actions that promise to initiate, broaden and extend the current set of rules, regulation, and orders seeking to reduce our emissions of carbon dioxide (and other greenhouse gases), largely by way of lessening (on the way to eliminating) our reliance on fossil fuels as our primary source of energy production. This collection of promised federal actions is large both in scope and number and includes everything from pursuing a carbon tax

Democrats believe that carbon dioxide, methane, and other greenhouse gases should be priced to reflect their negative externalities, and to accelerate the transition to a clean energy economy and help meet our climate goals.

to furthering regulatory control

Democrats are committed to defending, implementing, and extending smart pollution and efficiency standards, including the Clean Power Plan, fuel economy standards for automobiles and heavy-duty vehicles, building codes and appliance standards

to rallying international efforts

In the first 100 days of the next administration, the President will convene a summit of the world’s best engineers, climate scientists, policy experts, activists, and indigenous communities to chart a course to solve the climate crisis. Our generation must lead the fight against climate change and we applaud President Obama’s leadership in forging the historic Paris climate change agreement. We will not only meet the goals we set in Paris, we will seek to exceed them and push other countries to do the same by slashing carbon pollution and rapidly driving down emissions of potent greenhouse gases like hydrofluorocarbons.

and even to prosecuting folks who don’t toe to party line

Democrats also respectfully request the Department of Justice to investigate allegations of corporate fraud on the part of fossil fuel companies accused of misleading shareholders and the public on the scientific reality of climate change.

All and all, an extremely ambitious plan:

We are committed to a national mobilization, and to leading a global effort to mobilize nations to address this threat on a scale not seen since World War II.

The Republican sees things almost completely differently.

The Republican Party Platform does not share the Democrats’ concerns that climate change is a major pressing issue. Instead it describes how the severity of the issue has been grossly distorted through “intolerance toward scientists and others” who dissent from the “orthodoxy.”

The Republican platform wants to both reel in most for the current climate efforts put in place by the Obama Administration as well as put the kibosh on any new federal actions on reducing carbon dioxide emissions through restricting energy choice. As for current actions, the Platform includes things like

We will likewise forbid the EPA to regulate carbon dioxide, something never envisioned when Congress passed the Clean Air Act.

and

We reject the agendas of both the Kyoto Protocol and the Paris Agreement, which represent only the personal commitments of their signatories; no such agreement can be binding upon the United States until it is submitted to and ratified by the Senate.

and

We demand an immediate halt to U.S. funding for the U.N.’s Framework Convention on Climate Change (UNFCCC) in accordance with the 1994 Foreign Relations Authorization Act.

and

We oppose any carbon tax.

Instead, the Republicans want to ease restrictions and encourage development of any energy production methods that are competitive in the free marketplace. This includes support for

the development of all forms of energy that are marketable in a free economy without subsidies, including coal, oil, natural gas, nuclear power, and hydropower.

as well

the cost-effective development of renewable energy sources — wind, solar, biomass, biofuel, geothermal, and tidal energy — by private capital.

and for

lifting restrictions to allow responsible development of nuclear energy, including research into alternative processes like thorium nuclear energy.

Ultimately, the Republicans

firmly believe environmental problems are best solved by giving incentives for human ingenuity and the development of new technologies, not through top-down, command-and-control regulations that stifle economic growth and cost thousands of jobs.

And then there is the Libertarian Party Platform. This platform is considerably less wordy than their Democratic or Republican counterparts without any direct mention of climate change. Here are the sections on the Energy and the Environment in their entirety:

2.2 Environment

Competitive free markets and property rights stimulate the technological innovations and behavioral changes required to protect our environment and ecosystems. Private landowners and conservation groups have a vested interest in maintaining natural resources. Governments are unaccountable for damage done to our environment and have a terrible track record when it comes to environmental protection. Protecting the environment requires a clear definition and enforcement of individual rights and responsibilities regarding resources like land, water, air, and wildlife. Where damages can be proven and quantified in a court of law, restitution to the injured parties must be required.

2.3 Energy and Resources

While energy is needed to fuel a modern society, government should not be subsidizing any particular form of energy. We oppose all government control of energy pricing, allocation, and production.

It you like big government, the Democrats have a deal for you. If you prefer that the federal government largely stay out of our energy markets, then you’ll find much to like in either the Republican or Libertarian Platforms.

In our opinion, this presidential election should not be about climate change itself as we don’t believe that the risks and challenges it presents are greater than the ones that are posed by its proposed “solutions”(see our soon-to-be-updated book Lukewarming: The New Science that Changes Everything for reasons why we think the way we do). But, this election should be about climate change policies. A Democratic Administration will seek a further expansion of the reach of the federal government into our daily lives as the impacts of their vigorous pursuit of reducing carbon dioxide emissions increasing find their way into all aspects of our daily lives—reducing choice and increasing costs of all manner of things, while having minimal effect on the actual climate. As it stands now, the federal government’s reach has grown perilously. It is high time to insure the Constitutional limitations placed upon it are restored and respected.

The debate over the Seattle experiment has generated more heat than light to this point. A new report from Jacob Vigdor and his colleagues at the University of Washington attempts to shed some light on the effects of the first incremental stage of the increase. They use data from the state’s Employment Security Department from when the law was passed through the fourth quarter of 2015, at which point the minimum wage stood at $11 per hour. This does not include the second stage of increases that took place January 1, 2016, or the further increases that will eventually bring it to $15 per hour and much higher thereafter. The early results show the mixed effects of the first incremental increase, there does not appear to be much evidence of firms being driven out of business, and some low-wage workers have seen their hourly wage increase, it also reduced the employment rate and hours, with the end result for these low-wage workers being “ambiguous and likely fairly small.”

