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Last July, Dallas police used a robot to kill the man who fatally shot five Dallas-area police officers. Shortly after the shooting I noted that new technologies, such as robots, should prompt lawmakers to find ways to make the face-to-face interactions citizens have with officers safer and less frequent. A recent Amazon patent reveals how new technologies can play a role in improving traffic stops, one of the most common citizen-police encounters.

Amazon Technologies, Inc. recently secured a patent for small shoulder-mounted police drones. The patent abstract explains that, “The techniques and systems can include routines to provide enhanced support for police during routine traffic stops.”

Drones like the one detailed in the Amazon patent could help improve traffic stops. Drones would allow police to examine a pulled-over vehicle before approaching in person. This increased situational awareness would help police officers, providing them with valuable information about how many people are in the car and whether the driver or any passengers have their hands in sight. As drone technology improves it’s likely that police will be able to use similar drones to issue commands. 

If appropriate accountability policies are enacted, these small drones could serve as useful tools in police misconduct investigations. Drone footage of the Philando Castile and Samuel DuBose shootings, for example, would have been helpful to investigators.

But despite the potential for these small drones being useful in misconduct investigations and helping police during traffic stops, citizens may be concerned about the impact such drones could have on their civil liberties. Having a small drone buzzing around your car during a traffic stop may be unnerving, but unless the drone is outfitted with sophisticated surveillance tools it’s unlikely that it will prompt a robust Constitutional challenge.

If these small Amazon drones are equipped with traditional cameras and don’t enter a car during a traffic stop, then they will only be capturing images of material in “plain view.” Nonetheless, citizens should be wary of small police drones being outfitted with surveillance technology that could raise constitutional issues, such as thermal scanners.

New technologies such as drones and body cameras will undoubtedly play an increasingly prominent role in law enforcement. Small drones like the one described in Amazon’s patent could help make routine traffic stops safer for officers and citizens. However, as the ongoing debates about body cameras have demonstrated, these new technologies can only serve as tools for worthwhile criminal justice reform if they’re governed by good policies. It’s not hard to see how small drones could help police and citizens during traffic stops. But as police drones become more common we shouldn’t forget that they can serve as platforms for a host of technologies that threaten civil liberties.

It’s been a little over a year since Bernie Sanders assured America that the public was “sick of hearing” about Hillary Clinton’s “damn e-mails,” and to put it mildly, the claim has not aged well. Even before Friday’s announcement that the FBI had uncovered an additional cache of e-mails from Clinton’s personal assistant Huma Abedin—and the inevitable media feeding frenzy that followed—Clinton’s use of a private e-mail server during her tenure as Secretary of State had remained a central campaign issue. If anything, the controversy had metastasized: The FBI’s investigation into Clinton’s server, culminating in a recommendation that no criminal charges be brought, was received by many as evidence of a corrupt cover-up even more disturbing the underlying offense, a clear-cut case of a Beltway elite getting a pass for conduct that would have seen a normal schlub clapped in irons. It’s this, probably more than any other alleged misdeeds, that has made “lock her up!” a popular refrain at Donald Trump’s rowdy rallies.

As a frequent critic of the FBI’s routine demands for broadened surveillance powers, it’s heartening to see people recognizing that the Bureau is not somehow immune to improper political influence. Moreover, given the Obama DOJ’s unprecedented use of the Espionage Act to prosecute whistleblowers (rather than spies)—his administration has pursued more cases under that law than all his predecessors’ combined—it’s hard not to feel a twinge of schadenfreude when the public concludes that Clinton’s “extreme carelessness” with classified information (as FBI director James Comey characterized it) must surely be criminal too. But in large part because I’m uneasy about normalizing this aggressive approach to the Espionage Act, I think it’s necessary to explain why this widespread perception is wrong, and Comey’s conclusion that “no reasonable prosecutor” would have pursued charges against Clinton on the available facts was pretty clearly right. While it’s impossible to know what other damaging revelations the newly discovered tranche of e-mails may contain, it seems unlikely they will materially alter that basic legal conclusion.

One thing to get out of the way up front: None of what follows is ultimately a defense of Clinton. Beyond the poor judgement implied by her sloppy approach to classified information, the effect (and probable intent) of Clinton’s use of a private server was to hamper government transparency by giving her improper de facto control over correspondence that should be subject to Freedom of Information Act requests—which is to my mind perhaps the most troubling aspect of her conduct. (Much as this former reporter might wish otherwise, circumventing FOIA is not a criminal offense.) This post is narrowly concerned with whether she ought to have been prosecuted under the Espionage Act, specifically 18 USC §793(f). which reads:

(f) Whoever, being entrusted with or having lawful possession or control of any document, writing, code book, signal book, sketch, photograph, photographic negative, blueprint, plan, map, model, instrument, appliance, note, or information, relating to the national defense, (1) through gross negligence permits the same to be removed from its proper place of custody or delivered to anyone in violation of his trust, or to be lost, stolen, abstracted, or destroyed, or (2) having knowledge that the same has been illegally removed from its proper place of custody or delivered to anyone in violation of its trust, or lost, or stolen, abstracted, or destroyed, and fails to make prompt report of such loss, theft, abstraction, or destruction to his superior officer—Shall be fined under this title or imprisoned not more than ten years, or both.

I’m focusing on this clause because it’s the one the FBI itself seems to have considered the only plausible basis for bringing charges. There are other statutes that apply to mishandling of classified information by military personnel or other Defense Department employees, which obviously wouldn’t apply to Clinton. And there are other clauses of the Espionage Act that criminalize “willfully” providing classified information to uncleared persons, or obtaining the same “with intent or reason to believe that the information is to be used to the injury of the United States.” Nobody has seriously suggested that Clinton was deliberately trying to make classified information available to the adversaries of the United States. But what about 793(f), which requires not “willfulness” but only “gross negligence”?

There are three main obstacles to prosecution under that clause in this case: One factual, one statutory, and one constitutional. I’ll take them in turn.

The factual problem becomes clear when you ask what specific actions a prosecutor would charge—actions that could be laid at Clinton’s feet, as opposed to those of her staff. Setting up a private e-mail server, or using it to carry on professional correspondence? That surely wouldn’t fly: Having a private e-mail account doesn’t in itself constitute “mishandling” of classified information, and plenty of officials with high security clearances have done and continue to do the same. That it was Clinton’s own server, as opposed to a Gmail account, makes no difference. Indeed, while it’s certainly relevant to one’s judgment of whether Clinton was seeking to keep her e-mails beyond the reach of FOIA requests, the private server is largely a red herring when it comes to the charge of mishandling classified information. What’s of potential legal relevance is that the server was not an appropriate “place of custody” for whatever classified material ended up there: A personal server is, in that respect, no different from a commercial e-mail account or even an official but unclassified State.gov account. Moreover, being in receipt of classified information on an insecure channel would not, in itself, satisfy the elements of an offense under the statute: A classified document sent to Clinton’s account might constitute a violation by the sender, but it would by definition have to be “removed” and “delivered” by the sender—not the recipient. So the factual obstacle here is that, once we recognize that “setting up a server” is a red herring, it’s not at all clear whether the FBI found instances of Clinton, as opposed to her staff, removing or “permitting the removal” of documents stored in classified systems. (The second prong might conceivably apply if it was sufficiently clear to Clinton that classified material had been illegally removed, though we’d then be left wondering what “superior officer” the Secretary of State is obligated to notify. The president?)

The reference above to the removal of documents is deliberate, and that brings us to the statutory obstacle to prosecution. While several sections of the Espionage Act that apply a “willfulness” standard cover any inappropriate communication of classified information, §793(f) really appears to be about the exfiltration of files or documents, not the mere discussion of classified matters. As Prof. Steve Vladeck, an expert on the Espionage Act, has observed, discussing classified subjects on an insecure channel might be grounds for a reprimand or revocation of clearance, but it has not traditionally been viewed as a criminal offense—and the language and structure of the statute, as well as the history of prosecution, bear out that interpretation.

Start with the language: Discussing classified facts known to you is not, on any ordinary use of English, an instance of “removing” information from a “place of custody,” except perhaps on the strained reading that makes the cleared individual’s brain such a “place.” For confirmation, we can look to differences in the language found in other parts of the statute, as under traditional rules of legal interpretation, differences in otherwise parallel phrases should be construed as corresponding to a difference in legal effect. Whereas §793(f) applies to a person “being entrusted with or having lawful possession or control of” classified documents, it omits the language “access to” found in §793(e). Similarly, §783(f) covers allowing the materials to be “removed… delivered… lost, stolen, abstracted, or destroyed” but not “communicated” as in (e). The reading that most naturally makes sense of those differences is that (f) is about permitting the wholesale abstraction of files & documents, not merely communicating information someone may have gleaned from having access to them (or from access to classified briefings).

Structural considerations support the same conclusion. Consider: If §793(f) covers the same conduct as the rest of the statute, with the same penalties, with the only difference being the standard of “gross negligence” as opposed to “willfullness,” the structure of the whole becomes rather puzzling. Why have a separate clause to prohibit the same conduct under two standards, rather than having a unified prohibition on doing the same thing either “negligently” or “willfully”? Why, for that matter, would it make sense to penalize communication of classified information to uncleared individuals only with a strong intent requirement if communication of the same information even to cleared persons on an insecure channel would be subject to exactly the same penalties under a lower standard of negligence? Such a reading makes the statute into a patchwork quilt riddled with redundancies rather than a coherent whole.

