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In an interview with the New York Times editorial board, Donald Trump said that he would impose a 45% tariff on all goods from China.  That is, to put it mildly, a really bad idea, and a number of commentators have already taken it to task. 

I’d like to focus on what Donald Trump said immediately after he proposed a 45% tax on Americans who buy things that were made in China.  According to the New York Times:

Mr. Trump added that he’s “a free trader,” but that “it’s got to be reasonably fair.”

Unfortunately, Trump is far from the first politician to adopt the “free but fair trade” line.  Many of the other candidates vying for the Republican nomination for President in 2016 have employed the trope in some form this election cycle. (See, for example, Mike Huckabee, Rick Santorum, Bobby Jindal, Carly Fiorina, Jeb Bush, Marco Rubio.)  Some of these candidates, like Trump, are economic nationalists who openly advocate mercantilist economic policy. 

Many of the others are merely politicians.  They probably believe in the value of free trade, but when departing from that principle is politically expedient, they need some way to defend themselves.  Vague appeals to “fairness” are uniquely well-suited to that task.

The alternative to free trade is not “fair trade.”  The choice is between free trade and protectionism.  If you think a small amount of protectionism is good, then you do not support free trade.  This is important because the economic case for free trade is a case for free trade, not partially free trade or mostly free trade. 

Tariffs, quotas, and subsidies are bad economic policy in each instance.  Some trade barriers are more harmful than others, but there is not a correct quantum of protectionism you can support while still being a “free trader.”

Perhaps it’s a good thing that even when espousing protectionism, political candidates feel the need to proclaim their support for economic liberty.  Still, it would be better if their hypocrisy were called to task more often.

Today, the Supreme Court heard oral argument in Friedrichs v. California Teachers Association, a challenge to public-sector unions’ ability to extract forced dues from non-members. As my colleague Ilya Shapiro writes, and Ian Millheiser at Think Progress agrees, the Court seems poised to strike down “fair share” fees for public-sector workers who do not want to join the union. This would essentially mean that “right to work” would be constitutionally mandated for public-sector workers.

Such a ruling would correct a 40-year-old mistake the Court made in Abood v. Detroit Board of Education. There, the Court ruled that public-sector union dues can be meaningfully separated into the “political” and the “non-political,” and that, while the First Amendment forbids forcing people to support political causes with which they disagree, public-sector unions can extract a “fair share” fee for non-political purposes.

From the very beginning, this distinction was under attack. As Justice Lewis Powell wrote in concurrence in Abood:

Collective bargaining in the public sector is “political” in any meaningful sense of the word. This is most obvious when public-sector bargaining extends … to such matters of public policy as the educational philosophy that will inform the high school curriculum. But it is also true when public-sector bargaining focuses on such “bread and butter” issues as wages, hours, vacations, and pensions.

In other words, public-sector unions are just another political special interest that seeks favors from the government, and what they can’t get at the ballot box they’ll get at the bargaining table.

Yet, if public-sector unions are just another special interest group, then why does the government give them the extraordinary privilege of extracting dues from non-members? Parents don’t get this privilege. Trade associations don’t get this privilege. Non-profits don’t get this privilege. In fact, unions are the only special interest group in American society that gets this privilege.

The primary argument in favor of forced agency fees is the “free rider” argument–namely, that those who don’t contribute to the union will be allowed to free ride on those who do. But, as pro-union Professor Clyde Summers once pointed out, this is essentially what happens in all types of private associations:

Why is it not applicable to a wide range of private associations? If a community association engages in a clean-up campaign or opposes encroachments by industrial development, no one suggests that all residents or property owners who benefit be required to contribute. If a parent-teacher association raises money for the school library, assessments are not levied on all parents. If an association of university professors has as a major function bringing pressure on universities to observe standards of tenure and academic freedom, most professors would consider it an outrage to be required to join. If a medical association lobbies against regulation of fees, not all doctors who share in the benefits share in the costs.

The government-thumb-on-the-scale, forced-dues privilege that unions enjoy should give us pause. It seems positively un-democratic for the government to grant such an extraordinary privilege to one group, or possibly just un-republican.

The Guarantee Clause, or the “Republican Form of Government Clause,” can be found in Article IV, Section 3 of the Constitution. It reads: “The United States shall guarantee to every State in this Union a Republican Form of Government…” Writing in the Heritage Guide to the Constitution, Rob Natelson, one of the foremost originalist scholars, writes that a “Republican Form of Government” means three things: 1) “popular rule, broadly understood,” 2) no monarch, and 3) the rule of law.

In practice, the Guarantee Clause is one of those constitutional clauses that is so vague it is rendered essentially unenforceable. On top of this, the Supreme Court, in one of its most interesting cases, ruled that the clause is not justiciable by the courts and is therefore only a political question for Congress. That case, Luther v. Borden, concerned the Dorr Rebellion, a virtual coup in 1840s Rhode Island (really).

So my comments here should be read in light of the fact that the Guarantee Clause is severely under-theorized. Yet, it seems not absurd to argue that, if “republican form of government” means anything, it means that the government cannot privilege one interest group over another. This would broadly accord with Natelson’s concept of “popular rule, broadly understood.”

The Guarantee Clause is mostly dormant. It was recently revived, however, by teachers unions and other organizations seeking to overturn Colorado’s Taxpayer Bill of Rights (TABOR). Kerr v. Hickenlooper, in which Cato has filed two briefs, is a challenge to Colorado’s method of raising taxes only through popular approval by the people. By removing tax hikes from representatives, the argument goes, it is no longer a “republican” form of government.

This seems like a stretch, but so is any argument based on the Guarantee Clause. If the Supreme Court preserves forced agency fees for public-sector unions, however, it may be worth looking into whether a Guarantee Clause argument might be made.

The U.S. is allied with every major industrialized power on the planet. America’s friends in Asia and Europe generally are prosperous and populous. Yet decades after the conflicts which led to Washington’s security guarantees for them, the allied gaggle remains a bunch of “losers,” to paraphrase Donald Trump.

Last week North Korea staged its fourth nuclear test. Naturally, South Korea and Japan reacted in horror. But it was America which acted.

The U.S. sent a Guam-based B-52 wandering across South Korean skies. “This was a demonstration of the ironclad U.S. commitment to our allies in South Korea, in Japan, and to the defense of the American homeland,” opined Adm. Harry B. Harris, Jr., head of Pacific Command.

Unfortunately, the message might not work as intended. CNN’s Will Ripley reported from Pyongyang that “A lot of North Korean military commanders find U.S. bombers especially threatening, given the destruction here in Pyongyang during the Korean War, when much of the city was flattened.” Which sounds like giving the North another justification for building nuclear weapons.

Worse, though, reported Reuters: “The United States and its ally South Korea are in talks toward sending further strategic U.S assets to the Korean peninsula.” Weapons being considered include an aircraft carrier, B-2 bombers, F-22 stealth fighters, and submarines.

A better response would be for Seoul to announce a major military build-up. The Republic of Korea should boost its military outlays—which accounted for a paltry 2.4 percent of GDP in 2014, about one-tenth the estimated burden borne by the North. The ROK also should expand its armed forces from about 655,000 personnel today to a number much closer to the DPRK’s 1.2 million.

Doing so obviously would be a burden. But if the economic wreck to its north can create such a threatening military, why cannot the ROK, which enjoys a roughly 40-1 economic and 2-1 population advantage, meet the challenge?

South Korea is not alone. Japan has been another long-term defense welfare client of the U.S. Only under Prime Minister Shinzo Abe has Japan begun to do more, mostly because his government is no longer convinced that the U.S. will forever subsidize Japan’s defense.

Alas, the Europeans have not yet come to that conclusion. NATO sets a two percent of GDP standard for military outlays, yet the 2015 European member average was just 1.5 percent. Only four European states hit two percent.

Moscow’s aggressive behavior against Georgia and especially Ukraine set off all sorts of angst throughout Europe. U.S. officials and NATO leaders made their usual calls for members to hike military outlays, but most European states did what they usually do, continued to cut spending.

Under normal circumstances European behavior would be mystifying. The European Union demonstrates the continent’s ability to overcome historic national divisions and collaborate for a common purpose.

Collectively the Europeans enjoy around an 8-1 economic and 3-1 population advantage over Moscow. Even after its recent revival, Russia’s military today is a poor replica of that during the Soviet era.