The report only analyzes the first initial stage of the scheduled minimum wage increases, as the authors note and as illustrated in Figure 1. In addition, due to the timing of the study, it can only capture the short-run effects of this first incremental increase. As such, this analysis cannot provide insight into the impact of future additional increases to the minimum wage or what the longer-run effects might be.

Figure 1

Seattle Minimum Wage Schedule and Period Analyzed

Source: Seattle Minimum Wage Study Team, 2016.

They employ multiple strategies to try to discern the impact of the minimum wage increase. In the most straightforward, the “observable change,” they simply compare trends in Seattle before and after the increase took place. This might be affected by differences in underlying trends that would lead to spurious findings, so they include a number of other comparisons, like King County excluding Seattle, but their preferred specification is a “Synthetic Seattle” consisting of an aggregate of zip codes in the state with similar levels and trends to Seattle. They then compare what happened in Seattle, which was subject to the minimum wage increase, to “Synthetic Seattle” which had no minimum wage increase but in other ways was very similar. 

As might be expected, the share of workers with wages below $11 an hour decreased significantly, but this was also true to some extent outside of Seattle, which suggest much of this decline might be due to improvements in the broader economy rather than directly attributable to the minimum wage increase. They estimate the minimum wage increase responsible for a $0.73 rise in median hourly earnings.

While the employment rate of low-wage workers in Seattle increased by 2.6 percentage points over the period, it increased less than it did in their preferred comparison Synthetic Seattle, where it increased by 3.8 percentage points, leading them to conclude “the Minimum Wage Ordinance modestly held back Seattle’s employment of low-wage workers relative to the level we could have expected.” Evaluations simply looking at the total number of low-wage jobs in Seattle before and after the increase took effect would have observed a substantial increase in the total number of jobs, and may have erroneously concluded that there were no adverse employment effects of the minimum wage increase. While it is true that the discrete level of jobs increased, there is some evidence that it reduced the employment rate of lower-wage workers compared to what it otherwise would have been.

A similar dynamic can be seen with hours worked for this lower-wage group: due to an healthy broader economy, the hours worked increased relative to Seattle’s history, but improved less than it did in the control groups, and “on balance, it appears that the Minimum Wage Ordinance modestly lowered hours worked” by 4.1 hours per quarter compared to their preferred comparison, Synthetic Seattle.

Table 1

Impact on Low-Wage Workers

 

Source: Seattle Minimum Wage Study Team, 2016.

In aggregate the authors find some evidence of a reduction in hours per employee, and minimal evidence of an impact on the number of persistent jobs in industries with a high proportion of low-wage workers. They also find an increase in the rate of business closures and business openings, and suggest this could be in line with other research that found that minimum wage increases prompt in firm composition from more labor intensive companies to those that rely more on capital.

We don’t yet know what the long-term effects of the minimum wage increase will be. This study only encompasses the first step of the phase-in, and later scheduled increases will raise the wage floor to levels that are outside the scope of most past U.S. experiences, making it difficult to estimate the magnitude of potential effects. Some of the minimum wage literature has found that the long-run effects of an increase are greater in magnitude, as the authors of this report note saying “in the long-run, certain industries affected by the minimum wage, such as the fast food industry, have more opportunity to relocate, change the composition of their workforce, or invest in technologies that reduce their need for labor.” In addition a high wage city like Seattle implementing this incremental step during a time of relatively strong broader economy limit how applicable these findings might be for other places.

The initial results suggest that, at least in this initial stage, the sky is not falling, but there are signs that the increase did have unintended consequences, reducing opportunities for low wage workers that leave the net effect of the increase on these targeted workers ambiguous. Because the minimum wage is poorly targeted to poor households, think teenagers in relatively affluent families who are affected by the minimum wage increase, this ordinance likely has even less of an impact in terms of poverty reduction. These are just preliminary results from the first step of a minimum wage increase in a relatively high-wage city. The adverse effects of further increases and the long-run responses could be much larger and more costly.

Plenty of libertarians were wary of seeing former Massachusetts governor Bill Weld as the Libertarian Party’s nominee for vice president. Even those of us who haven’t had anything to do with the LP would like to see the party represented by, you know, libertarians. Weld, who seems like a nice man and was apparently a decent governor, is the living expositor of the difference between a libertarian and someone who’s “socially liberal and fiscally conservative.”

Case in point: this week’s ReasonTV interview, where Weld praises Justice Stephen Breyer and Judge Merrick Garland, who are the jurists most deferential to the government on everything, whether environmental regulation or civil liberties. Later in the same interview, he similarly compliments Republican senators like Mark Kirk and Susan Collins, who are among the least libertarian of the GOP caucus in terms of the size and scope of government and its imposition on the private sector and civil society.

My point isn’t to criticize the Weld selection as a matter of political strategy. Indeed, he seems to have brought a certain respectability to a party that is rarely taken seriously. And if that moves the national political debate in a more libertarian direction, bully.