Finally, the history of prosecutions under the law tends to support this understanding. Again, if discussing classified matters with other cleared persons on an insecure channel—as opposed to “removing” and transmitting classified documents—were understood to be a federal crime, you’d expect it wouldn’t be hard to find instances of that crime being prosecuted. But in fact, there don’t seem to be any such cases. As Ben Wittes, a former national security reporter turned think tank scholar, wrote this summer:

People simply don’t get indicted for accidental, non-malicious mishandling of classified material. I have followed leak cases for a very long time, both at the Washington Post and since starting Lawfare. I have never seen a criminal matter proceed without even an allegation of something more than mere mishandling of senstive information. Hillary Clinton is not above the law, but to indict her on these facts, she’d have to be significantly below the law.

A common refrain in discussions of the Clinton case has been that “anyone else” would have been charged in similar circumstances. Yet if you look closely at the supposedly parallel cases where lower-ranking individuals have been prosecuted for mishandling, you find that invariably the circumstances aren’t similar. You’ll find prosecutions involving classified material knowingly and intentionally provided to uncleared persons (as in the case of Gen. David Petraeus), or where large quantities of documents were literally removed from secure facilities, but I haven’t turned up any cases where conversations about classified subjects on an insecure line have been treated as a criminal matter. In a country where literally millions of individuals hold top secret clearances, we may safely assume this is not because such indiscretions never occur, but because they had not been understood to be criminal acts, and were dealt with as matters of administrative discipline.

There are, it’s worth noting, a small number of e-mail threads in which a small portion of an actual classified document does appear to have been sent to Clinton’s private account. These were apparently marked (C) for confidential, though Clinton told the FBI that, at least in the context of an e-mail (as opposed to a classified document with appropriate headers), she did not recognize that marking as a classification marking. Many have found that claim dubious, but if she testified in court that she either failed to notice it or interpreted it as a section marker (as in, text copied from a document in which it had been preceded by paragraphs A and B), I’m not sure how one would prove otherwise beyond reasonable doubt. At best, then, one would be left with a potential, albeit unprecedented, case against the staffer rather than Clinton.

At last we come to the constitutional barriers to prosecution. As Comey made clear in his testimony to Congress, while the statutory standard in §793(f) is “gross negligence,” the Justice Department has historically been reluctant to prosecute—indictments under §793(f) are vanishingly rare—without something at least approaching evidence of intent. One reason for that may be that the Supreme Court’s opinion in Gorin v. United States (1941), which suggests that the Espionage Act’s intent requirements are an important feature that save it from unconstitutional vagueness. Due process requires that the law give citizens clear notice of what conduct is criminally prohibited, and in a country that (in large part for First Amendment reasons) has never had a British-style Official Secrets Act, there would be real reason to fear it would be too easy to unwittingly commit a crime absent relatively strict intent requirements. After all, classified information is routinely (and lawfully) printed on the front pages of newspapers—it would be perverse if forwarding a New York Times article were an indictable offense—and the sheer volume of classified material means it’s often difficult for officials to keep track of whether a particular fact is classified at a given time. Add in the historical paucity of prosecutions for mere insecure discussion of classified facts and it’s easy to imagine Clinton’s attorneys successfully sinking any case with a due process argument.

At this point you may be asking the same question a conservative friend posed to me when I sketched this argument: If it’s so clear that Comey was correct, wouldn’t he and the Clinton campaign have been shouting all this from the rooftops? That did give me some pause, but there are reasons each might have incentives to be circumspect. If, as Vladeck argues in the piece linked above, the Espionage Act simply doesn’t cover a whole category of “mishandling” classified information, intelligence officials like Comey, who expect cleared persons to take their obligations seriously, might not want to advertise the fact too loudly—and may want to leave their options open for the sake of future prosecutions or threatened prosecutions. The Clinton campaign, on the other hand, probably understands that a lawyerly argument to the effect that her conduct was not technically illegal doesn’t sell terribly well on the campaign trail. Whatever the technicalities, this whole affair reflects terribly on her judgement, and they’ve likely concluded there’s no advantage to giving the issue any additional exposure, even if it’s to mount a defense. The old campaign adage “if you’re explaining, you’re losing” applies in spades here.

So do the additional e-mails recovered from Huma Abedin’s laptop change any of this? It’s certainly possible to imagine scenarios in which it might: If those e-mails contained clear evidence of intent to obstruct, or unambiguous instructions from Clinton that classified documents should be sent to her personal account. But then, one could as easily speculate about finding a confession to Vince Foster’s murder. If, instead, the e-mails include more of the same sort of correspondence the FBI has already reviewed—even if it includes more threads in which classified topics were discussed—all of the above analysis would apply.

To sum up, there’s little question that, as Clinton herself now acknowledges, the use of a private e-mail server to conduct official correspondence was a serious lapse in judgement. Individual voters can determine for themselves whether they find it disqualifying in a commander in chief. But we don’t need to resort to theorizing about political chicanery to explain why she wasn’t prosecuted for it: The simple answer is that—fortunately for all politicians—not every act of stupidity is a federal crime.

In the search for ways to reform the flawed current welfare system, some form of basic income guarantee has received more attention. My colleague Michael Tanner has reviewed some of the related pros and cons, but most of those studies confined themselves to the immediate to short-run impact on work, leaving many important questions unanswered. A new paper from Daniel Price co-authored with Jae Song offers one of the first studies to analyze the long-term impact of cash assistance from the negative income experiments that took place last century. Their findings suggest “unintended and unexpected long-term consequences for recipients” and ambiguous effects on their children. It’s important to understand these effects when considering ways to try to address the many problems with the troubled status quo.

In the 1960s and 1970s, when interest in a basic income was at a peak, there were large-scale evaluations of the idea of unconditional cash transfers in the Seattle and Denver Income Maintenance Experiments (SIME and DIME, respectively). Recipients were given an unconditional cash transfer that was phased out as earned income rose, for a period of either three or five years. There were a host of studies analyzing the impact on poverty, work impact, and other measures, but these were more focused on the short-term effects.

This paper is so important because, as the authors explain, “virtually no other research has been conducted on the impact of cash assistance—or, indeed, any other type of government assistance—on beneficiaries themselves long after the assistance has ended.” Some of this is due to data limitations, and the authors are able to combine SIME/DIME date with administrative records from the Social Security Administration and the Washington State Department of Health.

The impact on poverty and material hardship is more straightforward and easier to measure, but some of the effects on work effort and other measures are still not as well understood. In this paper the authors find some evidence that participation did seem to have an impact on both work and earnings later in life for adult recipients. Participation reduced the probability a worker was active in any given year by 3.3 percentage points, and decreased average earnings by $1,800 (about 7.4 percent of mean annual earnings).

Another way to put it: for each $1 in additional government transfers, the authors find that an individual’s discounted lifetime earnings are $4.50 lower. 

Impact on Propensity to Work and Earnings for Parents, by Age

Source: Price and Song (2016).

Notes: Each data point represents the estimate and 95% confidence interval of the coefficient on a dummy for financial treatment status in one regression, limiting the sample to data from individuals when they are a certain age. Earnings variables are based on one observation per year for all years between 1978 and 2013.

These effects are mostly concentrated towards the end of a person’s working life between ages 50 and 60. Song and Price suggest three channels that might explain this pattern of some reduced work effort during the experiment, minimal effect immediately after, and then larger effects decades later as former participants near retirement age. If these adults saved some of those transfers, they might be more able to reduce work hours or retire earlier. If they worked less, the wages they were able to command might be lower because they had less time to develop their skills and human capital. Or it could change their preferences, by making them place more importance on leisure time that they were able to increase during the experiment.

This could have significant implications for discussions about how to address some of the worst shortcomings of the current welfare system. The substantial reductions in earnings and work effort should be incorporated into how we think about the ramifications of these programs.

The parents weren’t the only ones affected by these programs, their children were too. There is a wide range of plausible effects on the children: parental benefit receipt could the probability of their children also receiving benefits and reducing work effort. It’s also possible that the additional income from transfers will allow parents to invest more in their children and increase their human capital and earning potential later in life.

In this long-term analysis, the authors find “little evidence of an effect on children for any variable studied.” These include probability of applying for disability, propensity to work, and impact on annual earned income. The results for children should be considered with caution due to the number of tests that they run on child outcomes. These findings cut both ways, in a sense: it doesn’t seem to be the case that parents getting sizable cash assistance during the program duration discouraged work for their children, but there also weren’t substantial positive effects on children’s eventual work outcomes due to more investment or other effects of having higher household income. In their words:

Taken as a whole, our results suggest that cash assistance could have unintended and unexpected long-term consequences for recipients without significantly improving their children’s earning potential or decreasing their propensity to use government benefits. On the other hand, in our context, we can rule out the idea that cash assistance creates a welfare culture that decreases children’s earned incomes or their dependency on disability benefits by a large amount.