Yet when Moscow acts against non-NATO members Europe’s eyes turn to Washington for military relief. Instead of acting in their presumed interests, they push for U.S. action.

Washington’s allies generally are a pathetic lot. Benefiting from sizeable and capable populations and enjoying large and advanced economies, they nevertheless can’t be bothered to invest heavily in their own defense.

When troubles arise U.S. friends expect the American cavalry, in the form of a B-52 in Korea this time, to arrive. As a result, I argue on National Interest online, “the U.S. is expected to defend much of the globe. And the bulk of Washington’s over-size military outlays are to project power for the benefit of its ne’er-do-well allies.”

In the years ahead Washington should take a page from the Trump play-book and choose as allies a few “winners,” nations whose friendship actually makes America more secure. The U.S. should stop treating national security as a form of welfare for other states.

Kim Jong-un’s gift to the world is North Korea’s fourth nuclear test. Washington should respond by backing away from a potential conflict that is not its own.

Although Western intelligence widely disbelieves the DPRK’s claim to have tested a thermonuclear device, or H-bomb, Kim Jong-un has clearly demonstrated that nothing will dissuade the regime from expanding and improving its nuclear arsenal.

The North’s action has led to widespread demands for action. Alas, no one has good ideas about what to do.

Pyongyang again ignored “the international community” because “the international community” has no cost-effective means to restrain the DPRK. Although as assistant secretary of defense Ashton Carter advocated military strikes against North Korean nuclear facilities, most people on and off the Korean peninsula don’t believe the answer to a potential war is to start an almost certain war.

Sanctions long have been the West’s go-to answer. Congress already was considering three different enhanced sanctions bills and the UN Security Council is planning new economic penalties.

But the North has never let public hardship get in the way of its political objectives. So far the People’s Republic of China has refused to encourage regime collapse by cutting economic ties and eliminating energy and food support. Moreover, Russia, with a newly revived relationship with the DPRK, insisted that any response be “appropriate” and “proportionate.”

Whether there ever was a chance to negotiate away the North’s nascent nuclear program may be impossible to know. But virtually no one believes the Kim regime is willing to eliminate existing weapons developed at high cost.

So what to do?

  1. Recognize that not every problem is America’s problem. North Korea matters a lot more to its neighbors than to the U.S. Indeed, Pyongyang wouldn’t be constantly tossing imprecations and threats toward Washington, if the U.S. didn’t have troops on its border and abundant air and naval forces pointed the DPRK’s way.
  2. Withdraw American conventional forces from the peninsula. The Republic of 
  3. Korea, with twice the population and upwards of 40 times the economic strength, of the North, is well able to provide for its own defense. U.S. troops act as nuclear hostages, unnecessarily put in harm’s way without constraining North Korean nuclear activities.
  4. Seek to persuade Beijing to pressure the North out of the former’s own interest. Washington’s only chance of enlisting China’s help is by addressing its concerns—impact of potentially violent implosion spurring conflict and refugees across the Yalu, loss of economically advantageous position in the North, creation of united Korea allied with America aiding Washington efforts at containment. This requires negotiating with the PRC.
  5. Offer to establish diplomatic relations with North Korea. Engagement might not change anything, but then, we can be certain that nothing will change if we maintain the same policy toward the North.
  6. Indicate that continuing expansion of Pyongyang’s nuclear arsenal would force Washington to reconsider its position on proliferation. After all, the U.S. does not want to be left extending a nuclear umbrella over South Korea, Japan, Taiwan, Australia, and who knows else against nuclear-armed North Korea, China, and Russia. Better to extricate America from such a miasma and allow its allies to create their own nuclear deterrents. If that prospect bothers the PRC, then it should do more to prevent the DPRK from continuing its present course.

North Korea has become a seemingly insoluble problem for Washington. Nothing the U.S. can do, at least at reasonable cost, is likely to create a democratic, friendly, non-nuclear DPRK.

But as I point out on National Interest: “Washington can share the nightmare, turning South Korea’s defense over to Seoul and nuclear proliferation over to the North’s neighbors, particularly China. Moreover, Washington can diminish North Korean fear and hostility by establishing diplomatic ties, just as America had official relations with the Soviet Union and its Eastern European allies during the Cold War.”

The geopolitics still would be messy. But no longer would it be America’s responsibility to clean up.

The conventional wisdom is that Justice Scalia is the swing vote in Friedrichs v. California Teachers Association, but he gave no indication at this morning’s argument that he was anywhere but on the plaintiffs’ side. Chief Justice Roberts and Justice Kennedy – other potential defectors from the pro-workers, anti-compelled-speech side – were similarly solid. With Justice Alito having written the two recent labor-related opinions, the most likely fifth vote for the unions (supported by California and the United States) becomes Justice Thomas, but only because he said nothing, as is his wont.

Not surprisingly, the biggest issue for the more conservative justices was the matter of compulsion: why should non-unionmembers in the public sector be forced to pay “agency fees” for so-called collective bargaining when (a) all issues that are collectively bargained by public-sector unions are matters of public policy (not simply wages and conditions of labor as in the private sector), and (b) those workers disagree with the supposed “benefits” that the unions want them to pay for (e.g., tenure protections versus merit pay). “Is it even okay to force someone to contribute to a cause you do believe in?”, asked Justice Scalia. “We’re not talking about free riders, but compelled riders,” posited Justice Kennedy.

“Since public employment contracts are submitted for public comment, that suggests this is different than private-sector collective bargaining,” explained Chief Justice Roberts, who was silent during the plaintiffs’ half of the argument and an active questioner of the union and governments (typically a sign of agreement with the former and disagreement with the latter). 

While the progressive justices focused on the importance of stare decisis – respecting precedent and the reliance interests built up around it – that didn’t appear to be a major concern for anyone else, regardless of the age of the ruling that’s now under attack (Abood v. Detroit Board of Education from 1977). “Everything that’s collectively bargained [in the public sector] is necessarily a political question,” thundered Justice Scalia in describing why a ruling to strike down agency fees would even comport with Abood’s statement that states can’t force workers “to contribute to the support of an ideological cause [they] may oppose as a condition of holding a job.”

In other words, to the extent we can predict anything based solely on oral argument – take this with a mine of salt – I’d much rather be us (those who support the teachers) than them (those who support the teachers’ union and state and federal governments). If that’s how the case goes, it would be a huge victory for workers’ rights, the First Amendment, and educational freedom – and probably the most important ruling this term. 

We’ll find out by the end of June.

For background and commentary about the case, see this two-minute primerCato’s brief, my two recent op-eds, and this podcast.

When China joined the World Trade Organization in 2001, it agreed that other members would be allowed to apply “nonmarket economy methodology” in antidumping cases against Chinese goods for 15 years.  That deadline will soon pass in December 2016, but the Financial Times reported recently that U.S. officials are actively pressuring their European counterparts to continue using NME methodology indefinitely.  The report is disappointing but not at all surprising.

Given Washington’s long history of actively and intentionally violating WTO antidumping rules, most experts have guessed that the United States would not change its practices at the end of 2016 to comply with WTO rules.

It’s important to realize at the offset that the U.S. antidumping law is bad policy that exists to protect a handful of politically powerful U.S. industries from legitimate competition.  My colleague Dan Ikenson has thoroughly catalogued the numerous fallacies used to support antidumping in general, the myriad abuses of the U.S. government, and the particularly nonsensical nature of nonmarket economy treatment.

I wrote a Cato Policy Analysis in October 2014 explaining the history of NME status as an excuse for lawless protectionism.  I also spelled out some of the possible paths the United States could take following the 2016 expiration of China’s NME status at the WTO and what the legal consequences would be of each.  At the time, I thought the most likely outcome would be no change in practice resulting in years of embarrassing trade litigation at the WTO where the United States will be continually called out for violating trade rules.  According to the Financial Times, that’s exactly what they’re planning to do:

The Obama administration … is advocating a policy of inaction, which would force China to bring a challenge in the WTO and thus put the onus on Beijing to prove that its state-heavy economic model has met all the criteria for [market economy status].

Unfortunately, the article perpetuates a frustrating myth that advocates of the status quo use to misdirect the debate.  Whether China’s economic model meets the criteria laid out in U.S. or EU law for market economy or nonmarket economy treatment is irrelevant.  Those criteria are not part of WTO law. 