But then look at the most recent news made by the man at the top of the LP ticket. Former New Mexico governor Gary Johnson, in an interview with (my friend) Tim Carney of the Washington Examiner, calls religious freedom “a black hole” and endorses a federal role in preventing “discrimination” in all its guises. More specifically, he’s okay with fining a wedding photographer for not working a gay wedding – a case from New Mexico where Cato and every libertarian I know supported the photgrapher – and forcing the Little Sisters of the Poor to pay for contraceptives (where again Cato and libertarians supported religious liberty). He also bizarrely compare Mormonism to religiously motivated shootings.

In other words, Johnson doesn’t just come off as anti-religion, but completely misses the distinction between public (meaning government) and private action that is at the heart of (classical) liberal or libertarian legal theory. That’s a shame: it makes him no different than progressives in that regard – or social conservatives, who miss the distinction in the other direction, restricting individual rights in addition to government powers.

And so, what we’re left with is a Libertarian Party ticket that’s positioning itself as “moderate” more than anything else. Again, that may well be a clever political ploy – though it makes the dubious bet that there are more #NeverHillary Democrats than #NeverTrump Republicans – but it’s not very encouraging for libertarians who want to “vote [their] conscience.”

When Secretary of State John Kerry promised to respond more vigorously to the worldwide refugee crisis last year, more than 85 members of Congress signed onto a bill to shut down the entire refugee program. Texas Congressman Brian Babin, the bill’s sponsor, explained their view: “The most persecuted religious minority in the world have been Christians, and of these 70,000, soon to be 100,000 per year coming in from the Middle East, less than four percent are Christian.”

Rep. Babin is right to be concerned for Christian refugees, but his facts about the refugee program are quite wrong. A majority of the 70,000 refugees that the United States accepted last year were from areas other than the Middle East. The U.S. refugee program has not only accepted a higher percentage of Christians than he stated, it has actually accepted more Christians than Muslims, even after President Obama’s changes at the beginning of this year.

A shutdown of the refugee program would injure refugees of all faiths.

Because most Syrian refugees are Muslim, and Syria has received the bulk of the attention recently, many people have come to associate the refugee program exclusively with the Middle East and Muslims. But the reality is that the majority of refugees come from outside the Middle East. More than 60 percent of refugees come from areas that are not the “Near East” or “South Asia,” according to data from the State Department. As can be seen below, this share is down from 2014.

Figure 1: Refugees in U.S. Refugee Program by Region (FY 2014-2016)

Source: State Department

It’s also incorrect to associate the refugee program primarily with Muslims. The State Department data show that the majority of the refugees admitted under the U.S. refugee program so far this year subscribe to religions other than Islam. The share of Muslims has steadily risen as the refugee crisis in Iraq and Syria has worsened, but not at the expense of Christians, whose share has remained level since 2014.

Figure 2: Refugees in the U.S. Refugee Program by Religion (FY 2012-2014)

 

Source: State Department

President Obama has also not overseen any dramatic changes to the religious makeup of the refugee program compared to his predecessor. In the years available, the Bush administration admitted a slightly higher share of Christians and slightly lower share of Muslims.* Other religions saw the largest percentage increase during the Obama years (5.6 percent), but overall the makeup is still similarly divided.

Figure 3: Refugees in the U.S. Refugee Program by Religion Under the Last Two Administrations*

Source: State Department

The lower share of Christian refugees, though still larger than for other religions, could create the misleading impression that Christians have done somewhat worse in recent years. This is decidedly not the case. In absolute terms, significantly more refugees of all faiths, including Christians, were accepted during President Obama’s final seven years than during his predecessor’s final seven years (data is unavailable before January 2003).* In fact, 27,000 more Christians escaped persecution under the current administration.

Figure 4: Refugees in U.S. Refugee Program By Religion Under the Last Two Administrations

Source: State Department

Adherents of religions other than Islam compose a substantial portion of the refugee flows even from majority Muslim countries. While most of the refugees admitted from these nations are Muslim, about a third are not. The refugee program admits large numbers of non-Muslims from areas in which they are the minority, far in excess to their proportion of the populations (Figure 5). More than 80,000 Christians escaped persecution in Muslim majority countries since January 2003. 

Figure 5: Muslim and Non-Muslim Refugees in the U.S. Refugee Program from Majority Muslim Countries

Source: State Department, CIA World Factbook

Banning refugees—from any area in the world—would hurt members of many faiths. The question for congressmen like Rep. Babin is whether they should allow their fears over Muslims to trump their compassion for Christians. Considering no Muslim refugee has carried out a deadly attack in the United States in the history of the modern refugee program, we should overcome those fears. The United States should do more to provide safety for Christian refugees but that does not require—nor should it prompt—doing less to help Muslim and other non-Christian refugees.

 

*FY 2009’s refugee allocation was apportioned under President Bush.

Judging from my Facebook page, the internet is blowing up with arguments that, in November’s election, voters must cast their ballots for a major-party candidate even if they dislike that candidate, and they must not vote for a third-party candidate.

These arguments go like this:

Third-party voters say neither major-party presidential candidate is worthy of their vote. But in fact, [major-party candidate the writer supports] is not nearly as objectionable as [other major-party candidate]. If [other major-party candidate] wins, terrible things will happen, but if [major candidate the writer supports] wins, terrible things won’t happen. So stop selfishly thinking about a third-party candidate, and cast your ballot for [major-party candidate the writer supports]!