Impact on Propensity to Work and Earnings for Children, by Age

Source: Price and Song (2016).

Notes: Data from Denver families only. Each data point represents the estimate and 95% confidence interval of the coefficient on a dummy for financial treatment status in one regression, limiting the sample to data from individuals when they are a certain age. Earnings variables are based on one observation per year for all years between 1978 and 2013.

These findings highlight why experiments with rigorous evaluation are so important because there are significant effects that aren’t yet fully understood. Studies like this can produce surprising results and new evidence that forces policymakers and researchers to update how they think about these issues. There are some aspects of cash assistance and a basic income guarantee that the authors can’t analyze here, for example these experiments treated a small share of people within their respective cities and the impact of a community wide experiment could be significantly different. The one thing we do know is that much more research in this sphere is needed to understand the limitations and unintended consequences involved.

Muslim immigrant assimilation in the United States is proceeding well. American Muslims have either similar or greater socio-economic status and levels of education than the average American. They are also active in civil and political society. However, this is not the case in Europe where Muslim immigrants tend to have worse labor market outcomes, are less well educated, and less socially integrated. The lack of assimilation and integration in Europe is affected by policies regarding multiculturalism, welfare, labor market regulation, citizenship, and guest worker laws that make integration more costly.

Integration in Europe

Social opinions show how Muslims in Europe are less integrated than in the United States. In Europe, there is a wide gap between Muslim and non-Muslim acceptance of homosexuality (Figure 1) and abortion (Figure 2) according to three surveys published in 2007 and 2009. The acceptance gap on these issues is the smallest in the United States – meaning that Muslims in the United States have opinions that are closer to the general public than in European countries (Figure 3).    

Figure 1

Is Homosexuality Morally Acceptable?

 

Sources: Pew and Gallup.

Figure 2

Is Abortion Morally Acceptable?

 

Sources: Pew and Gallup.

Figure 3

Acceptance Gap

 

Sources: Pew and Gallup.

Opinions on social issues are just one aspect of this gap in assimilation but an important one for judging how assimilated immigrants are into Western culture.  Although there are many other areas that could be compared, opinions of abortion and homosexuality show that Muslim Europeans are less well-assimilated than Muslims in the United States.

Labor Markets        

In Europe, Muslims were less likely to have a job than non-Muslims in 2009, while they were more likely to have one in the United States (Figure 4). 

Figure 4

Do You Have a Job?

 

Source: Gallup.

Immigrants in Europe are more likely to be unemployed than natives in every country except Hungary and Slovakia. Figure 5 shows the gap in native-born and Muslim unemployment. In the United States, immigrants have a lower unemployment rate than natives. However, in most European countries the unemployment rate for immigrants is far above that of natives – by almost 11 percentage points in Belgium.

Figure 5

Unemployment Gap between Immigrants and Natives

 

Source: OECD.

Virtually all Muslims in Western Europe are immigrants or the descendants of recent immigrants from outside of the EU. The employment gap, measured by subtracting the non-EU immigrant employment rate from the EU-15 employment rate, shows an even wider gap for the predominantly Muslim immigrants (Figure 6). There are other immigrants in Europe from outside of the EU that are included in this figure.    

Figure 6

Employment Gap between Non-EU Immigrants and Native-EU Citizens, 2015

 

Source: OECD.

Figure 7 addresses that problem by showing that immigrants to the EU-OECD from the Middle East and North Africa, who are predominately Muslim, fare the worst in the labor market. European labor market controls and regulations explain the differences between American and European outcomes.

Labor market regulations make it expensive for firms to hire new workers, incentivizing employers to hire workers they know and are familiar with. Since immigrants are some of the most unfamiliar workers in any labor market, regulations in Europe result in lower employment rates for Muslim immigrants. There is empirical literature documenting their relatively poor labor market integration going back decades (Kogan, 2004; Fleischmann and Dronkers, 2010; Kogan, 2010). Less employment means less hope for the future, fewer opportunities for integration, and a general sense of unease in their new societies. European labor market regulations are crushing job opportunities for Muslim immigrants and their descendants.    

Figure 7

EU-OECD Unemployment Rate by Region of Origin, 2015

Source: OECD.

A plethora of rules across countries, from minimum wages to collective bargaining to severe punishments for firing employees, all increase the cost of hiring workers (OECD EPL Database, 2013). In France, employees must be rehired if they were fired unfairly, which includes cases where the firing was done to “save money or boost profits.” In these inflexible labor markets, firms have an incentive to keep their workforces small and to entrust responsibilities to experienced employees rather than to hire unknown or unproven job seekers who are more likely to be immigrants. 

Muslim immigrant workers are generally less skilled and productive than European workers, meaning they earn a lower wage, but minimum wages prevent such legal bidding down. Labor market regulations are categorized and ranked by the OECD on a 0 to 6 scale ranging from no labor market protections to total government control. Averaging the categories shows that the United States’ labor market is significantly less regulated than Europe (Figure 8). This explains part of the employment and unemployment gap between Muslim immigrant and native Europeans.

Figure 8

Labor Market Regulations

 

Source: OECD.

Baked into the OECD labor market regulations are rules to protect trade unions, which are more powerful in most European countries than in the United States (Bisin et al., 2011). Unions exist to raise the wages of their members by decreasing the supply of labor available to employers. Immigrants increase the supply of labor so unions favor rules that exclude them from employment, benefiting the economic “insiders” who already have union jobs at the expense of the “outsiders” who are more likely to be Muslim immigrants (Lindbeck and Snower, 2001). 

The empirical literature supports the theory that inflexible labor markets disproportionately harm the employment prospects of immigrants. Bisin et al. (2011) find a statistically robust negative relationship between trade union density and the immigrant employment rate. They also find some evidence that employment protections and minimum wages reduce immigrant employment. Kogan (2006) finds that “liberal welfare regimes” with decentralized industrial-labor relations and high labor market flexibility lead to better employment outcomes for male immigrants. Gebel and Giesecke (2011) add that extensive employment protections for permanent workers increase both unemployment for low-skilled workers as well as the incidence of temporary contracts between employers and low-skilled workers. 

The United States is the least regulated labor market among the developed countries analyzed (Figure 8). American labor markets are much less rigid than their European counterparts and thus significantly less likely to disadvantage immigrants in employment, Muslim or otherwise. This partially explains the higher employment of immigrants in the U.S. labor market (Figure 5) and the higher rate of Muslim employment in the U.S. relative to the general public (Figure 4). 

Welfare

Many European countries have generous welfare states that provide extensive aid to the poor, including immigrants. This creates two significant obstacles to integration. The first is that welfare programs reduce the incentive to work. Work provides useful skills and experience, facilitates social relationships and cultural understanding, provides an incentive to learn the language and culture of the new country, and supplies hope for the future. Since many immigrant families have a large number of dependents, the incentive to collect means-tested aid rather than find employment is stronger than for natives who tend to have fewer dependents at home (Bratsberg et al., 2010). The inherent unpleasantness of work and the added difficulty of working in a new country that restricts employment because of onerous labor market regulations make welfare a particularly attractive alternative.

Figure 9 shows that EU countries spend more on social welfare as a percent of GDP than the United States. The total quantity of social welfare spending as a percent of GDP isn’t as important as how it’s spent. Benefits to working-age Europeans and immigrants will have a worse impact on the labor force than benefits to retired workers. Hansen and Lofstrom (2003) found that immigrants in Sweden were more likely to use welfare services than natives even when accounting for the negative effect of assimilation on welfare participation. 

Figure 9

Social and Welfare Spending as a Percent of GDP, 2014

 

Source: OECD.

In addition to working in a country with a smaller welfare state, poor immigrants to the United States are less likely to use means-tested welfare benefits than natives and, when they do, the dollar value of their consumption is lower than for poor natives. Borjas (1999) finds different welfare policy between American states negatively-selects immigrants but Zavodny (1997) and Kashoul (2005) find otherwise. However, the perception that immigrants overconsume welfare certainly holds an important place in partisan debate and contributes to anti-immigration sentiment (Hussey and Pearson-Merkowitz, 2013) or an anti-welfare opinion.  

Guest Workers and Quasi-Citizens

Some European countries established guest worker visas for lower-skilled workers after World War II to allow the temporary migration of workers to aid in post-war reconstruction and to fuel a rapidly recovering economy. The European governments intended the guest workers to migrate for work and to eventually resettle in their home countries, perhaps after several trips back and forth via circular-migration. This is in contrast to the United States where most Muslim immigrants originally entered as skilled workers who sent for their similarly educated and skilled relatives.    

Germany’s guest worker program operated from 1955 to 1973 (Anil, 2006). Although the workers came from many nations inside of Europe, Turkey quickly became the largest origin country (Anil, 2006). Of the 14 million guest workers who entered Germany, only 11 million returned (Anil, 2006). As soon as the guest worker program was canceled, the migrants sent for their families to join them in Germany. The Netherlands had a similar experience whereby workers, mainly Turkish and Moroccan (Buijs, 2009), and their families entered the country (Doomernik, 2012). France had a similar experience with mostly North and West African migrants. In 1974, the guest workers who had remained were legally permitted to bring over their families and gain citizenship (Salem, 2013). In Britain, this happened even sooner, with an immigration ban being instituted in 1962. Although it prevented more workers into the country, it created a system for the workers who were present to bring in their families (Leiken, 2015). To beat the ban, this “secondary migration” occurred hastily and on a great scale (Leiken, 2015).