The WTO Antidumping Agreement lays out detailed rules for how members can implement antidumping measures, and the use of NME methodology is plainly inconsistent with those rules.  China’s accession protocol to the WTO exempts members from some of those rules until December 2016.  After that, United States, European Union, or any other WTO member that uses NME methodology against Chinese goods will be violating global trade rules.

To be blunt, the United States uses NME methodology against Chinese imports because it provides for more protectionist outcomes, not because China doesn’t have a market economy. Whether China qualifies as a market economy under any set of criteria will have no impact on WTO rules or U.S. practice.

What’s more, it’s clear that China considers resolving the NME issue to be an important international economic goal this year.  Ending NME treatment on time would smooth over relations and enable the United States to work on more important bilateral issues. 

Antidumping duties on imports from China harm American consumers and businesses by making the things we buy more expensive while privileging inefficient, rent-seeking domestic industries.  Rather than kowtowing to special interests, the U.S. government should promote economic growth and international peace by ending the NME charade as soon as possible.

In less than an hour, the U.S. Supreme Court will hear oral arguments in one of the most important cases of the year, Friedrichs v. California Teachers Association. The plaintiffs in Friedrichs are ten California teachers who are suing their union because they believe that laws forcing government employees to join a union or pay them “agency fees” as a condition of employment violate their First Amendment right to free speech, which includes the freedom not to speak, and not to be compelled to subsidize the speech of others.

SCOTUS has previously held that the agency fees may cover collective bargaining activities but not the unions’ political activities. However, as the plaintiffs argue, public-sector collective bargaining is inherently political. For example, more funding for teachers means higher taxes or less money for public parks, etc. The Cato Institute has filed an amicus brief in support of the plaintiffs, and several Cato legal eagles, such as Ilya Shapiro, Andrew Grossman, and Trevor Burrus, have already weighed in. 

Much of the constitutional analysis floating around the interwebs has focused on whether or not overcoming the supposed “free rider” problem constitutes sufficient grounds for states to grant unions the right to expropriate funds from non-members to cover collective bargaining activities that supposedly benefit them. Champions of free speech have generally attacked the other side’s strongest case, therefore their arguments assume that all teachers do, in fact, benefit from that collective bargaining, but that freedom of speech entails the freedom not to be forced to pay for someone else to advocate even on your supposed behalf. In an op-ed for the Orange County Register, however, Ilya Shapiro and I explain how collective bargaining can actually come at the expense of some teachers:

[E]ven if collective bargaining weren’t inherently political, it’s easy to see how workers could object to the supposed “benefits” negotiated on their behalf. For example, a teacher might prefer higher pay to tenure protections, or a defined-contribution pension plan – such as a 401(k) – to one that has defined benefits.

There are countless ways in which union-negotiated contracts or laws that the unions lobbied to enact can actually harm the interests of individual teachers. For example, “last-in, first-out” laws protect long-serving teachers regardless of ability at the expense of talented, young teachers. Worse, as we explain, such contracts and laws can harm the interests of the very children our education system is supposed to be designed to serve:

Collective bargaining also can come at the expense of students. When schools lack high-quality math teachers because the union contract requires they be paid the same amount as gym teachers, kids lose out. And when that contract has “last in, first out” (LIFO) rules that force a district to lay off a talented young teacher before a low-performing teacher with seniority, students suffer.

Last year, a judge in California struck down such tenure and LIFO rules after finding “compelling” evidence that making it hard to fire low-performing teachers had a negative impact on students, especially low-income and minority students. The judge pointed to research by Harvard professor Thomas Kane showing that Los Angeles Unified School District students who were taught by an English teacher in the bottom 5 percent of competence lose the equivalent of several days of learning in a single year relative to students with average teachers.

“Indeed,” the judge concluded, “it shocks the conscience.”

Sadly, the deleterious effects of collectively bargained tenure rules can be serious and long-lasting. In a 2012 study of more than 2.5 million students, Harvard professors Raj Chetty and John Friedman and Columbia professor Jonah Rockoff found that students who had just a single year in a classroom with a teacher in the bottom 5 percent of effectiveness lose approximately $50,000 in potential lifetime earnings relative to students assigned to average teachers.

If the Friedrichs plaintiffs win, it won’t solve all these problems. Some states will still have LIFO rules, teacher salary and benefits schedules, or related matters in enshrined in statute. Nevertheless, if the Friedrichs plaintiffs prevail, it will mean that district school teachers will no longer be forced to support advocacy that they believe works against their interests or the interests of their students. In the long run, less funding for such advocacy may well translate into fewer policies that come at the expense of some teachers and students.   Ultimately, a win for the plaintiffs in Friedrichs would be a victory for teachers and their students.

The Supreme Court said in Hobby Lobby that, under the Religious Freedom Restoration Act (RFRA), the Department of Health and Human Services (HHS) could not apply its contraceptive mandate to closely held for-profit corporations when doing so would violate the owners’ sincere religious beliefs. Around the time of that decision, the Court stayed the application of the mandate to a group of nuns known as the Little Sisters of the Poor. The Little Sisters—like the plaintiffs in six other cases that have now been consolidated under the name Zubik v. Burwell—object to the “accommodation” that HHS crafted for their religious beliefs and the Supreme Court will now be evaluating their claims.

Here’s the deal: The Affordable Care Act tasked HHS with developing guidelines to ensure that health insurance plans provided women with “preventive care” (a term undefined in the statute’s text). Although the ACA said nothing about accommodating or exempting religious organizations from that “preventive care” requirement, which HHS interpreted to include various contraceptives (four of which Hobby Lobby had objected to), HHS established a rule that exempted churches and their “integrated auxiliaries” from the mandate altogether but required other religious organizations to submit a self-certification that would lead insurance providers or third-party administrators to cover the costs of the objectionable contraceptives.

The Little Sisters, Reverend David Zubik, and the other plaintiffs believe that filing this self-certification makes them complicit in sin, in violation of their sincerely held religious beliefs. The Court granted cert. to determine whether the contraceptive mandate and the accommodation indeed violate RFRA.

But a preliminary question is whether the executive departments responsible for creating the accommodation (HHS, Labor, and Treasury) had the authority to do so. The short answer is that they did not, as Cato and the Independent Women’s Forum argue in our amicus brief.

The departments claim that the source of their authority is the instruction that they interpret what “preventive care” employers must provide to their employees. The departments accordingly tried to balance religious liberty and access to contraceptives by exempting churches and merely accommodating other religious employers. They justified this distinction by saying that non-church religious employers were more likely to employ people who did not share their faith or adhere to the same objection. That distinction does not hold up, however, as the case of the Little Sisters—nuns who have vowed obedience to the Pope!—demonstrates.

Furthermore, there is no indication in the vast amount of ACA text delegating authority to the departments that Congress intended for them to make religion-related judgment calls, as the word “religion” does not appear anywhere in those statutes. It is particularly unlikely that Congress would have delegated, without any statutory guidance, this sort of authority given that the departments have no expertise in crafting religious accommodations. Executive agencies simply cannot impose arbitrary burdens on religious non-profits that they guesstimate to be “less” religious than churches.

In the analogous area of tax exemptions, for example, an organization need only indicate on a form that it is religious—it need not prove or even claim some level of religiosity—and once exempt, it receives the same treatment as a church. That’s a good model for this case: The departments, which lack the “expertise” to answer this “major question” of social, “economic and political consequence,” to quote King v. Burwell, are simply not entitled make religious-liberty policy or receive judicial deference when they do.

Although administrative law’s Chevron doctrine allows agencies to fill in the gaps where a statute’s language is ambiguous, that power does not entitle agencies to make major decisions that alter the fundamental aspects of religious free exercise when the only potential source of that power is the term “preventive care.” Finally, where there is a lack of clear indication of congressional delegation, the Court must avoid constitutional questions that could lead to church-state entanglement, as even the government has argued elsewhere.

The Supreme Court will hear oral argument in Zubik v. Burwell this spring, with a decision expected by the end of June.

Over at Cato’s Police Misconduct web site, we have identified the worst case for the month of December.  It involved the shooting of a man in Paradise, California.

According to news reports, here’s what happened:  Andrew Thomas was seen leaving the parking lot of a bar and his vehicle didn’t have its lights on – even though it was late at night.  Officer Patrick Feaster suspected the driver (Thomas) might be intoxicated and so pursued Thomas to pull him over and investigate further.