No doubt this argument is appealing to the writer and other major-party backers. But even if we grant the writers’ assertion about the virtues of their preferred candidate AND their belief that a third-party candidate can’t win the presidency, it literally is irrational and–worse–it deprives voting of perhaps its greatest virtue.

The Real Clear Politics “Battle for White House” electoral map currently shows only 13 states, plus one Maine congressional district, to be toss-ups in the presidential race. Six more are rated as “leaning” toward Democrat Hillary Clinton and six (plus a Nebraska congressional district) are leaning toward Republican Donald Trump. RCP categorizes the other 25 states and the District of Columbia as being “solidly” (or stronger) in either the Clinton or Trump columns.

For those latter 25 states plus D.C., a would-be third-party voter’s grudging ballot for a major-party candidate is literally meaningless in deciding the presidency. The state’s Electoral College electors will go to Clinton or Trump regardless of how that voter casts his or her ballot–and the voter certainly must know that. So if that person chose to forgo voting for a third-party candidate and instead voted for a major party candidate anyway, that voter made an irrational decision.

What about the other 25 states? Yes, there is a possibility that a voter’s ballot could matter—but only if that voter’s state (or congressional district, in the states where electors are awarded by distict) popular vote is perfectly evenly divided +/– one vote , and the national electoral college is decided by that state’s (or district’s) Electoral College electors. (Notice that I used the qualifier “only if,” which means there are still more conditions that need to be met in order for the one ballot to prove pivotal.) In this case, the probability that the voter’s ballot would be meaningful isn’t zero, but it practically is.

So does this mean that people shouldn’t vote for president? It does if their sole motivation is to cast the deciding ballot. Voting has costs in time and money (e.g., gas money, bus fare), and it is pointless to absorb those costs for no benefit.

But there is a sound reason to vote (for some people, at least): for the pleasure of expressing one’s political preference. If voting for one of the major-party candidates provides that pleasure, then the voter should do it. For some voters, third-party candidates provide that pleasure because third parties are strongly associated with specific political causes (e.g., liberty, the environment, federalism) that many people care about deeply. Expending time and money to enjoy that pleasure is as sensible as spending time and money for the pleasure of reading a good book, or watching a baseball game, or eating chocolate.

So if a person wants to vote for Jill Stein in order to signal concern for the environment and disgust with the major party candidates, it’s perfectly sensible to do so. The same is true for the person who wants to vote for Gary Johnson to show support for individual liberty and free markets. It’s even sensible to vote for the perennial write-in favorite Mickey Mouse, to indicate dissatisfaction with American politics. And, of course, one can always follow H.L. Mencken’s advice and not vote at all.

Today, on Milton Friedman Legacy Day, the Nevada Supreme Court will hear oral arguments in two lawsuits against the state’s education savings account (ESA) law. Under the law, students who leave their assigned district school can receive a portion of the funds that would have been allocated to them in their district school (about $5,100 to $5,700 depending on family income). The parents can use those funds to customize their child’s education by purchasing a wide variety of educational good and services, including private school tuition, text books, online courses, homeschool curricula, and more. They can even save funds for future expenditures. A similar program in Arizona has proved highly popular among parents.

However, a group dedicated to protecting the district school monopoly is asking the state supreme court to strike down the program before it goes into effect:

“I fear that, because this is the most aggressive model for this program, the privatization of education … will spread like wildfire,” said Electra McGrath-Skrzydlewski, whose 12-year-old daughter is a student in the Clark County School District.

McGrath-Skrzydlewski joined several parents last October to sue the state in a Carson City court, challenging SB302 on the grounds that it diverts money meant “exclusively” for public schools to private schools and other private expenses. Their complaint also claims the bill violates a constitutional requirement that lawmakers create a “uniform” system of public schools.

As Neal McCluskey noted on Twitter, even the opponents of the ESA assume that parents want it. And they’re right: more than 8,000 eager families have already applied.

In separate case, the ACLU claims that the ESA law violates the state constitition’s “uniformity” clause as well as a separate constitutional provision prohibiting the state funding of religious instititions. However, as I’ve discussed previously, these arguments do not hold water. The ACLU wants the court to interpret the constitutional mandate that the state create a system of “uniform” and nonsectarian schools to mean that it must exclusively fund those schools. Fortunately, the lower court rejected this strained interpretation, holding instead that “the Nevada constitution requires the state to establish a non-sectarian system of public schools, but it is also empowered to encourage education by other means that are not limited to non-sectarian schooling.”

Likewise, the lower court rejected the ACLU’s Blaine Amendment claim, holding that it “was not intended to preclude any expenditure that has an incidental benefit to religion, where such is made for a primary secular purpose,” and that the ESA “was enacted for the valid secular purpose of providing financial assistance to parents to take advantage of educational options available to Nevada children.”

For more information on the two cases and to watch live feed of the oral arguments beginning at 1:00pm EDT, go to Choice Media’s website.

Nevada Parents Stand Up for School Choice

The 2015 Medicaid actuarial report came out last week, and with it another entry in the series of upward revisions to how much Medicaid would spend on the adults made newly eligible by the ACA’s Medicaid expansion. In 2015, per enrollee costs for the adults made newly eligible by the ACA’s Medicaid expansion were estimated to be 49 percent higher than the previous projection. 