The Dutch response to the labor migration that turned permanent was a series of multicultural programs that encouraged immigrants to retain their own culture rather than to assimilate. The German response was to treat the immigrant communities as just guest workers until the 1990s, separating them from German society (Salem, 2013). Indeed, until the German government passed citizenship reforms that granted birthright citizenship to children of immigrants who had lived on German soil for eight years and eased naturalization, these immigrants were largely in citizenship limbo (Anil, 2006).  

Citizenship remains a key component of integration. Without it, immigrants are limited in how they can interact with civil society. Citizenship gives one a greater sense of belonging (de Rooij, 2012) and can fuel both political and professional participation with others. Muslims have had a different experience in the United States because they have been able to naturalize ever since they’ve started arriving in increasing numbers since the 1960s (Salem, 2013).  

When the guest worker programs were canceled in Europe, many of the workers made the rational choice to stay and work illegally rather than return to poverty in their home countries. When guest worker programs operate, workers go back and forth secure in the knowledge that they can return for economic opportunity. When the programs end then those same workers refuse to leave because they will then never be able to return legally, thus turning a temporary worker flow into a permanently settled population. Interestingly, extending citizenship to these former guest workers or not terminating the program in the first places creates a circular flow with relatively few permanently settled residents. Increasing labor market regulations and a growing welfare state eventually pushed them out of the labor market but not out of the country. Multicultural policies separated the migrants from their neighbors while citizenship laws kept them and their descendants in a legal underclass. The United States avoided virtually all of these mistakes through not having a federal integration policy that emphasized cultural fads and by mandating birthright citizenship. Though Europe in recent years has moved away from multiculturalism towards assimilation, multicultural policy of the 1970s and 80s has left a lasting effect on integration to the present.

Cultural Barriers to Assimilation in Europe

Different histories and cultural attitudes toward immigration in Europe and the United States also help explain the different outcomes (Leiken, 2015). Immigration is engrained into the founding and continuous formation of the United States, but in a Europe defined by near-homogeneous ethnically-demarcated nation-states, immigration is recent and more troubling (Leiken, 2015). European multicultural policies made assimilation and integration more costly and helped to legitimize parallel communities. The Netherlands responded to waves of migration through “inclusionary” policies such as the Ethnic Minorities Policy of 1983 that spent government funds on religious institutions, educational programs, and immigrant media, for which immigrant communities could coexist with the native Dutch in autonomy. The result was separation (Vasta, 2007).

In Britain, multiculturalism emerged to counter discrimination, and encouraged new British subjects to live differently if they chose to (Malik, 2015), including a preservation of their cultural identity at the cost of social inclusion (Leiken, 2015). Germany’s self-conflicting identity of traditional German ethnocentrism and liberal multiculturalism both welcomes immigrants to stay without an incentive to integrate with ethnic Germans. Over time an ethnic identifier for being German might fade away and be replaced with a sense of “Germanness” like in the United States whereby being an American is not an issue of ethnicity but more of certain values, allegiances, and history.  German policies halted that process.  As a result, the large Turkish population’s social sphere remains within the Turkish community (Leiken, 2015), where Turks have become more religious and isolated (Malik, 2015), and employment opportunities continue to deteriorate.

Western Europe finds itself in a struggle between the ideals of modern universal tolerance and national ethnic-based identities that predate the current waves of immigration. European governments have made many mistakes in dealing with this issue. Inclusive programs to help these new ethnic and religious minorities created coexisting societies that run parallel to mainstream society, rather than in cohesion with their adopted homeland. The negative impact on citizenship as an institution has spilled over into other facets of life for Muslim immigrants, including employment, economic mobility, education, social acceptance, and political life.

Political Participation

In the United States, Muslims are about as politically active as their fellow countryman but not so in Western Europe. Muslim Americans are more likely to have a college degree than Americans generally while Muslim immigrants to Europe are much less well educated than native Europeans so the education difference could explain the difference (Angenendt et al., 2007). People who earn higher educations tend to be more politically active (Ayers & Hofstetter, 2008). They more readily embrace their American identity and have confidence in American institutions (Angenendt et al., 2007). Less educated European Muslims are more isolated, less economically successful, and they are less interested in participating in politics and civil society.  They have less faith in European institutions and fewer resources to devote to community building.  

Religion

Americans are more tolerant of religious differences and are more likely to recognize the positive role of religion than Europeans (Foner and Alba, 2008). Religious immigrants in the United States frequently use religion as a bridge to social inclusion and taking up American identity. For instance, religious membership serves the instrumental purpose of providing “refuge, respectability, and resources” to first- and second-generation immigrants looking for identity and sense of belonging, leadership, upward mobility, and an entryway into political life (Foner and Alba, 2008).

Europeans are less religious and there are fewer legal protections for religion. Broadly, European secularists either seek a rejection of religion from all public life or seek to promote a diversity of religious views (Mandaville, 2009). The “thick” secular view, as exemplified by the French government, seeks to marginalize religious expression as much as possible and prevent it from entering the public sphere through actions like the burqa ban (Mandaville, 2009). 

The United Kingdom is more tolerant of religious differences than France. Interestingly, some Muslims support the official establishment of the Anglican Church on the grounds that it recognizes a positive role for religion in public life (Koenig, 2005). Cooperation between the government and religious organizations is not unique to the UK. In Germany, religious groups have a strong incentive to incorporate and thereby form nationally recognized and hierarchical religious organizations that receive subsidies but Muslims have not taken advantage of that system (Warner and Wenner, 2006).  

Due to European religious institutions and government favoritism toward established churches, Muslims in Europe are at a de facto and de jure disadvantage compared to their American co-religionists who inhabit a much more religiously diverse, open, and free religious marketplace.  The American view of religion as a force for social cohesion contrasts sharply with religion practiced the more secular, state-dominated, and alien established churches of Europe.  

Conclusion

The results of Muslim immigration to the United States and Western Europe vary significantly. Muslims and their descendants are assimilating well in the United States while that is not the case in Europe.  Since the end of guest worker programs in the 1970s, Muslim immigrants have struggled to fully integrate into much of European society. The relatively stricter labor markets and large welfare states have decreased the economic well-being of immigrant groups. European governments have strived for tolerance through pretty-sounding policies that have stifled integration, too often separating immigrant populations from the larger society. Those policies along with damaging welfare and labor market regulations should be reversed. 

Special thanks to Cole Blondin and Martin Stillman for their excellent research and writing assistance on this piece.    

Following my recent blog on Obama’s Housing Toolkit, Michael Hamilton took exception with the question: “Who better to determine local needs than property owners and concerned citizens themselves?” and suggested that this type of local-centric thinking raises questions about the reach and influence of constitutional protections for property rights. 

But the Obama Toolkit does not propose protecting or amending constitutional rights. At the federal level, it suggests spending $300 million to modernize cities’ housing regulation, when the only modernization required is a reduction in zoning regulation. Theoretically, this reduction in regulation should cost nothing.

Although the language in the report is anything but explicit, given HUD’s historical preference for withholding funding from communities that fail to do the agency-approved urban policy action du jour, it’s not a stretch to suggest we could see a similar carrot-and-stick approach used by HUD in the granting of “Local Housing Policy Grants.” Actually, HUD is already punishing or rewarding municipalities this way, through the euphemistically-titled Affirmatively Furthering Fair Housing, Community Development Block Grants, Home Investment Partnerships, Emergency Solutions Grants, and other programs.

But simply because this method is employed with regularity, or even with worthy aims, doesn’t mean that we have to favor it. This carrot-and-stick approach is, for one thing, usually unconstitutional. Sadly, an unconstitutional approach is unremarkable in the climate of complete rejection/ignorance of constitutional law in which we exist.

It isn’t that cities or even “concerned citizens” aren’t often inimical to reducing regulation; they are. Property values are bolstered by zoning regulation, giving citizens every incentive to support restrictive zoning. The question is whether we would like federal or state administrative agencies involved in policing this.

But if you remain unmoved on the merits of (un)constitutionality alone, HUD’s ability to effectively and impartially police local municipalities is unproven (see: HUD’s involvement in Westchester, NY). It’s not as if HUD goes after the real zoning or affordability problems (see: San Francisco, CA). In other words, this is just bad policy.

On the other hand, local governments should be prohibited from enacting many types of zoning regulations, and one way to do that is to use higher levels of government—state or federal—to help protect people against arbitrary deprivations of property rights. That’s actually more of a “bottoms up” philosophy, individuals asserting rights, than a top-down one, expanding federal or state agency policing powers.

So, again: is there anything that can be done by the federal or state government to reduce regulations? Probably not constitutionally via agency blackmail but yes, there are things that could be done that are not suggested in Obama’s Housing Toolkit.

The federal government could overturn Euclid v. Amber, which legitimized zoning regulations via police powers to begin with, or any of the cases that have expanded zoning regulations following it.