No problem so far.  We want police to be alert for impaired drivers who may endanger other people.

Next, Thomas did not pull over after Feaster was behind him with his police lights flashing.

Moments later, Thomas’s SUV crashed and his wife was ejected from the vehicle.  She died.

Next, things get even worse.  Officer Feaster is seen on dash-cam video walking toward the crashed SUV.  The video shows Thomas trying to climb out of the overturned SUV.  Feaster draws his sidearm and shoots Thomas in the neck and he falls back into his SUV.

After the shooting, Officer Feaster gets on his radio to report that the driver is refusing his commands to get out of the vehicle.  He does not mention that he shot the driver.  Feaster also reports that a injured woman is unresponsive, but the video shows that he is not checking on her condition or rendering aid.

Other police and responders get to the scene, but ten minutes go by before Feaster says he fired his weapon.  It is very unclear what could be the justification for shooting a man after a vehicle crash in these circumstances.  Officer Feaster says he was not threatened, but that his gun went off accidentally.

On a police body camera, Feaster is heard telling the watch commander that his gun went off, but he didn’t think the driver was hit because he wasn’t aiming his weapon in the driver’s direction.  Thomas initially survived the shot to his neck, but was paralyzed.  He died weeks later.

Despite community outrage, the local prosecutor, Mike Ramsey, declined to file any criminal charges against Officer Feaster because he said he lacked sufficient evidence to prove a crime in court.  That’s very odd.  Prosecutors would typically be relieved to know that the incident was captured on videotape.

View the video for yourself here:

After menacing states across the country this fall, the Department of Homeland Security has once again caved on threats to enforce REAL ID by denying Americans their right to travel.

This afternoon, DHS Secretary Jeh Johnson put out a press release backtracking on agency claims that the Transportation Security Administration would turn away air travelers from states that don’t comply with the U.S. national ID law in 2016.

The new deadline, according to Secretary Johnson’s statement, is January 22, 2018. That’s sure not 2016. That’s more than two years away.

The date is significant for more than just proving the Department of Homeland Security’s bluff. January 22, 2018 is more than a year into the next into the next presidential administration. Secretary Johnson will be gone. The new president, whoever he or she is, will have a Homeland Security Secretary whose underlings will probably have driven the issue too hard for DHS and Congress to tolerate. And the 2018 REAL ID deadline will get pushed back again, by that group of federal bureaucrats.

It’s why I’ve said time and time again that REAL ID deadlines aren’t real.

Secretary Johnson’s press release breaks some new and interesting ground. Starting on October 1, 2020, it says, “every air traveler will need a REAL ID-compliant license, or another acceptable form of identification, for domestic air travel.”

The claim is not true. If Congress has still failed to repeal the law, DHS will once again cave on this deadline. But it makes clear where the REAL ID Act takes us. Every American is supposed to carry a national ID card. With luck and a little bit of advocacy by state leaders like Neal Kurk (R-NH) and Warren Limmer (R-MN), that will never happen.

Earlier this week, NBER released the first random-assignment study ever to find a negative impact from a school voucher program. Previous gold standard studies had almost unanimously found modest positive effects from school choice, which raises the obvious question: what makes the Louisiana Scholarship Program (LSP) so different?

In an article for Education Next, I argued that, “although not conclusive, there is considerable evidence that the problem stemmed from poor program design.” The LSP is one of the most heavily regulated school choice programs in the nation, and that burden has led to a very low rate of private school participation.  Only about one-third of Louisiana private schools accept voucher students, a considerably lower rate than in most other states. From a survey of private school leaders conducted by Brian Kisida, Patrick J. Wolf, and Evan Rhinesmith for the American Enterprise Institute, we know that the primary reason private schools opted out of the voucher program was their concerns over the regulatory burden, particularly those regulations that threatened their character and identity. For example, voucher-accepting schools in Louisiana may not set their own admissions criteria, cannot charge families more than the value of the voucher (a meager $5,311 on average in 2012), and must administer the state test.

We also know from the NBER study that the participating and non-participating private schools differ in at least one important respect. Whereas the non-participating schools experienced modest growth over the decade before the voucher program was expanded statewide (about 3 percent, on average), the participating schools had been experiencing a significant decline in enrollment (about 13 percent, on average). In other words, schools that were able to attract students tended to reject the vouchers while voucher schools tended to be those where enrollment had been dropping.

The difference in enrollment trends suggests that the LSP’s regulatory burden had the opposite of its intended effect: discouraging higher-performing schools from participating, leaving only the lower-performing schools that were so desperate to reverse their declining enrollment and increase their funding that they were willing to do whatever the voucher program required.

Several other researchers and education reform advocates reached similar conclusions, including Matthew Ladner, Adam Peshek, Michael McShane, Lindsey Burke, and Jonathan Butcher. However, others expressed skepticism about what I shall call the Overregulation Theory, and proposed alternative explanations for the LSP’s poor results. 

Writing at Education Week, Douglas Harris of the Education Research Alliance for New Orleans concedes that “regulation probably does reduce the number of private schools, especially the number of higher-performing private schools,” but he still believes the Overregulation Theory is “premature.” Harris instead offers two potential alternatives: 1) the improved public/charter school performance in New Orleans made the performance of the private sector look relatively worse; and 2) the curriculum at most private schools may not have been aligned to the state test, so the poor performance merely reflects that lack of alignment rather than poor performance. 

Harris’s first theory is explicitly rejected by the NBER study. On the third page of the study, the authors write: “Negative voucher effects are not explained by the quality of public fallback options for LSP applicants: achievement levels at public schools attended by students lotteried out of the program are below the Louisiana average and comparable to scores in low- performing districts like New Orleans.” In other words, the public school alternatives are not so great and the performance of the participating private schools is considerably worse.

That said, Harris’s second theory, which Jason Richwine also suggested, is plausible as a contributing factor. However, it is no more plausible than the Overregulation Theory. Indeed, whereas the differences in enrollment trends between voucher and non-voucher private schools provide some suggestive evidence for the Overregulation Theory, Harris provides no evidence to support the Nonaligned Test Theory. How many voucher schools were already aligned with the state curriculum and/or administered the state test? At this point, we do not know. Moreover, to the extent that testing nonalignment explains some of the very large 0.4 standard deviation difference in math scores, it is unlikely that it explains all or even most of that difference. Then again, Harris stated that he will be releasing the results of his own research on the LSP, so it’s likely he knows something that I do not.

Harris also notes that the NBER study only examined the results of one year of one program. He is certainly correct that we need more data over time to draw firmer conclusions, which is one reason I presented my interpretation as “not conclusive” and wrote that “the regulations may have had the opposite of their intended effect” (emphasis added). And, indeed, there is some evidence that voucher schools improved slightly in the third year since the statewide expansion (although if the voucher schools were their own district, they’d still be the fifth-worst of 76 in the state).

Nevertheless, such strongly negative results should give reform advocates great pause about the regulatory strategies employed in Louisiana. We know the regulatory burden chased away most private schools, and we have evidence that the voucher-accepting schools had been struggling with declining enrollment. If we want to better understand the LSP’s atypically disastrous performance, its program design is the logical place to start. 

The history of China’s banking system in the first half of the 20th century offers powerful insights into the conduct of monetary policy and the consequences of government intrusion into banking and monetary institutions that are well worth considering today. Monetary economists and monetary historians would do well to study China’s example, and, in particular, Chang Kia Ngau’s 1958 book, The Inflationary Spiral: The Experience in China, 1939-1950. As you’ll see, sound money and sound banking matter a great deal in creating a harmonious and prosperous society.

In 1905, during the final years of the Qing Dynasty, the first government bank, the Hupu Bank, opened in Peking. It was established by the Imperial Ministry of Revenues when China was still on the silver standard to help finance government deficits by issuing paper currency (see specimen above). In 1908, the bank was renamed the Ta Ching Government Bank (Great Qing Bank), and in 1912, under a new charter, the bank became known as the Bank of China. Another government bank of issue, the Bank of Communications, was established in 1908.

The constant pressure for central and provincial governments to increase spending beyond revenues led to attempts to suspend convertibility. For example, in 1916, President Yuan Shih-kai of the Republic of China ordered the Bank of China and the Bank of Communications to halt convertibility of their bank notes, and the public was instructed to accept those irredeemable notes at par. The largest note-issuing bank, the Shanghai Branch of the Bank of China, refused to comply with the president’s order and was able to defend its notes against a bank run. The Peking Branch of the Bank of China, however, complied with the order, as did the Bank of Communications (Chang: p. 5).