This is not the first upward revision. In last year’s report, In earlier estimates these newly eligible adults were projected to have average benefit costs one percent lower than adults that were already eligible, but in last year’s report this expansion population was instead estimated to have average expenditures 19 percent higher. So per enrollee costs, previously estimated to be $4,636 in 2014, were revised up to $5,517.

Even after that correction, last year’s report projected that per enrollee costs would fall significantly in the second year of the expansion because they estimated that the effects of pent-up demand and adverse selection would be much less of a factor. In that report, actuaries estimated that per enrollee costs for this group would fall significantly, from $5,571 in 2014 to $4,281 in 2015. Instead, the new report estimates that per enrollee costs actually climbed to $6,366 in 2015, as pointed out by Brian Blase at The Apothecary

Figure 1

Per Enrollee Costs for Newly Eligible Adults, by Year of Report

Source: 2013, 2014, and 2015 Medicaid Actuarial Reports.

The new report suggest that much of the discrepancy in estimates can be attributed to states putting more of these newly eligible enrollees in managed care which have capitation rates that were much higher anticipated. There is a high degree of uncertainty whenever actuaries have to project expenditures and costs for newly eligible groups like this, and it is possible that when more data for this newly eligible population and different adjustments for risk-sharing arrangements, the per enrollee expenditures for this group could be slightly lower. That said, that the estimates from 2014 report for the following year were so much lower should raise some concerns. Many states are in a tight fiscal position and have already had to make adjustments to other areas of their budgets. If the costs of this expansion population continue to be much higher than initial projections, it will place even more pressure on their already strained budgets.

Figure 2

Per Enrollee Costs for Newly Eligible Adults Through 2022, by Year of Projection

Source: 2013, 2014, and 2015 Medicaid Actuarial Reports.

This uncertainty, and the implications it could have for state and federal costs, is illustrated in Figure 2. By 2022, projected per enrollee costs for this newly eligible population is more than 40 percent higher in the 2015 report than it was in the previous two years. The outer years of this projection are most important from the state perspective because it is when they will begin to bear some of the costs of the Medicaid expansion population. States that have moved forward with the Medicaid expansion might be forced to pursue significant fiscal adjustments to other aspects of their Medicaid programs, or to other components of their budgets.

The actuaries now project Medicaid outlays to be almost $250 billion higher than last year’s estimate (over the nine years where they both have projections). This projected increase comes even as they ratcheted down their assumption about how many states would expand Medicaid in the future, from 60 percent of the potential expansion population to only 55 percent.  If the recent trend continues and this newly eligible population continues to be much more expensive than anticipated, the expansion could end up costing much more. 

In a Wall Street Journal oped today, Naomi Schaefer Riley discusses federal policies toward American Indians:

There are almost no private businesses or entrepreneurs on Indian reservations because there are no property rights. Reservation land is held in trust by the federal government and most is also owned communally by the tribe. It’s almost impossible for tribe members to get a mortgage, let alone borrow against their property to start a business. The Bureau of Indian Affairs regulates just about every aspect of commerce on reservations.

Instead of giving Indians more control over their own land—allowing them to develop natural resources or use land as collateral to start businesses—the federal government has offered them what you might call a loophole economy. Washington carves out a sector of the economy, giving tribes a regulatory or tax advantage over non-Indians. But within a few years the government takes it away, in many cases leaving Indian tribes as impoverished and more disheartened than they were before.

I explored the same themes in a 2012 essay at DownsizingGovernment. My essay traces the history of Indian policies back to our nation’s founding and concludes:

American Indians and Alaskan Natives have a unique history and a special relationship with the federal government. However, subsidies and regulatory preferences are not a good way to create broad-based and durable economic growth for these peoples. Subsidies are also inconsistent with the movement toward Indian self-determination. A better way to generate a lasting rise in Indian prosperity is to make institutional reforms to property rights and tribal governance on reservations.

The problem is that Washington is a massive screw-up these days in so many ways. There is so much to repeal and reform, but members of Congress don’t seem to have the time, patience, or incentive to fix the failures that they have created, including the failures of Indian policies.

It is true that the solutions to Indian poverty and related problems will not be easy to implement, but I do think that free markets and property rights is what Indians should aim for. I found that,

One of the historic reasons why the federal government variously exploited, coddled, and micromanaged Indians was because of the belief that they were primitive socialists with no understanding of market institutions such as property rights. But research has found that stereotype to be false. One recent study argues that “most if not all North American indigenous peoples had a strong belief in individual property rights and ownership.” Various tribes in North America developed systems of property rights in farm lands, garden plots, horses, fishing streams, fur-trapping territories, hunting grounds, and other resources. Research has also found that Indians were very entrepreneurial and had extensive trading networks.

Kudos to Ms. Riley for tackling this important subject that Congress is ignoring. Her new book is titled The New Trail of Tears: How Washington Is Destroying American Indians. But you can get a free introduction to the general issues by reading my “Indian Lands, Indian Subsidies, and the Bureau of Indian Affairs.”

This weekend Virginia and Maryland begin a sales tax holiday for the worthy-sounding goal of helping to reduce the cost for parents shopping for school clothes and supplies for their children. But a sales tax holiday makes for terrible tax policy.

The problem is that most of it is inevitably captured by the merchants, who anticipate increased demand for their goods during the holiday and respond by keeping prices higher than they otherwise would be. As a result it utterly fails to achieve its ostensible purpose. 