The people could amend the Constitution to protect property owners from regulatory takings, though it’s not obvious this would be necessary: a casual reader of the Constitution has good reason to believe that the Fifth Amendment already covers this quite well when it states that “private property [shall not] be taken for public use, without just compensation.”[1] At the federal level, the Constitution really doesn’t need an addendum; it just needs adherents and adherence.

The same thing goes for states. Amending state constitutions to include language that forbids irrational local zoning regulation is fine, though that’s not what is proposed. Using the state equivalent of the Tax & Spend Clause to justify any and all state agency overreach, which is what we often see in practice, is not.

In summary, the federal government’s role is to preserve [property] rights; it is not to create new programs, new schemes, and new mechanisms for controlling cities to ensure that municipalities finally spawn the elusive urban utopia of planner’s fantasies. Property rights should be thought of as originating with the individual – yes, even with property owners who happen to be concerned citizens. Though there is much to be admired in the report overall, this does not seem to be the position of the Obama Housing Toolkit when it comes to federal or state oversight.

1. The takings clause, however, has only been used to protect citizens against full takings (e.g. eminent domain), rather than regulatory takings (e.g. zoning regulation).

With each passing day, I find myself reading wildly inaccurate reports about Venezuela’s inflation. I have already had to take no less than the Wall Street Journal to task for its misreporting. Now, it’s Zero Hedge’s one and only Tyler Durden’s time. On October 27th, he asserted that Venezuela was on the cusp of hyperinflation. Durden’s assertion is dead wrong.

Durden relies on the International Monetary Fund (IMF) for his inflation data, as well as estimates for Venezuela’s inflation. This is a big blunder, as the IMF’s reports on Venezuela contain no indication of their methodology. Indeed, it’s clear from reading their reports that they’re using a finger-in-the-wind method to measure current inflation and forecast future inflation. Durden says that Venezuela’s end of year inflation will be 481 percent, a far cry from Venezuela’s current 74.4 percent annual inflation rate courtesy of the Johns Hopkins-Cato Institute Troubled Currencies Project. The Hopkins-Cato project uses changes in black market (read: free market) exchange rates and the principle of purchasing power parity (PPP) to translate exchange rate changes into deadly accurate inflation rate estimates. 

As the accompanying chart shows, Venezuela’s inflation is not about ready to break out in hyperinflation, but has decelerated dramatically from annual rates exceeding 700 percent in 2015 to today’s still punishing rate of 74.4 percent. 

By the way, for those who play fast and loose with the word “hyperinflation,” the hyperinflation threshold is 12,875 percent, year over year. For those who are seriously interested in the topic, see the only documented treatment of all the 56 hyperinflations in the world: Steve H. Hanke and Nicholas Krus, “World Hyperinflations” in The Handbook of Major Events in Economic History, ed. Randall Parker and Robert Whaples (London: Routledge Publishing, 2013).

Once again, the 95 percent rule reigns – 95 percent of what you read in the financial press is either wrong or irrelevant.

In 2009, Canada and the European Union launched negotiations on a trade agreement, commonly known as CETA (which does not stand for Canada-EU Trade Agreement, as you might expect, but rather the Comprehensive Economic and Trade Agreement). This past weekend they reached a milestone, resolving a few outstanding issues so that the Agreement will soon be “provisionally applied” (after approval by the European Parliament). Full ratification will have to wait for some EU court decisions on the division of powers between the EU itself and the EU member states over certain issues (most importantly, the controversial investor-state dispute settlement provisions), and, depending on the court rulings, may also have to wait for approval by these member states for some aspects of the Agreement.

So if you’re counting, seven years into these trade negotiations, a final implemented deal still has not been concluded. And this is a deal with Canada, which is probably one of the least controversial trading partners around.

This all suggests that EU trade policy may face even more challenges than U.S. trade policy does right now. And this is something that worries people following the Brexit vote, in relation to upcoming UK trade negotiations to leave the EU and to come up with a new set of UK-EU trade arrangements. (They also worry more generally about the prospects for UK trade deals with anyone.) This is from the Guardian:

There are still several more chapters in the stop-start drama over the European Union’s comprehensive economic and trade agreement (Ceta) with Canada. The lifting of the Walloon veto clears the way for 28 EU governments to sign the treaty, allowing it to come into force on a temporary basis.

But 38 national and regional assemblies will have the final say on whether the treaty becomes a permanent legal document. It is a story that is likely to have implications for EU trade policy, but also for post-Brexit Britain.

“This Ceta saga has illustrated an additional layer of complexity that the UK will have to deal with,” said Lourdes Catrain, a partner at law firm Hogan Lovells. 

The British government is wary of parallels with Canada, although a government source acknowledged that Ceta showed “if we do end up in a world of an FTA [free trade agreement] outside the EU it isn’t going to be terribly easy”. …

I’ve written about how the UK should approach trade negotiations after Brexit, and I think the CETA experience confirms my earlier thoughts. If governments focus their trade deals on aspects of trade liberalization that are most beneficial and least controversial – such as lower tariffs, or mutual recognition of product regulations – the negotiations will not take very long and will generate wide support. On the other hand, if they insist on including provisions of questionable value that have strong opposition, such as investor-state dispute settlement, the process could drag on for many years. In my view, this makes a decision on what the UK should include in its trade negotiations pretty easy: Stick with the core trade liberalization issues, and get the deals done quickly.

Recently, I’ve worked with the excellent Cato Multimedia team on the first edition of a project you’ll be seeing more of: Ask a Cato Expert.

In this first episode, I’ve answered the question of “Should you take the government’s dietary advice?” I highlight the history behind our current dietary guidelines, and come to the conclusion one should not. Please take a look at the video below, and tweet us new questions at #AskACatoExpert!

 

The folks at the Kaiser Family Foundation will publish studies that explain how ObamaCare creates “an incentive to avoid enrolling people who are in worse health” such as “by making [insurance] products unattractive to people with expensive health conditions.”

Then, when their own polling shows three of the public’s top four health care concerns are the very sort of health-insurance features ObamaCare pushes insurers to adopt, they spin it as evidence the public does not want Congress to reopen ObamaCare.

As many predicted, especially us at Cato, the Affordable Care Act is beginning to make health insurance less affordable for many Americans. Part of the problem, in a nutshell, is precisely what my colleague Michael Cannon described in 2009, the young and the healthy avoiding signing up for health insurance and choosing to pay the fine, or, as Chief Justice John Roberts would call it, a tax.

MIT economist Jonathan Gruber, often described as an architect Obamacare, recently said that some of these problems can be alleviated by increasing the “tax” on those without insurance. “I think probably the most important thing experts would agree is we need a larger mandate penalty,” said Gruber.

Depending on how high the penalty goes, there could be a constitutional problem with that. In the opinion that converted the “penalty” into a constitutional “tax,” Chief Justice Roberts described the characteristics of the “shared responsibility payment” that made it, constitutionally speaking, a tax rather than a penalty. One of those characteristics is that the penalty was not too high: “for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more. It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the ‘prohibitory’ financial punishment in Drexel Furniture.” In Drexel Furniture, also known as the Child Labor Tax Case, the Court struck down a 10 percent tax on the profits of employers who used child labor in certain businesses. One reason the Court struck it down was because its “prohibitory and regulatory effect and purpose are palpable.”

Roberts actually went out of his way to describe paying the “tax” as a voluntary and permissible act. Even though they won, this should have irked the government a bit because the Chief was essentially giving millions of people permission to not buy insurance, which the government knew would severely undermine the law. In Roberts’s words:

Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS. The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law.

Indeed, it is estimated that four million people each year will choose to pay the IRS rather than buy insurance. We would expect Congress to be troubled by that prospect if such conduct were unlawful. That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws. It suggests instead that the shared responsibility payment merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance.

So could raising the “tax” turn it into a “penalty” and thus make it unconstitutional? Possibly. At some point, the tax would take on a punitive character, and, if people like Gruber get their way, the tax might have to be pretty stiff. With health insurance prices going up, it can still be cheaper to pay the “tax” rather than purchase insurance. And that tax might have to go up a lot to make some people change their minds. If the government ever tries to attach criminal penalties to noncompliance, then the argument is even stronger that it would become an unconstitutional regulation of commerce, given that the Court held that the individual mandate isn’t a valid use of the commerce power.

It’s all just another act in the ACA’s tragic comedy of errors.

When things aren’t going so well for a president, it can be useful to find a scapegoat. Foreign threats are also useful distractions. The movie “Wag the Dog” told us that, as if we hadn’t seen the pattern repeated many times in our political history.

We can see the same phenomenon in a recent Washington Post dispatch from Moscow about the Russian parliamentary elections, which resulted in a big win for political parties aligned with President Vladimir Putin. Andrew Roth interviewed a Moscow pensioner:

“The president’s party, who else would I vote for?” said Nadezhda Osetinskaya, a 67-year-old pensioner and former nurse who lined up before polls opened at 8 a.m. at a school in northwest Moscow.

Osetinskaya had her share of complaints. Prices for food and medicine are increasing, she said, and she required support from her children to live on her $250 monthly pension. She was unhappy with the quality of care at a hospital where she receives treatment for a kidney ailment. The city had carried out years of road work, she said, but the potholes on her neighborhood streets are legion, probably the result of corruption. 