In Manchuria, officials imposed the death sentence on individuals who exchanged irredeemable bank notes at less than par. Despite this severity, there were heavy discounts on provincial government bank notes “which placed a very real limit on the extent to which these issues could be increased.” By 1922 all irredeemable notes from the Bank of China and the Bank of Communications were withdrawn (Chang: p. 5). The public then slowly regained confidence in paper currency as banks recommitted to redeem their notes in silver.

Institutional Limits on the Quantity of Money

In March 1928, the Bank of China sought to enhance the credibility of its currency by embarking on institutional reform to limit note issue. The bank established a “Supervisory Committee” in Shanghai, comprised of members from the Chamber of Commerce, the Bankers’ Association and the Native Bankers’ Association, designed to ensure that the bank had sufficient silver backing for its notes. The Committee published quarterly reports on the bank’s reserve position that were certified by a public accountant (Chang: p. 6).

This institutional check on the credibility of the bank’s promise to honor its commitment to maintain a convertible currency was also adopted by the newly created Central Bank of China, as well as by the Bank of Communications and private banks. To quote Chang (p. 6), “The public became less wary of holding bank notes, and note circulation increased rapidly in the years after 1928. Sound currency gradually drove the unsound notes of the provincial banks out of circulation except in Manchuria and Canton” (emphasis added).

Currency Reform

The silver backing of bank notes was relaxed by the rule change that allowed banks to back up to 40 percent of their note issues with government bonds, and, in November 1935, the central government replaced the silver standard with a foreign exchange standard. The currency reform provided that only notes issued by the Central Bank of China, the Bank of China, and the Bank of Communications would be acceptable as legal tender, and would henceforth be called “the Chinese National Currency” (CNC). Silver could no longer be used to back bank notes, and the public would have to return all monetary silver to a government appointed Currency Reserve Board or to its agents in exchange for CNC (Chang: p. 7).

Those who drafted the new currency plan had recommended additional measures to safeguard the value of money: (1) make the Central Bank of China independent of the Ministry of Finance; (2) establish a Supervisory Committee to limit note issue and avoid inflation; and (3) rationalize government financing to minimize deficit spending and debt monetization. However, those sensible measures were never instituted and instead bank notes in circulation were increased from CNC $453 million in 1935 to nearly CNC $1.5 billion by mid-1937 (Chang: p. 8).

Fiscal Dominance, Inflation, and Repression

Demands on the fisc increased during the Second Sino-Japanese War (1937–1945). The lack of central bank independence and the lack of any hard anchor for the price level under a pure government fiat money system led to an inflationary spiral. During the early war years, from 1937–39, inflation in “Free China” (areas not held by the Japanese) averaged 40–50 percent per year; inflation then accelerated to 160 percent per year until the end of 1941, and during the last four years of the war averaged more than 300 percent per year (Chang: p. 12).

Following the war, the Nationalist government continued to rely on the printing press to finance deficits, inflation spiraled upward, and the government imposed wage and price controls to suppress inflation.[1] Direct measures were also used and “economic instability finally led to a general loss of confidence in the Nationalist government, and total collapse of political and social morals followed” (Chang: p. 367).

Lessons

Several lessons emerge from China’s experiences prior to the Communist Party takeover in 1949. The first lesson is that long-run economic growth and prosperity depend on “respect for the soundness of private enterprise and banking.” When the government engages in massive debt monetization, the resulting inflation destroys “popular confidence in banking institutions” (Chang: p. 368).

Second, allocating capital to state-owned enterprises crowds out private investment. “Overzealousness in forcing the pace of economic development [by supporting state-owned enterprises] often results in little more than the destruction of private capital formation, thus defeating the very purpose of development” (Chang: p. 368).

Third, the inclination of underdeveloped countries to inflate means that “the establishment of an institutional framework for budget control and the independence of the central bank are of paramount importance for the long-term welfare of the population” (Chang: p. 368).

Fourth, “once inflation is under way, the government is perforce led to the path of increasing intervention and direct control.” Thus, inflation inevitably leads to the loss of economic and personal freedom as the government imposes wage and price controls and allocates resources. Corruption becomes endemic (Chang: pp. 368–69).

Fifth, the experience of Nationalist China shows “without equivocation that the complexity of modern economic life defies the grasp of any single individual” (Chang: p. 369). This point may seem trivial but is one that Nobel laureate economist F. A. Hayek often emphasized in such works as “The Use of Knowledge in Society” and The Fatal Conceit. Central bankers who favor pure discretion in the conduct of monetary policy — as opposed to rules — are prone to think that their intricate macroeconomic models capture the complexity of the real economy and that they can accurately forecast the path of the economy. In contrast a rules-based regime recognizes the difficulty of monetary planning and the benefits of what legal scholar Richard Epstein calls “simple rules for a complex world.”

The most important lesson, perhaps, is that “inflation is no less an enemy of the free society than Communism and, as we have seen in China, may be a harbinger of a Communist triumph” (Chang: 369).

Conclusion

China’s economic experiences during the first half of the 20th century reinforce fundamental principles about the importance of sound money and banking, fiscal rectitude and economic freedom for creating a harmonious society. It also suggests that the adoption of a rules-based monetary regime, which limits money creation and allows competing currencies, also deserves further attention.

____________

[1] This was the second time the Nationalist government resorted to wage and price controls; the first use was in December 1938. However, enforcement was difficult because as Chang (p. 343) notes, “The public … was antagonistic to all forms of government controls on the economy; still prevalent was the laissez faire view that market problems would best solve themselves if only the government would not interfere.”

[Cross-posted from Alt-M.org]

Some of you may have seen my December 2 post showing an “isochronic” map of the world. The map visualized the length of time it took to get from London to anywhere else in the world in 1914. More recently, the good folks at The Telegraph have updated the original 1914 map with 2016 data. To give just one example, it took five days to reach the East Coast of the United States in 1914. Today, it takes half-a-day.

The recent “occupation” of government-owned lands in Eastern Oregon by disgruntled ranchers’ motivated Quoctrung Bui and Margot Sanger-Katz of the New York Times (NYT) to produce an edifying essay on January 6th. It was aptly titled “Why the Government Owns So Much Land in the West.” Curiously, the NYT essay fails to mention one of the most significant, recent, and contentious attempts to “dispose” of federal public lands.

When Ronald Reagan was elected president for his first term in 1980, he received strong support from the so-called Sagebrush Rebels. The Rebels wanted lands owned by the federal government to be transferred to state governments.Their champion was James Watt, a self-proclaimed Sagebrush Rebel who became the Secretary of the U.S. Department of the Interior.

When I was operating as one of President Reagan’s economic advisers, an early assignment was to analyze the federal government’s landholdings and make recommendations about what to do with them. This was a big job. These lands are vast, covering an area six times that of France.

These public lands represent a huge socialist anomaly in America’s capitalist system. As is the case with all socialist enterprises, they are mismanaged by politicians and bureaucrats dancing to the tunes of narrow interest groups. Indeed, the U.S. nationalized lands represent assets that are worth trillions of dollars, yet they generate negative net cash flows for the government. I first presented my findings and recommendations publically at the annual Public Lands Council meeting of September 1981 in Reno, Nevada. The title of my speech was “Privatize Those Lands”—privatize being a word Mrs. Hanke, a Parisian, had imported from France.

My Reno speech caused a stir. James Watt, the Secretary of the Interior, was furious because he wanted to hand over the lands to the state governments—exchanging one form of socialism for another. Needless to say, I thought I was in deep trouble. Hoping to avoid political immolation, I rapidly sent my analysis to the President.

Reagan instantly responded, taking my side. Better yet, he swiftly made my proposals the Administration’s policy. The president endorsed privatizing federal lands in his budget message for the 1983 fiscal year: “Some of this property is not in use and would be of greater value to society if transferred to the private sector. In the next three years we would save $9 billion by shedding these unnecessary properties while fully protecting and preserving our national parks, forests, wilderness and scenic areas.”