It’s easy to see that this is true if we considered doing the opposite and had a short term sales-tax spike. With a short-run sales tax spike people would do their best to evade the tax–either by delaying their shopping until the tax expired or shopping elsewhere. Stores would be forced to eat most of the tax if they wanted to keep their customers coming to the store during the spike. If the increase were permanent no such evasion would be possible and stores would fully pass the tax to the customer. In the long run such evasion would be difficult or impossible so prices would rise enough to pass the tax along to the customer.

A sales tax holiday, and the attendant publicity that comes with it, pushes shoppers to hit the stores during that period. Savvy store owners respond by holding more sales before and after the holiday, knowing that the holiday makes makes such sales unnecessary. Studies on tax holidays confirm this behavior. 

Sales tax holidays not only fail to save shoppers any money but they also allow politicians to pretend they are doing a tax favor for their constituents, and help convince a few voters that their state’s tax code isn’t all that bad after all. The reality is otherwise. 

When I criticize Donald Trump’s immigration policy proposals, the most common response is some variant of “Trump is against ILLEGAL immigration, not LEGAL immigration.  Get your facts straight.”  Although Trump makes contradictory statements on many topics, allowing virtually any supporter to find a quote in support of his or her preferred policy position, Trump has been mostly consistent on legal immigration: He wants to cut it.

Here are Trump’s anti-legal immigration positions, in bold, pulled from his position paper:

1.      Immigration moderation.  Trump calls for a “pause” on the issuance of any new green cards to workers abroad so that “employers will have to hire from the domestic pool of unemployed immigrant and native workers.”  Trump’s position paper is unclear on this point because immigrants on employment-based green cards are not the only green card holders who work in the United States – a majority of green card holders who enter through family categories work too.  In 2014, 61 percent of family-based immigrants came from abroad.  If Trump wanted to be sure that none of them would work in the United States then he would support cutting those 61 percent of family-based green cards, which are equal to 38.7 percent of all green cards issued in 2014. 

Trump’s policy statement could also mean that he only wants to restrict the issuance of employment-based green cards, a smaller numerical restriction but one that would cause more economic damage.  Of the 151,596 employment-based green cards issued in 2014, 86 percent went to folks already in the U.S. legally on other visas.  Those 14 percent of green cards that Trump would deny to workers abroad would likely just be reallocated to migrant workers already in the United States.  However, Trump’s proposed changes to the H-1B visa program (explained below) would greatly damage or destroy the feeder system that sends migrants to the employment-based green card. 

Thus, if Trump’s policy is adopted then the employment-based green cards may not decrease in number for a few years as those already on H-1Bs adjust their status.  After those years pass and as the number of H-1Bs fall and aren’t replaced by new ones because of the onerous restrictions, the number of new employment-based green cards will steadily drop and could hit zero.  If that happens then the total number of all green cards issued annually will drop by 14.9 percent. 

If employment-based green cards from abroad are cut off and those slots remain unfilled then this reform might only cut the number of all green cards by 2.2 percent.  If Trump’s plans produce the worst case scenario and exclude most family-based green cards and result in the end of the employment-based green card program, then it could end up cutting the number of all green cards issued annually by 53.7 percent – depending on how long he continues this policy.  Verdict: Anti-legal immigration.           

2.      Increase prevailing wage for H-1Bs.  This policy proposal will reduce the number of legal skilled temporary migrant workers.  Just over 124,000 H-1Bs were approved in 2014 for initial employment in the United States, 85,000 of them for employment in firms and the rest in non-profit research institutions, with an average salary of $75,000.  If the minimum salary for H-1B visas was bumped up to $100,000 then the number of H-1Bs hired by private firms would decrease while they’d also shrink for research institutions – if this new wage regulation would apply to them. 

For initial H-1B employment, the 75th percentile for compensation is $81,000.  Even including all of the petitions for high wage workers that are rejected each year, this reform would significantly shrink the number of H-1B visas issued at an enormous economic cost.  Combined with additional rules and regulations, this reform would reduce the H-1B program to a shadow of itself.  Verdict: Anti-legal immigration. 

3.      Requirement to hire American workers first.  This policy would increase the regulatory cost for American firms hiring skilled foreign workers in specialty occupations.  Congress considered just such a policy for the H-1B visa in 1990 and rejected it because the regulatory costs would be so high.  Higher regulatory costs mean fewer migrants.  Verdict: Anti-legal immigration.

4.      Refugee program for American children.  This policy would raise the standards for refugees and asylum seekers in order, according to Trump’s position paper, to cut down on abuse and fraud.  However, higher standards won’t reduce actual oppression by foreign governments so this proposal will likely just result in more fraud and many people who meet the criteria being sent back to oppressive regimes. 

Assuming the worst case scenario, Trump’s policy proposal would decrease humanitarian immigration by 70 percent according to the exaggerated fraud statistics peddled by nativist organizations.  That policy, if in place in 2014, would have cut humanitarian immigration by about 94,000 under the worst case scenario.  This section of Trump’s paper assumes that there will be fewer asylees and refugees, so he is definitely anticipating a cut in the legal numbers but it’s unclear to what extent.  Verdict: Anti-legal immigration.     

Assuming that all sections of Trump’s immigration position paper become law, the combined worst case scenarios from each of these sections of Trump’s position paper – the end of the employment-based green card program, the halting of new arrivals under the family-based immigration green card system, and a 70 percent reduction in humanitarian visas – would reduce the annual number of green cards issued by 62.9 percent or about 640,000. 