But on broader questions, she enthusiastically supported Putin, lauding the recent annexation of Crimea and blaming Russia’s economic difficulties on a Western conspiracy. Voting for United Russia was a way to support Putin, she reiterated.

So this voter is unhappy with rising prices, poor health care, and government corruption. But she supports the longtime incumbent because he’s fighting a war and blaming Russia’s problems on someone else. (Maybe Snowball!) Blaming America has worked for the dictators of Cuba and Venezuela, not that they’ve ever allowed a real election.

Writers have often seen the true nature of rulers and politics. Henry Adams wrote a century ago, “Politics, as a practice, whatever its professions, had always been the systematic organization of hatreds.”

And Shakespeare understood the value of foreign military adventures to rulers long before that, when he wrote in Henry IV, Part 2,

I cut them off and had a purpose now To lead out many to the Holy Land, Lest rest and lying still might make them look Too near unto my state. Therefore, my Harry, Be it thy course to busy giddy minds With foreign quarrels… It still works. 

People shopping around on the insurance exchanges when the Affordable Care Act’s Open Enrollment period begins next week will find that the choices they have are limited and that insurance premiums have gone up significantly. A new brief from the Department of Health and Human Services reports an average increase of 22 percent for benchmark plans, and consumers in some states will face hikes as high as 116 percent in Arizona. 

The high profile exits of Aetna and UnitedHealth were covered at the time, but the report gives new insights into the aggregate effects of smaller exits and discontinuations as well. In the states included in the HHS brief, there was a net reduction of 73 issuers from last year, with Iowa and Maine being the only states to see a net increase in the number of issuers.

As might be expected, this significant drop in the number of issuers has led to a corresponding reduction in the number of choices available to consumers in most states. The trend prior to this year had been a reduction in the number of counties with only one insurer, but that quintupled this year in the wake of insurer exits, from 182 last year to 960 this year according to calculations by Sarah Frostenson.  In this year’s open enrollment 21 percent of the consumers in the 38 states the HHS brief included only had one issuer to choose from, and only 56 percent had three or more. The weighted average number of qualified health plans to choose from in a county dropped from 47 to 30.

Number of Issuers by State

Source: ASPE, “Health Plan Choice and Premiums in the 2017 Health Insurance Marketplaces.”

Note: Made with Datawrapper.

In the starkest illustration of this lack of choice and competition, 5 states have only one insurer in the entire exchange this year: Alaska, Alabama, Oklahoma, South Carolina, and Wyoming.

Two other states are in virtually the same position. Arizona, which made headlines earlier this year when it looked like Pinal County may end up with zero options on the exchange, has only on insurer in every county but one. North Carolina has only one insurer in 95 percent of its counties.

Many people are increasingly finding that when it comes to the ACA exchanges, there’s not much choice at all. Part of the reason there have been so many insurer withdrawals is that they’ve struggled to find a way to be profitable, or even sustainable, in this sphere. The plans that are remaining are implementing substantial premium increases this year, and in some cases they requested even higher increases in response to other issuers leaving in anticipation of absorbing some of their costly enrollees.

It might not be surprising that the premium increases are even higher in these states as remaining insurers aren’t being forced to compete and trying to reduce premiums as they would if there was more room for the free market here. The premium increase for the benchmark plan was well above the national average in every one of these states except for Wyoming, reaching as high as 69 percent in Oklahoma and an astronomical 116 percent in Arizona.

Premium Increases for States with Available Data

Sources: Charles Gaba, ACASignups.net for weighted average increases; ASPE for benchmark increases.

Notes: Only states included in ASPE brief are included in the figure. * is for states with requested but not approved increases. Weighted averages assume enrollees renew existing policies.  Increases listed are prior to any applicable subsidies. For the roughly 1.4 million people who are losing their plan, no estimate for increase as they cannot be assumed to re-enroll. Made with Tableau.

Not everyone has the benchmark plan, some might opt for more comprehensive Gold plans, while others might decide to go with the more affordable Bronze plans, so looking beyond the benchmark increases is also important. The weighted average increase of all plans before subsidies is roughly 25 percent according to estimates from ACASignups.net, with some variations between the sates.

While the majority of enrollees in the ACA exchanges are subsidized, those that are not and people buying plans off-exchange will have to bear the full brunt of these increases, and many of them could find maintaining coverage increasingly difficult, calling into question the ‘Affordable’ part of the law’s name. In Arizona, for example, more than a quarter of on-exchange enrollees last year were unsubsidized, and this share ranges from 9 percent to 32 percent in the states, accounting for millions of people.

Fewer choices and higher premiums are just two of the latest high-profile problems with the law. Their associated costs will feel all too real to millions of people trying to find some kind of coverage that won’t drain their pocketbooks in Open Enrollment next week. The Affordable Care Act has left a series of broken promises in its wake, but the biggest one might be in the name. 

Sam Hammond and Robert Orr of the Niskanen Center have published a very thoughtful paper proposing the establishment of a Canadian-style Universal Child Benefit. They make a compelling argument that replacing the current mish-mash of child-centered social welfare programs with a single cash benefit would be both more efficient and more humane than what we have today. But, before we get carried away and rush down the road to another new entitlement, there are many questions that need further exploration.

Hammond and Orr call for the elimination of eight existing programs (the dependent tax exemption, the portion of food stamps (SNAP) going to child recipients, five separate school nutrition programs, and the dependent care credit). They would also fold the existing Child Tax Credit (CTC) into their new benefit. This would free up $147.5 billion annually, allowing for a $2,000 per child cash grant on a budget-neutral basis.  The benefit would be phased out for incomes above $75,000 for single heads of household and $110,000 for a married couple.

There are several important advantages to this approach. First, cash is almost always preferable to in-kind programs. Cash payments are transparent, treat recipients like adults, and allow for greater flexibility of individual preferences and circumstances.  Moreover, the shift to cash will help break up the concentrated lobbying power of special interests who benefit from in-kind programs, reducing the constant pressure to increase benefits.  In general, as I have argued, we should be transitioning our entire social welfare system to cash.

Second, Hammond and Orr’s approach would treat families more equitably.  For example, current benefits reward parents who purchase external child care services, but do not benefit traditional stay-at-home parents.  Existing programs also tend to benefit those individuals, often more educated and even middle-class, who have the time and expertise to navigate the bureaucracy, rather than those families most in need.  A universal child benefit would extend benefits to many who have not been able to access them.

And, third, a universal child benefit could help reduce poverty.  Hammond and Orr estimate that their proposal would reduce poverty by 1.7 percentage points and bring some families out of deep poverty, using the Supplemental Poverty Measure.  If we can reduce poverty without any increase in expenditures, that has to be considered a positive.

Why then am I cautious about heading down this road?  First, while Hammond and Orr are sanguine about the effect on work incentives, I am less so. No doubt, the availability of funds for child care would help many mothers enter the labor force. But, at the same time, previous studies with guaranteed cash benefits have resulted in a decline in work participation.  Most recently, a study by David Price and Jae Song found some evidence that cash-assistance could lead to unintended and unanticipated long-term reductions in work effort for adult recipients, although it’s not yet clear what the underlying mechanisms are.

We should also recognize that a child benefit is a reward for having children, not for work.  Should we be in the business of redistributing from childless families to those with multiple children?  For that matter, should we be in the business of rewarding child-bearing by families well above the poverty level?  We may well want to offset the cost of having children for the poor, but do we want to do the same for the families earning $110,000?  And, what does this say about the relationship between individuals, the state, and the choices we make?

Finally, and most importantly, Hammond and Orr envision their proposal as a substitute for existing social welfare programs.  In this regard, they are heading down the road to a Universal Basic Income (UBI) advocated by Charles Murray. However, many liberal advocates of a UBI or child benefit see such a program as being added on top of existing welfare programs. Indeed, Hillary Clinton has called for doubling the current credit for children ages 4 and under, and eliminating the earnings exclusion for refundability.  Such an add-on approach would both increase dependence on government and be unaffordable. 

In particular Hammond and Orr’s call for eliminating child SNAP and school nutrition benefits would be heavy political lifting.  The demagoguery from advocates of the current welfare state would be amazingly easy.  That doesn’t mean that it’s an approach that shouldn’t be pursued.  It does mean that it should be pursued with great caution.

There are two types of markets for parking in Washington DC: the private market, which tends to charge what the market will bear, and the government, which charges a price that’s deemed to be “fair” and “non-exploitative” to the constituents in residential areas. How’s that working out for everyone?

Not very well, it turns out. The “fair” price on residential streets is just $25 a year, which is less than one percent of the private market rate. As a result there’s a large excess demand for parking on city streets, which has created a few predictable and undesirable consequences: For starters, people spend a lot of time driving around looking for “free” on-street parking, which congests streets, increases pollution, and makes streets less safe for pedestrians, as automobiles do quick U-turns and other risky maneuvers to claim a spot that suddenly opens.

The pro-free-on-street parking people will acknowledge these costs to some degree but would dismiss them in the name of “fairness” by trotting out the canard that some poor people drive to work and therefore this reduces inequality. The problem is that most people with cars parked on city streets are wealthy and most of the attendant consequences of the lousy deal are all borne by the less-well-off, most of whom do not own cars.