It turned out that Reagan had already thought about this issue. The book Reagan, In His Own Hand (2001) makes that clear. This volume contains 259 essays Reagan wrote in his own hand, mainly scripts for his five minute, five-day-a-week syndicated radio broadcasts in the late 1970s. Reagan, In His Own Hand contains several essays on the subject that clearly foreshadowed his policy statement on privatizing public lands. His 1970s musings on public lands echo the writings of Adam Smith. While Reagan never cited Smith, he employed similar reasoning.

Indeed, Smith concluded in The Wealth of Nations (1776) that “no two characters seem more inconsistent than those of the trader and the sovereign,” as people are more prodigal with the wealth of others than with their own. In that vein, Smith estimated that lands owned by the state were only about 25% as productive as comparable private holdings. Smith believed Europe’s great tracts of crown lands to be “a mere waste and loss of country in respect both of produce and population.”

Unfortunately, political opposition—largely from ill-informed environmentalists and some Sagebrush Rebels, too—stopped Reagan from privatizing. U.S. nationalized lands remain ill-used and a constant source of dispute.

Your odds of “making it to the top” might be better than you think, although it’s tough to stay on top once you get there.

According to research from Cornell University, over 50 percent of Americans find themselves among the top 10 percent of income-earners for at least one year during their working lives. Over 11 percent of Americans will be counted among the top 1 percent of income-earners (i.e., people making at minimum $332,000 per annum) for at least one year.

How is this possible? Simple: the rate of turnover in these groups is extremely high.

Just how high? Some 94 percent of Americans who reach “top 1 percent” income status will enjoy it for only a single year. Approximately 99 percent will lose their “top 1 percent” status within a decade.

Now consider the top 400 U.S. income-earners—a far more exclusive club than the top 1 percent. Between 1992 and 2013, 72 percent of the top 400 retained that title for no more than a year. Over 97 percent retained it for no more than a decade.

HumanProgress.org advisory board member Mark Perry put it well in his recent blog post on this subject:

Whenever we hear commentary about the top or bottom income quintiles, or the top or bottom X% of Americans by income (or the Top 400 taxpayers), a common assumption is that those are static, closed, private clubs with very little dynamic turnover … But economic reality is very different—people move up and down the income quintiles and percentile groups throughout their careers and lives

What if we look at economic mobility in terms of accumulated wealth, instead of just annual income (the latter tends to fluctuate more)?

The Forbes 400 lists the wealthiest Americans by total estimated net worth, regardless of their income during any given year. Over 71 percent of Forbes 400 listees and their heirs lost their top 400 status between 1982 and 2014.

So, the next time you find yourself discussing the very richest Americans, whether by wealth or income, keep in mind the extraordinarily high rate of turnover among them.

And even if you never become one of the 11.1 percent of Americans who fleetingly find themselves in the “top 1 percent” of U.S. income-earners, you’re still quite possibly part of the global top 1 percent.

With the rise of electronic communications, the volume of snail mail has fallen precipitously, and the U.S. Postal Service (USPS) has been losing billions of dollars. The 600,000-worker USPS is an unjustified legal monopoly that is heavily subsidized. It is a bureaucratic dinosaur that Congress should put on the way to extinction.

In April, I highlighted an excellent study by Robert J. Shapiro that described USPS subsidies in detail. The subsidies include: exemption from taxes, low-cost government borrowing, monopoly protections, and other special benefits.    

Shapiro completed another study in October, which is a great addition to the postal debate. He details how government-conferred advantages have translated into cross-subsidies from USPS monopoly products to products sold in competitive markets. The USPS uses its monopoly over letters and bulk mail to unfairly compete with FedEx, UPS, and others on express mail and packages.

Shapiro finds that USPS raises prices on its monopoly products, and uses those extra revenues to artificially push down prices on its competitive products. For USPS, this makes sense because consumers are less price sensitive for the monopoly products than for the competitive products. Shapiro concludes, “USPS has strong incentives to cross-subsidize its competitive products with revenues from its monopoly operations,” and it does so by $3 billion or more a year.

For Fed Ex, UPS, and other private firms, this is completely unfair because they have to pay taxes, borrow at market rates, and abide by all the normal business laws and regulations. Fed Ex, for example, had an effective income tax rate in 2015 of 35 percent, per the company’s 10-K. That tax load is money that it could not use for reinvestment to meet the subsidized USPS challenge. Shapiro thinks that “without its subsidies, [the USPS] could probably not compete at all” with its more nimble private competitors.

As Shapiro discusses, Congress and the USPS regulatory agency are familiar with the cross-subsidy problem, but their solutions have been weak. Part of the problem—as we also see with other government businesses like Amtrak—is that USPS is secretive about its accounting, and so the cross-subsidies are hidden.

The solution to all this is privatization and open entry. That would end cross subsidies, increase efficiency, improve transparency, and provide new opportunities for America’s entrepreneurs. Retaining special protections for a centuries-old paper delivery system when 215 billion emails blast around the planet every day is getting pretty silly.

This week, President Obama announced a package of proposals with the ostensible goal of stemming gun crime in America.  Unfortunately, however, the proposals represent a mishmash of ideas that lack a solid logical nexus to the problems they’re being offered to solve.  President Obama even acknowledged this incongruity himself when he admitted that the tragic shootings he emotionally invoked would not have been prevented by his recommendations.

But faced with a Congress that fundamentally disagrees with the president’s views on gun control, his authority to act is limited, and these proposals are proof.   The full “Executive Action” plan released by the White House can be found here, but I thought it would be useful to sum up the major points.

“Engaged in the Business” of Selling Firearms

One of the primary goals of the Obama Administration has been expanding the National Instant Criminal Background Check System (NICS).  The president and his gun-control allies have long called for universal checks in order to close the (non-existent) “gunshow loophole,” but Congress has thus far refused to go along (and for good reason).

Still, the president gave the impression during his remarks that he would use his executive authority to expand the background check system by reconsidering what it means for people to be “engaged in the business” of selling firearms.  For almost 50 years, the ATF regulations have interpreted this somewhat vague phrase by distinguishing those who sell guns commercially as a means of livelihood and those non-commercial sellers who transfer the odd gun every so often. Commercial sellers are required to perform background checks through the NICS system, while non-commercial private sellers are subject to a federal statute requiring that the transferor not know or have reason to know that the recipient of the weapon is prohibited from having it. Every transfer, in other words, is currently regulated by federal law.  The only difference is which law applies.

While President Obama’s announcement and the action plan released along with it suggested a move to broaden the category of transferors that are required to put customers through the NICS system, it’s not clear that there has been any change at all.

As Jonathan Adler writes at The Washington Post, there hasn’t been  a new ATF rule issued making any substantive change to the government’s interpretation of what it means to be “engaged in the business.”  The criteria President Obama and Attorney General Loretta Lynch gave for how they would be assessing whether someone is engaged in the business of selling firearms closely mirror language the ATF included in a recently issued “guidance document.” 

The guideline document represents an outline of current federal law, including caselaw based on the longstanding interpretation of the statute, rather than a change.  In other words, as Adler writes, this proposal, the centerpiece of President Obama’s plan, may not have any effect on the law at all:

According to the White House, the new ATF guidance is intended “to ensure that anyone who is ‘engaged in the business’ of selling firearms is licensed and conducts background checks on their customers.” The ATF is achieving this not by issuing new regulations (re)defining what it means to be “engaged in the business” of selling guns under federal law. Instead, the ATF issued a guidance document that simply explicates what this legal requirement means, providing examples of the sorts of things that would indicate that a given individual is in the gun business, rather than conducting the occasional personal sale as a hobbyist or as part of an estate liquidation, or something of that sort. According to both the White House release and the ATF guidance, the various indicia identified in the guidance are, in turn, based upon what federal courts have found in relevant cases. (The relevant court decisions are not cited or otherwise identified in the document, and I have asked both ATF and the White House for more information on this point.)

Taken at face value, the new ATF guidance is thus nothing more than a restatement of existing legal requirements. Put another way, it merely identifies those who are already subject to the relevant federal requirements and does not in any way expand the universe of those gun sellers who are required to obtain a license and perform background checks. In other words, it is — as the document says — a guidance, and not a substantive rule. It has no legal effect.