In the best case scenario whereby the “fraudulent” asylees and refugees are entirely replaced by legitimate ones and Trump doesn’t restrict family based immigrants who are also workers, the employment-based green card program would shrink to a fraction of itself and potentially end entirely.  This would decrease the total number of annual green cards issued by between 2 percent and 14 percent.      

To be clear, all of these immigration programs have problems and need reform.  Cato scholars have written about the problems with H-1B visas, refugees, and green cards in the past.  But the way to fix those systems is not to pile on more regulations on firms, restrictions on workers, prohibitions on immigrants, and higher costs for everybody.  The solution is to deregulate visas to lower costs for everybody involved, allow immigrants to switch jobs without gaining government permission and without legal consequences, and expand the number of green cards and other visas.  Refugee access to means-tested welfare should be curtailed and Americans should be able to sponsor them if they choose.  Trump’s proposals here do the opposite as he confirmed during his convention speech – and this doesn’t even touch on his proposed ban on Muslim immigrants.   

If a liberal Democrat proposed policies that would restrict legal gun ownership by up to 62.9 percent, conservatives and Republicans would rightly label that Democrat as anti-gun.  It is fair and reasonable to label somebody who proposes policies that could restrict immigration by up to 62.9 percent as anti-immigration or anti-legal immigration.  Those labels are thus appropriate to describe Donald Trump based on his policy proposals.  

Last night at the Democratic National Convention, many speakers made impassioned pleas for “common sense” gun reform. That might sound like a good idea but, like most public policy, gun policy is hard

As I wrote at the Washington Post website in December, using “common sense” to describe new gun policy is a “convenient piece of jargon that conveys level-headedness, non-partisanship, and empathy” without tackling the issues that drive gun crimes and gun deaths:

The United States contains an estimated 270 million to 310 million firearms. All gun crimes and gun deaths are overwhelmingly perpetrated with handguns, yet barely one quarter of Americans favor a handgun ban that would be required to lower that number significantly. So-called “assault weapons” and “high-capacity” magazines are easy political targets because they sound scary to people unfamiliar with firearms. However, restricting either or both would likely have no measurable effect on gun crime rates.

This week, the Washington Post published more information that should inform the push for more gun laws: less than 20 percent of all gun crimes are committed with legally owned firearms. This means that the overwhelming majority are committed with illegal weapons and/or by people who are not legally permitted to own guns. If lowering gun crime is the intended outcome of new legislation, most of the current proposals ignore 80 percent of the gun crime that happens in our country.

This is not to say there are no ways to improve our laws to reduce gun crime. But, with apologies to Burt Bacharach, what the policy world needs now are evidence-based solutions to our gun violence problem, not new laws that have no measurable effect on reducing gun crime.

Immigrants are commonly told to “get in line” if they want to stay in the United States. This call is disingenuous for many reasons. Many immigrants have no line to get into. And even they do, we are asking them to join lines when no one knows how long they are. In many cases, we could be asking many immigrants to join a line the end of which they will never live to see.

We don’t know much about who are in these lines, but here’s what we do: Thousands of immigrants come to the United States each year on temporary work visas. While working in temporary status, some of their employers petition on their behalf to obtain green cards for them to stay permanently. If the employer has jumped through all the appropriate hoops, the worker can then apply for a visa, if—and this is a big if—the limit on visas that year has not been reached.

This is where the line—and the waiting—starts. For lawmakers trying to fix the immigration system, figuring out how many people are at this point in the process is critical. But even they don’t know.

We do have a good idea how many people are waiting overseas. The State Department keeps track of those numbers and publishes them annually, and we’re quickly approaching 5 million immigrants waiting abroad, which is an astounding number on its own. But for immigrants already in the United States, the Department of Homeland Security doesn’t keep track—or doesn’t publish—the number of applicants who are prevented from receiving a green card due to the limits.

The State Department publishes a monthly visa bulletin that tells people in either line—here or abroad—whether they can apply for a green card. It lists a date, as seen below, next to a visa category. (Essentially, 1st (EB-1) refers to workers with a PhD or its equivalent, 2nd (EB-2) to Master’s, 3rd (EB-3) to Bachelor’s, and “other” to non-college grads.) If your employer’s petition was filed after the date listed, you cannot apply for a green card yet:

Figure 1: Visa Bulletin—Application Final Action Dates for Employment-Based Preferences

Source: State Department

These dates can sometimes create the misleading impression that immigrants from India, for example, will have “only” twelve years to wait for a green card. But that’s not right. That’s just how long immigrants who are currently receiving their green cards today have been waiting. We simply don’t know how many people applied since October 2004, so we don’t know how long these immigrants will have to wait.

Apparently even the State Department  doesn’t know who is in the line. When the department moves ahead the filing date, it basically guesses how many people applied between the current date and the new date. When it moved the date up to 2010 and 2007 for EB-2 and EB-3 categories from India, the government was flooded with more applications than there were visa numbers available, and so it moved the dates back again to 2004. 

This mistake, however, gave us some small insight into who is waiting.

We cannot know for sure whether everyone who could apply submitted an application before the date moved back, but the Department of Homeland Security lists 46,098 Indians currently waiting at this stage. The State Department also lists almost 30,000 more waiting for employment-based green cards abroad, for a grand total of nearly 76,000 Indians. Because each country is limited to no more than 2,800 visas in each category, clearing just this backlog alone will take almost 10 years for EB-2 and more than 14 years for EB-3.