Making residential on-street parking nearly free means that those who avail themselves of it fight fiercely to limit competition for those spots. As a result, every proposed housing development in these neighborhoods are bitterly fought in the name of (pick one) historical preservation, neighborhood harmony, architectural purity, or some other vague sentiment that belie the true motive. In the last few years residents of Northwest DC have sought to declare an empty lot and a parking lot as “historic” and prevent any development on them, for no reason other than some fraction of those in the new apartment buildings to be constructed may also want to park on the street.

New developments in the city take years to get approved and are invariably shorter than the existing buildings they abut. The result of all this is that housing becomes more expensive, and middle-income residents find themselves struggling to remain in the neighborhood.

The city has come to realize this problem and has decided to combat it–not by tackling free parking or explicitly encouraging the construction of more housing but by strengthening rent controls in the city. Such a step would only exacerbate the housing shortage: if we are going to cap rental prices then developers will build less rental housing and either build more condos that they can sell and escape before more restrictions enter that market or else they will forego investing in housing altogether. There is already considerable backlash against developers who buy, expand, and subdivide large townhomes in the area for being “anti-family” although having four two bedroom apartments that cost $500,000 each is infinitely more amenable to middle income households than a single $2 million home.

Rent control will only make the city’s housing problem worse, but from a political perspective it works because it allows the rich progressives who benefit from the city’s inane parking giveaway to tell themselves that they aren’t the cause of the problem. Rent control helps those who currently have housing that will be protected but it hurts every middle class family who will be looking for housing in the future.

The true solution to high housing costs is simple: The government should stop giving away a scarce asset and set a market price to be charged to the wealthy residents of Washington DC who park their cars on city streets. Providing an implicit subsidy to some of the richest people in town is not only bad land-use policy but it also costs the low and middle income earners plenty by creating the economic conditions that dampen the construction of new homes, pushing up their rents.

And if the progressives and activists who make up the bulk of my neighbors have a problem with a policy change that reduces inequality, improves the environment, and makes the city more livable, they’re going to have to work a lot harder to defend their free parking. 

Some decent news to report: The latest National Assessment of Educational Progress (NAEP) science results are in, and scores for 4th and 8th graders have improved since 2009, the first year of the test. Unfortunately, 12th grade scores remained flat. Sound familiar?

Why the increases at the lower levels? A lot of people will trot out their pet reform: the Common Core, the Next Generation Science Standards, some federal program—I’ll throw in school choice—but my suspicion is none of these had much effect. My guess is people are simply focusing a little more on science than they were in 2009, driven by their personal feeling that grasping science is important, and will be increasingly so as the economy evolves. At this point many folks have probably been exposed to the mantra “STEM fields, STEM fields, STEM fields” enough times that a new emphasis on science has seeped into their brains, even if they don’t explicitly think to yell at their kids, “Jane and Johnny, STEM is important, and there’ll be no Xbox tonight unless you make a volcano in the kitchen right this instant! I mean it! I’ll get the baking soda…”

Few people could probably tell you what STEM stands for (that would be science, technology, engineering, and mathematics) but they have a strong sense science needs learnin’!

Or that could be wrong, too. If nothing else, it fails to explain why no improvement was seen in 12th grade scores. The fact is, just looking at NAEP scores tells us very little about why we got them, and the best we can do is make educated guesses. There is, frankly, no exact science when it comes to interpreting NAEP—especially given only two or three years of data—even if people may talk like there is.

Back in July 2015 I reminded Alt-M readers of a paper I presented at the 2012 Mont Pelerin Society meetings in Prague, as part of a session in which Otmar Issing, one of the euro’s architects, also took part. As I remarked in that last post, although Mr. Issing “put a much more favorable spin on the euro’s prospects for survival” than I did, I argued at the time that our apparent disagreement boiled down to the fact that while he chose to regard “the merest heartbeat from Frankfurt” as proof of the euro’s vitality, I considered it “for all intents and purposes already brain-dead.”

The gist of my argument was that the viability of the euro depended on strict enforcement of the 1997 Stability and Growth Pact. However, when both France and Germany were allowed to violate it in 2003, the pact ceased to be credible. “That change meant, in effect, that either the ECB’s independence or the no bailout commitment or both would have to give way, as both have indeed done.” That stage having been reached, I argued, the euro’s eventual disintegration was all but certain.

I’m bringing this up yet again because Central Banking Journal recently published a remarkable (but, unfortunately, gated) interview with Mr. Issing in which he acknowledges that the euro is indeed falling apart. What’s more, he agrees that the euro’s fate was sealed when “Germany and France violated the pact in 2003, delivering a fatal blow to the pact from which it has never recovered.”

The idea of installing a politically controlled mechanism of fiscal policy of member states via the Stability and Growth Pact has more or less failed. Market discipline is done away with by interventions by the ECB. So there is no fiscal control mechanism from markets or politics. This has all the elements to bring disaster for monetary union.

The euro’s other, critical flaw, according to Issing, consisted of European authorities’ decision to make the ECB responsible for banking supervision. Issing and other ECB economists strenuously opposed that step, having been

concerned about conflicts with monetary policy and interactions with politics when it comes to rescuing individual banks — as, ultimately, rescues involve taxpayer money, rather than central bank money. This brings the central bank unavoidably into contact and conflict with national fiscal policy.

“How,” Issing and his colleagues wondered, “can you separate monetary policy from effort that supports the weak banks to ensure they survive?” How indeed! Once the Stability and Growth Pact was a dead letter, “[q]uite a few countries — behaved as though they could still devalue their currencies.” Those countries’ creditors in turn, European banks among them, had reason to expect the ECB to intervene in the bond markets to keep them from failing. Indeed, “nobody” really believed

that the ‘no-bail-out’ principle would be observed in a crisis. There was a belief the ECB would come in. And now of course, the ECB is heavily invested in these bonds whose spreads are artificially low, meaning an exit from QE policy is more difficult, as the consequences potentially could be disastrous.

Another problem with the design of the European Monetary Union, Issing observes, “was that once a member, you remain a member.” In retrospect,

It would have been better to demonstrate a country could leave the euro and rejoin from a much stronger position later. Such an event would have clarified that being a member of the ‘euro club’ can only come by meeting the club’s economic rules. But this opportunity was missed.

And now? “Realistically,” Issing says,

it will be a case of muddling through, struggling from one crisis to the next one. It is difficult to forecast how long this will continue, but it cannot go on endlessly.  Governments will pile up more debt — and then one day, the house of cards will collapse.

[Cross-posted from Alt-M.org]

At a monetary conference in Vienna back in 2014, the distinguished Frenchman, my friend, and occasional collaborator Jacques de Larosière proclaimed that the current world monetary order should be termed an “anti-system.” He has a point – an important point. Among other things, such an anti-system invites an enormous amount of instability, as well as uninformed loose talk that influences public opinion and policy.

The Chinese yuan has been at the center of much of the recent misinformation and disinformation about currencies. For example, during the first presidential debate between Donald Trump and Hillary Clinton, Trump fingered China as the world’s best practitioner of currency devaluations – devaluations that Trump claims power China’s exports. Clinton didn’t object to Trump’s thesis. Indeed, she boarded the same bandwagon. And with the Chinese yuan making new lows, the ever-misinformed mercantilists who populate Washington, D.C. are clinging to the bandwagon, too.

What are the facts? Well, they contradict the Beltway’s conventional wisdom. Chinese exports have steadily risen since 1995, but they have not been powered by a depreciating yuan. In fact, the yuan has slightly appreciated in both nominal and real terms. The accompanying charts tell that story. Note that the real and nominal charts tell the same story because the inflation rates in the U.S. and China have been similar over the past two decades.

You Ought to Have a Look is a regular feature from the Center for the Study of Science.  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.

One of our favorite lukewarmers, Matt Ridley, was invited by the Global Warming Policy Foundation to give its 2016 Annual Lecture. He certainly did not disappoint. While Matt titled his speech “Global Warming Versus Global Greening” that title only suggested part of what he had to say. We offer “The Hows and Whys of Lukewarming” to be a more apt descriptor:

These days there is a legion of well paid climate spin doctors. Their job is to keep the debate binary: either you believe climate change is real and dangerous or you’re a denier who thinks it’s a hoax.

But there’s a third possibility they refuse to acknowledge: that it’s real but not dangerous. That’s what I mean by lukewarming, and I think it is by far the most likely prognosis.

I am not claiming that carbon dioxide is not a greenhouse gas; it is.

I am not saying that its concentration in the atmosphere is not increasing; it is.

I am not saying the main cause of that increase is not the burning of fossil fuels; it is.

I am not saying the climate does not change; it does.

I am not saying that the atmosphere is not warmer today than it was 50 or 100 years ago; it is.

And I am not saying that carbon dioxide emissions are not likely to have caused some (probably more than half) of the warming since 1950.

I agree with the consensus on all these points.

I am not in any sense a “denier”, that unpleasant, modern term of abuse for blasphemers against the climate dogma…. I am a lukewarmer.