In the event that the administration attempts to enforce the law as if there has been a substantive change, Adler points out that there would be an immediate legal challenge:

A consequence of choosing to issue a guidance document instead of a new regulation, however, is that the guidance document cannot have legal force. That’s what it means to be a guidance — and is one reason that such documents do not have to go through the rulemaking process. To be sure, sometimes agencies do one thing while saying they are doing another — issuing a new substantive regulation that changes the relevant legal requirements but calling it a guidance. Yet when agencies do this, they make themselves legally vulnerable. Courts reviewing agency actions are more concerned with the substance of what an agency does than what the agency calls it. So if one were to conclude that the new ATF guidance is really an expansion of existing regulatory requirements, it would be legally invalid under the Administrative Procedure Act because ATF did not go through the relevant rulemaking requirements.

Our own David Kopel, who recently released a paper on the state of gun control in America, agrees with that understanding of the ATF’s interpretation and also argues that President Obama’s commitment to ensuring that everyone who should have a federal firearms license is able to attain one is actually a reversal of a Clinton-era program of taking licenses away from people who were considered to be selling too few firearms to justify the issuance of a license.

Despite the rhetoric, then, President Obama’s proposals on background checks do not seem designed to upset the status quo in any meaningful way.  Whether they’ll be enforced in some new way that raises legal concerns remains to be seen.

Mental Health

More worrisome are the president’s recommendations on mental health and their potential to expand the negative consequences of seeking treatment for mental health problems.  Despite acknowledging that mentally ill Americans are far more likely to be victims of violence than perpetrators, and professing a desire not to stigmatize people who seek mental health treatment, the president’s proposals threaten to do exactly that.

Federal law prohibits people who have “been adjudicated as a mental defective,” from possessing firearms.  Traditionally, “adjudicated” has been seen as requiring some measure of judicial process, and mental health patients who had not been adjudicated mentally ill by a court could still rely on the patient protection provisions of laws like HIPAA. But over at The National Review, Josh Blackman argues that while President Obama’s proposals will have little, if any, impact at the federal level, they do seem to pave the way for anti-gun state governments to drastically expand the definition of “mentally defective” for purposes of the NICS background system:

Yesterday, the Department of Health and Human Services announced that it would modify HIPAA regulations to allow state health agencies to disclose personally identifiable information of a “mental[ly] defective” individual directly to NICS. On its face, the regulation doesn’t require anyone to disclose this information, and merely allows certain entities that “are responsible for the involuntary commitments or other adjudications” to submit this information to the federal database. But on page 38 of the rule, HHS notes that “this final rule does not preempt State or other laws that may require reporting to the NICS.” In English, that means that while the executive action does not require entities to report this information, progressive states are free (and indeed invited!) to mandate that doctors collect and report this information.

Along with the president’s press conference Tuesday, Attorney General Loretta Lynch sent letters to 50 governors “permitting” them to report the names and information of such individuals from their states to the federal government. The NICS database can be expanded by leaps and bounds, through the actions of cooperative states, without the need for any congressional action. Supporting governors can take a hint. In contrast, Texas governor Greg Abbott tweeted “come and take it.”

Understandably, many in the mental health community are wary of policies that will further stigmatize mental illness or impose conflicts of interest on mental health professionals unsure whether they’re obligated to report their patients to the government.

The president also called on Congress to increase spending for mental health services by $500 million.

Social Security Administration

President Obama also suggested that the NICS system would start incorporating information from the Social Security Administration to prohibit people who are mentally incapable of managing their benefits from purchasing firearms.  The action plan released by the White House insists there must be an adequate process for beneficiaries who lose their right to bear arms to contest the decision, but at this early stage it’s unclear what that process will look like.

President Obama’s plans to expand the meaning and scope of the federal prohibition on firearm possession by “mental defectives” is concerning.  Few would argue that dangerous people, including violently mentally ill people, should have easy access to firearms, but the problem quickly reduces to how we define what it means to be dangerously mentally ill, who gets to make these determinations, and what recourse exists for individuals who feel they have been unjustly denied their rights.

Unfortunately, President Obama’s proposals do not evince a serious concern about these process issues. The proposals run the risk of further stigmatizing mental health and drastically increasing the liberty cost of seeking treatment.  Given the ease with which point-of-sale gun laws are circumvented, the danger in pushing people away from treatment is plainly a grave concern that deserves more attention.

Whether it’s “potential terrorists” from the federal no-fly list or “potentially dangerous” mentally ill citizens reported by their doctors or government bureaucrats, there must be an adequate process in place to protect the rights of people who have not been convicted of any criminal behavior.

National Firearms Act Items

One interesting change in federal firearms law strangely didn’t appear in either the president’s remarks or the action plan released by the White House. 

Under the National Firearms Act of 1934, people who wish to acquire, transfer, or manufacture certain weapons and accessories, including machine guns, short-barreled rifles and shotguns, and silencers/suppressors, must submit to the ATF fingerprints and passport photos, undergo a background check, and receive a “certification” from a chief law enforcement officer (CLEO) in their jurisdiction. 

If the CLEO in an applicant’s jurisdiction refused to authorize the transfer, the ATF would refuse the application.  In other words, the ATF gave local law enforcement a veto power over the possession of NFA items.  In order to evade the CLEO requirement while still complying with the law, some enthusiasts created what are known as “gun trusts,” which are not subject to the CLEO certification requirement.

Announcing his desire to ensure that everyone involved with NFA-regulated items undergo adequate screening, President Obama announced that he was directing the ATF to enforce the photo, fingerprint, and background check provisions on the trusts as well as the individual applicants.  In effect, this would abolish the procedural distinction between an NFA gun trust and an individual applicant.

However, neither President Obama’s remarks nor the action plan mentioned another change from the same new ATF rule promulgation: the abolition of the CLEO certification requirement.

The goal of this final rule is to ensure that the identification and background check requirements apply equally to individuals, trusts, and legal entities. To lessen potential compliance burdens for the public and law enforcement, DOJ has revised the final rule to eliminate the requirement for a certification signed by a chief law enforcement officer (CLEO) and instead require CLEO notification.

So, while it will now be more burdensome for individuals to acquire NFA items through a gun trust, the Obama Administration has also eliminated a bureaucratic burden that incentivized individuals to form the trusts in the first place.

Additional  Recommendations

President Obama’s proposal also contains a push for “smart gun” technology that would theoretically ensure guns can only be operated by their owners, a clarification of the reporting obligations for situations in which gun shipments are lost or stolen, and calls for increased “coordination” between federal prosecutors and state and local officials to combat domestic violence.

The prosecution of domestic violence offenses is traditionally a state matter, and it’s unclear what “coordination” with federal prosecutors will entail.  The clarification over which party bears responsibility for reporting stolen gun shipments or inventory is unobjectionable.  Faith in smart gun technology is largely unjustified at this point, as the technology is underdeveloped and the market seems to have very little interest in it.  It’s conceivable that bulk government purchases could “stimulate” that market, but for now smart gun mandates remain largely speculative. 

Conclusion

For all the pomp and ceremony, nothing in the president’s proposals is going to put a dent in U.S. gun crime or even substantially change the federal legal landscape.  In that sense, apoplectic opponents and overjoyed supporters are both probably overreacting.   President Obama’s clarifications on the FFL system and the ATF’s removal of a substantial burden on individual enthusiasts wishing to procure NFA-regulated items may even be improvements over the status quo (in deep contrast to the tone of the president’s emotional message). 

The mental health proposals are more worrisome, and the behavior of state governments and federal healthcare agencies in response to an expansion of their power to circumscribe the rights of people seeking mental health treatment will require close scrutiny (and perhaps litigation) to ensure that people diagnosed with mental illnesses are not being unfairly deprived of their rights.

The most disappointing aspect of the proposals is that there is so little in them to suggest that President Obama is willing to address any of the major drivers of gun crime in America.  The sad irony is that President Obama could do far more to protect American lives and clean up our streets by ending the drug war than by expanding background checks.  Criminals, from gang members to spree shooters, have no trouble passing checks, finding straw purchasers, or simply buying guns on the inherently unregulated black market.  As long as there are hundreds of billions of dollars changing hands in the illicit drug market every year, the black market for firearms and the violent competition for market shares will continue to claim thousands of lives annually and make a mockery of the idea of gun control.

Gun crime is a serious problem, and it deserves attention.  Unfortunately, these proposals do not offer effective solutions.

In 2015 we witnessed an astonishing sight: by the end of the year news coverage of Donald Trump in major U.S. newspapers eclipsed coverage of every major world hotspot and the dreaded Islamic State.