But that only gets us up to 2007 and 2010 for those categories. We simply have no idea how many people could be waiting beyond those dates. It would be nice to be able to estimate the number based on green card applications filed before those dates, but the list only gives us the number pending at any given time. It doesn’t show the total number submitted in a year. Some may have already been processed. Others may have been submitted later after other older applications passed through.

We know that in 2008, there were at least 19,512 green card applications under EB-2. For EB-3, the numbers haven’t gotten up to 2008 yet, but in 2006, there were at least 12,708 filed for that category. Simply carrying these numbers forward for each unknown year, there would be roughly 230,000 people in line, which would translate into an almost 50-year wait.

The situation is likely worse than that. We know that the number of Indian temporary workers has increased dramatically relative to the number of green cards issued to them in the past couple decades (Figure 2). We also know that roughly half of all employment-based labor certifications (the step employers complete prior to submitting most EB-2 and EB-3 green card petitions) are for Indian workers.

Figure 2: Total Cumulative Green Cards and L or H-1B Visas Issued to Indians Since 2007

Sources: H-1B/Ls: USCIS/State Department; Green cards: DHS

Since 2002, 450,000 Indians received a green card, while roughly 2.4 million high skilled immigrants from India and their families have entered under the H visa or L visa (for employees transferring to a U.S. branch of their company). Some portion of these workers could have been beneficiaries of an EB-3 green card petition after 2007, the last date on which we know anything about who is in line.

All we know is this: that somewhere between 230,000 and 2 million Indian workers are in the backlog, so they’ll be waiting somewhere between half a century and three and a half centuries. It is entirely possible that many of these workers will be dead before they receive their green cards. And that’s just one country. The backlogs for Chinese and the Philippines continue to grow as well.

America’s immigration system is broken worse than anyone can even know.

Last summer I contributed a post about the Liquidity Coverage Ratio (LCR), a new regulation that is part of the latest international Basel Accords (Basel III) and that is being imposed on U.S. banks and other financial institutions. As I explained in that post, the LCR requires banks to hold “high quality liquid assets” (HQLA) sufficient to cover potential net cash outflows over 30 days. Both George Selgin and I have pointed out that the LCR probably contributes to the continuing desire of banks to maintain such a high level of reserves.

Two economists who have severely criticized the LCR are Gary Gorton, noted for his work on bank panics, and his co-author, Tyler Muir. Earlier this year they published online a short version of a much longer unpublished paper that scrutinizes the potential impact of the LCR. Whereas my post, appropriately entitled “Reserve Requirements Basel Style,” compared the LCR to the traditional but now largely abandoned reserve requirements imposed on banks, Gorton and Muir compare it to the bond-collateral (or bond-deposit) requirement of the national banking era, prevailing from the Civil War until creation of the Federal Reserve. They conclude that the LCR will cause the same sorts of problems that, ironically, the Fed was supposed to solve.

For those unfamiliar with the bond-collateral requirement, it was a feature of the system of nationally chartered banks established by Congress. Congress imposed a tax that suppressed the banknotes of state-chartered banks, but national banks could still issue banknotes, with a requirement that tied their quantity to the banks’ holdings of Treasury securities. Although nominally national banknotes were the liability of the issuing bank, they were in fact fully guaranteed by the government. The system thus created what was referred to as an “inelastic currency,” in which widespread demands to convert bank deposits into more liquid banknotes led to financial stringency and bank panics. This problem became the justification for the creation of the Federal Reserve as a lender of last resort.

Today the LCR counts both reserves and Treasury securities as the most highly liquid assets. So thinking about the LCR as either a modern modified reserve requirement and thinking of it as a modern modified bond-collateral requirement are complementary, particularly since reserves now pay interest and therefore have become like Treasury securities that only banks can hold. Gorton and Muir recognize this similarity in their online article when they state that “the LCR then requires that government money (Treasuries) must be used to back bank money – i.e., short-term debt, a kind of narrow banking [emphasis mine].”

Gorton and Muir’s concerns about the LCR can be briefly summarized in two points. First, despite the growing U.S. national debt, the worldwide liquidity demand for Treasury securities will severely impinge on their general availability. As they put it, “the LCR may result in a shortage of safe debt because too much of the Treasuries is tied up.” Second, this “shortage of safe debt” may encourage “other forms of [privately issued] short-term debt to emerge, making the financial system riskier.” Here they are drawing an analogy to the way restrictions on banknotes during the national banking era not only encouraged the increasing use of bank deposits but also contributed to financial instability.

I am not convinced by all parts of Gorton and Muir’s argument. Indeed, their characterization of bank deposits as the “shadow money” of the national banking era, by implication, gets the causes of the inelastic currency exactly backwards. The panics and financial stringency of this period did not result from too little regulation of deposits but instead from too much regulation of banknotes. Moreover, Gorton and Muir’s fear of a new form of shadow money seems to cut against their enthusiasm for the widespread use, prior to the financial crisis of 2007-2008, of repurchase agreements and asset-backed commercial paper. Nonetheless, their overall point is sound. Given the universally conceded failure of the bond-collateral requirement during the national banking era, why in the world are regulators going back to the same kind of system with the LCR? It did not work then; why should it work now?

HT: Bruce Tuckman

[Cross-posted from Alt-M.org]

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