And from there, Ridley goes on to do a laudable job of laying out the case that future climate change from human activities will prove to be towards the low end of climate model projections—but squarely within the bounds of consensus expectations. As Matt puts it:

…I am not disagreeing with the consensus on climate change.

There is no consensus that climate change is going to be dangerous. Even the IPCC says there is a range of possible outcomes, from harmless to catastrophic. I’m in that range: I think the top of that range is very unlikely. But the IPCC also thinks the top of its range is very unlikely.

Be sure to check out the whole thing for a great review of why carbon dioxide emissions are not the civilization-ending monster that many climate activists would have you believe (plus there are a few surprises in there that you won’t want to miss).

If Matt’s arguments are not enough to convince you that urgent actions to mitigate carbon dioxide-induced climate change are not required, then, perhaps, Dave Roberts’ piece for Vox should at least illustrate to you why they are not working.

In his in-depth article “The Left vs. a Carbon Tax,” Roberts describes the goings-on in Washington state where Initiative 732, a revenue neutral carbon tax (of the type featured by many pitches to conservatives), is on the ballot this year, but is garnering very little support from environmental organizations. Roberts illuminates the many alliances and allegiances among the various climate activist groups operating in the state and the complicated reasons why, by and large, they oppose I-732. Probably the biggest reason is that it is revenue neutral—a feature that was supposed to be its main selling point. It seems rather than give the money collected through a carbon tax back through a combination of corporate tax cuts, a reduction of the state sales tax, and tax rebates for low income households, most activist organizations want to spend the money on their particular pet projects—green energy initiatives, climate justice, clean water, healthy forests, etc. (however they define those things). Consequently, they have pulled (or never even offered) their support.

Here’s a teaser:

Here’s the situation. There’s a carbon tax on the ballot in Washington this November, meant not just to put the state on the path to its climate targets but to serve as an example to other states.

The measure, called Initiative 732, isn’t just any carbon tax, either. It’s a big one. It would be the first carbon tax in the US, the biggest in North America, and one of the most ambitious in the world.

And yet the left opposes it. The Democratic Party, community-of-color groups, organized labor, big liberal donors, and even most big environmental groups have come out against it.

Why on Earth would the left oppose the first and biggest carbon tax in the country? How has the climate community in Washington ended up in what one participant calls a “train wreck”? (Others have described it in more, er, “adult” terms.)

That turns out to be a complex and ill-fated story, revealing divisions among climate hawks — over who pays, who benefits, and who decides — that will not long stay confined to the West Coast. The future of climate politics is playing out in Washington state, and it is not pretty.

The full article is a remarkable story and provides further evidence for our view that a carbon tax is a bad idea, both in theory and in practice.

Restricting carbon? No. But what about restricting hydrofluorocarbons (HFCs)?

An amendment to the Montreal Protocol (which phased out ozone destroying chlorofluorocarbons, CFCs) was agreed to at a U.N. meeting in Kigali, Rwanda last week. Under the agreement, HFCs—manmade chemicals primarily used in refrigeration systems and air-conditioners, and which are safe for the ozone layer but which are powerful greenhouse gases—are to be phased down over the next several decades.

Some future projections suggest rapid growth in HFC use in developing countries as air conditioning systems become more affordable, and cheap, reliable energy becomes more available. Recent estimates of the amount of global warming that will result from the projected expansion of HFC use range from near 0.0°C up to about 0.5°C by 2100.  Unsurprisingly, the 0.5°C number is the one touted by the amendment’s supporters—but the closer we look, the more this figure is a bald-faced exaggeration. It basically assumes that HFCs come to dominate the refrigerant market in developing countries by 2050, and continue to do so to 2100. It also assumes the sensitivity of temperature to a doubling of carbon dioxide is about 3.0°C.

More recent analyses (as we have described in this series) indicate that the sensitivity is perhaps half of that value, which drops the top temperature change to around 0.25°C. And the assumption that HFCs will be everyone’s go-to refrigerant through 2100 is ludicrous.

There are already a number of refrigerants available that can do many of the jobs that HFCs do; several are cheaper, more efficient and simple. Ammonia, for example, used to be the refrigerant of choice but it was replaced by chlorofluorocarbons because of occasional leaks and fires. Use of these ozone-damaging chemicals was cheaper and easier than making a disaster-safe cooler, which nonetheless is certainly possible. Good old carbon dioxide is another viable replacement for some applications and can provide a double benefit.  It requires a much higher pressure which makes the compressor quite hot—and those clever Norwegians are already selling combined units where that heat is then used to provide hot water. What’s not to like? And there are others (see here for a rundown).

So the 0.25°C maximum temperature reduction is itself high, depending on what comes along to replace HFCs with or without the Kigali amendment.     

What we’re saying here is pretty much in agreement with a recent post by Oren Cass of the Manhattan Institute:

Here, the chosen baseline appears to be a 2013 study in Atmospheric Chemistry and Physics that rejected previous forecasts for HFC growth and introduced a much higher one. The authors acknowledged this and explained their scenario was “not necessarily a more accurate forecast of future HFC emissions than other scenarios, but a projection of what can happen if developed countries continue current practices in [adopting] HFCs and if developing countries follow this path as well.” Generally, their model discounted “technological and economic developments,” which are already leading to adoption of HFC alternatives in the developed world. It assumed HFC use, still in its infancy today, would be ubiquitous and still growing alongside GDP by the end of the twenty-first century.

Now, all of our analyses could be wrong and the world is just going to opt in to HFC-only refrigeration.  But given the behavior of technological development over the past 100 years, we doubt it.

Having said all that, there’s one reason to support the largely  irrelevant  Kigali amendment:  It has to be approved by a two-thirds majority of the U.S. Senate.  And when that comes up, how about the House and the Senate declare last December’s Paris agreement on climate change to be precisely what it is—another treaty requiring the same treatment in order to have the force of law.

If that sounds like faint praise, it is!

Recent reportage in the Wall Street Journal by Matt Wirz, Carolyn Cui, and Anatoly Kurmanaev states that Venezuela’s annual inflation rate is 500 percent. The authors fail to indicate the source for that 500 percent figure. Knowing that the most accurate estimate of Venezuela’s current annual inflation rate is 55 percent, I concluded that the Journal was way off and set out to determine the source for its incorrect figure. The most likely candidate turned out to be the International Monetary Fund’s (IMF) October 2016 World Economic Outlook (WEO), which contains an estimate for Venezuela’s annual inflation. This report projects Venezuela’s annual inflation to average 475.8 percent for 2016, a far cry from my current estimate of 55 percent. The IMF’s figure, though, gives the appearance of a finger-in-the-wind approach because no methodology accompanies the IMF’s October report. The 95% rule reigns – 95% of what you read in the financial press is either wrong or irrelevant. 

 

So, how does one make an accurate estimate of inflation in countries experiencing elevated inflation levels? The Johns Hopkins-Cato Institute Troubled Currencies Project calculates reliable inflation estimates. These are based on changes in black market (read: free market) exchange rates. The principle of purchasing power parity (PPP) is used to translate exchange rate changes into estimates of implied inflation rates. When inflation is elevated, this method provides deadly accurate estimates.

In the third and final debate last week, Hillary Clinton tried to flex her fiscal responsibility bona fides by vowing  that she “will not add a penny to the debt” on three separate occasions. That must mean she has comprehensive reforms to address entitlements, rein in other spending, and reduce our commitments abroad, if she is not going to add a penny to the current gross debt of $19.7 trillion, right? No, not really.

She is only promising not to make things worse relative to the current baseline, which projects the debt increase to $28.2 trillion over the next decade. To be fair, her plans would add less to the debt than Donald Trump’s, although that’s almost entirely due to an array of new taxes. Even with those hikes, the debt would increase a lot more than a penny were she to win, and neither major party candidate has put forward a substantive plan to address the problems with the country’s fiscal health.

And that’s just the projection over the next decade. The long-term fiscal picture is even bleaker. In the baseline scenario from the most recent Long-Term Budget Outlook from the Congressional Budget Office, federal debt held by the public will almost double by midcentury, from around 77 percent of GDP to more than 140 percent by 2046. Kicking the can down the road, which is effectively the plan by for both candidates in the debate due to their lack of an actual plan, would only increases the magnitude of the changes that will eventually be needed.

Clinton may have meant that her specific proposals are paid for, but even that is not accurate, as the Committee for a Responsible Federal Budget (CRFB) estimated that her proposals would add $200 billion to it, even with the assumption that she would be able to help shepherd immigration reform through Congress and attributing that positive fiscal impact to her. If she were to stabilize the debt to GDP ratio and restrict herself to her preferred method of hiking taxes on high earners (eschewing spending cuts or entitlement reform), she’d have to raise the top tax rate all the way to 61 percent, which would impose significant new disincentives and economic distortions. 

She is not promising that she would not “add a penny to the debt” or at least that can’t be what she means, unless she wants to set herself up to break that promise shortly after taking officer were she to win. She’s promising not to further accelerate our movement down the unsustainable fiscal path we’re on now, which is hardly comforting. Neither of the candidates at the debate last week has put forward any substantive plan to do anything to address the debt or our fiscal trajectory, despite what promises they may have made. 

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