 

At the most basic level, this reflects the American tendency to focus on domestic politics during presidential campaigns. Foreign affairs often fade from view as the presidential campaign season heats up and economic and social issues take the fore. But this year foreign policy has in fact been a major focus of the campaign, making this a less powerful effect than in most years.

More importantly, the news flow is a function of Trump’s uncanny ability to set the news agenda. This ability stems only in part from the fact that he holds a commanding lead in the polls. More critical is his tendency to make outrageous statements, tapping into anger and frustration in the electorate, which has not only stimulated outrage and concern on left and right but also discussion about what the Trump phenomenon means beyond the election itself. In December Trump appeared in twice as many stories as both Ted Cruz, his closest competitor in both the polls and coverage, and President Obama. Simply put, Trump is incredibly newsworthy given the way in which American news outlets define news and given the news Americans appear to want.

But less obviously, this pattern also reflects the long-term shrinking of the international news hole in the United States. Since the late 1980s the share of American news devoted to international affairs has shrunk by as much as half in major U.S. newspapers and broadcast television news. With occasional and temporary reversals, this trend has persisted despite increasing globalization, despite constant U.S. military intervention abroad since the early 1990s, and despite 9/11 and the war on terrorism.

Trump’s news dominance has at least three important consequences for U.S foreign policy. First, Trump’s success has clearly shifted the debate on how to confront the Islamic State. Even though Trump’s most outrageous statements about killing the wives and families of terrorists are not serious policy proposals, they have nonetheless found considerable support among the American public. And since Trump continues to lead the field, his competitors have responded by ratcheting up their own rhetoric, leading the Republican contest to take on an increasingly hawkish tone. This has also encouraged Hillary Clinton to continue to take a more aggressive stance toward confronting ISIS than she otherwise would be likely to have done. The end result is that public approval for military intervention against ISIS is at an all-time high.

Second, Trump’s rhetoric has shifted the American debate about borders and refugees in a decidedly nativist direction. Trump’s obsession with the U.S.-Mexican border early on in his campaign and his willingness to suggest extreme measures others would not ensured him a leading role in responding to the Syrian refugee crisis. In the wake of the Paris attacks, Trump’s hyperbole about the dangers posed by immigrants and refugees not only tapped into fears and frustrations of many conservatives but also pushed Republican governors and the other GOP presidential candidates to affirm extreme positions regarding Syrian refugees. At this point it will be surprising if the United States manages to take in even the 10,000 refugees President Obama originally promised and it seems extremely unlikely that the next president will suggest taking in any additional refugees.

But perhaps the most troubling consequence of the Trump phenomenon is its impact on the very quality of the foreign policy debate itself. Thanks to his popularity and the responsive chord his rhetoric has struck, Trump has legitimized a simplistic and naïve approach to dealing with the world. To listen to Trump, the United States can meet all of its challenges simply by “getting tougher” with our adversaries. In a Trump-dominated news environment the world loses its complexity and we lose the ability to ground foreign policy in a realistic and sophisticated debate about how to meet the challenges we face. 

Though election watchers remain doubtful that Trump will wind up the Republican nominee, 2016 begins with Trump in first place both in the national polls and in news coverage. And whether Trump wins a single caucus or primary, the echoes of his campaign will be felt for a long time to come.

This week Hillary Clinton became the second prominent Democrat to refuse to answer the question, “What’s the difference between a socialist and a Democrat?”

In July MSNBC host Chris Matthews stumped Democratic national chair Rep. Debbie Wasserman Schultz (D-FL) with the question. Asked three times, Wasserman Schultz first looked blank, then evaded: “The relevant debate that we’ll be having this campaign is what’s the difference between a Democrat and a Republican….The difference between a Democrat and Republican is that Democrats fight to make sure everybody has an opportunity to succeed and the Republicans are strangled by their right-wing extremists.”

On Tuesday Matthews asked Clinton the same question. Clinton could see it coming, and she did say of socialism, “I’m not one.” But pressed to explain “What’s the difference between a socialist and a Democrat?” she too retreated to boilerplate:

I can tell you what I am, I am a progressive Democrat … who likes to get things done. And who believes that we’re better off in this country when we’re trying to solve problems together. Getting people to work together. There will always be strong feelings and I respect that, from, you know, the far right, the far left, libertarians, whoever it might be, we need to get people working together.

Hey, thanks for the “libertarians” plug, Madam Secretary! But seriously, why is this a hard question? Here’s a clear answer:

“Socialists believe in government ownership of the means of production, and Democrats don’t.”

Would that be a true statement? If so, why don’t Clinton and Wasserman Schultz just say it?

One possibility, of course, is that they don’t actually think there’s much difference between Democrats and socialists. Clinton, after all, voted with taxpayers only 9 percent of the time as a senator, according to the National Taxpayers Union. She calls herself a “government junkie.” She says, “There is no such thing as other people’s children,” a strikingly collectivist thought. She tried to nationalize health care long before President Obama. Voters could be forgiven for seeing a socialist lurking there. But Clinton has never called for mass nationalization of the Soviet or even the British Labour variety.

Maybe Clinton and Wasserman Schultz see socialism as a beautiful dream that simply can’t be achieved with the current American electorate. Take a look at Clinton’s answer to Matthews: “I am a progressive Democrat … who likes to get things done.” That reminded me of her comment in 2008 when she was running against Barack Obama: “Dr. King’s dream began to be realized when President Johnson passed the Civil Rights Act. It took a president to get it done.” Perhaps in that case and the current one she’s saying that speeches are fine, but she’s the candidate prepared to dig in and do the hard work to “get things done” – the things that King and Obama only talked about, the things that Bernie Sanders gives speeches about, maybe even the things that socialists aspire to do. In 2008 she also explained that she had never supported a single-payer health care system – medical socialism – because “we had to do what would appeal to and actually coincide with what the body politic will and political coalition building was.” That’s a rejection on political grounds, not on the basis of economics, political philosophy, or an understanding of the failures of socialism.

My guess is that politics is driving Wasserman Schultz’s and especially Clinton’s evasion on the question of socialism. This week we’ve seen repeated charges in the mainstream media that Republican presidential candidates were treading cautiously on the issue of the takeover of a federal building in Oregon – or even “flirting with extremists” – because they don’t want to offend voters who are angry at federal land ownership or at federal overreach more generally. Democrats also have base voters, and extreme factions, and voters who might stay home or vote for Ralph Nader if they feel disrespected. Apparently Wasserman Schultz and Clinton think enough Democratic voters to worry about are sympathetic to socialism. They may be right. Although most Americans say they wouldn’t vote for a socialist, a majority of Democrats report favorable views of socialism. Clinton doesn’t want to diss those voters.

And that seems like something that journalists other than Chris Matthews ought to ask about. Let’s see some articles about the refusal of arguably the two most important leaders of the Democratic party (other than President Obama) to state that Democrats are not socialists.

The plunging Shanghai Stock Exchange and the sudden reversal in the yuan’s appreciation have caused fears to spread beyond China’s borders. Is something wrong with the world’s growth locomotive? In a word, yes.

Indeed, China’s leadership has chosen instability. They have forgotten my golden rule: stability might not be everything, but everything is nothing without stability.

How did China arrive at this point — a point of high uncertainty and potential economic instability? A look at China’s exchange-rate regimes provides a window into these troubled waters. Since China embraced Deng Xiaoping’s reforms on 22 December 1978, China has experimented with different exchange-rate regimes. Until 1994, the yuan was in an ever-depreciating phase against the U.S. dollar. Relative volatile readings for China’s GDP growth and inflation rate were encountered during this phase.

After the maxi yuan depreciation of 1994 and until 2005, exchange-rate fixity was the order of the day, with little movement in the CNY/USD rate. In consequence, the volatility of China’s GDP and inflation rate declined, and with the yuan firmly anchored to the U.S. dollar, China’s inflation rates began to shadow those in America (see the accompanying exchange-rate table). Then, China entered a gradual yuan appreciation phase (when the CNY/ USD rate declined in the 2005-14 period). In 2015, the yuan began to experience weakness. In terms of volatility, economic growth and inflation rates, China’s performance has deteriorated ever since it dropped exchange-rate fixity.

 

So, why did China drop exchange-rate fixity in 2005? After all, China’s fixed-rate regime had performed very well. Pressure from the U.S. and many nonsensical mercantilist’s arguments, emanating from Washington, D.C., caused China to abandon fixity. Little did Beijing realize that it had chosen instability.

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