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We’ve all heard it said that the “rich are getting richer” while the middle class suffers. Political figures on both the right and left frequently speak about the need to “bring back” or “restore” the “disappearing” middle class. Pew Research Center just put out a report that calls those ideas into question, according to a recent Washington Post opinion piece.

The report shows that from 1971 to 2014, middle-income households (meaning three-person households making from $41,869 to $125,608 annually in inflation-adjusted dollars) decreased from 61 to 50 percent of U.S. households. Why the 11 percentage point difference?

Seven of those 11 percentage points can be explained by households moving into a higher income bracket. High-income households grew from 14 percent to 21 percent of all households during the same period.

The Pew report also stated that all income groups have typically made double-digit pre-tax income gains since the 1970s:

Middle-income household income increased by 13% in the 1970s, 11% in the 1980s, and 12% in the 1990s. Lower-income households had gains of 13% in the 1970s, 8% in the 1980s and 15% in the 1990s. Upper-income households registered a 10% gain in the 1970s [and] 18% in both the 1980s and 1990s.

Then the Great Recession struck in the late 2000s. But even the Great Recession only removed 6 percentage points from the gains made by the middle class. In 2000, an average middle-income household earned 40 percent more than in 1970. In 2014, an average middle-income household earned 34 percent more than in 1970.

The Washington Post piece opines that “We’ve mistaken what is plausibly a one-time setback—the response to the Great Recession—for long-term stagnation. People have understandably but wrongly taken their recent experience and projected it onto the past.” We cannot predict the future, but it certainly seems as though the middle class has fared better than many people believe.

Yet another top North Korean official has met a violent and untimely death. No one knows if it was a tragic accident or political assassination.

Kim Yang-gon was in charge of negotiations with South, where he was respected. He supposedly died in an early morning car accident. A surprising number of North Korea’s high officials appear to leave the world this way; yet defectors say accidents are common given the poor streets and tendency of top officials to drive drunk.

Still, it looks suspicious. But it doesn’t appear to be a state-sanctioned hit. Dictator Kim Jong-un praised his “close comrade-at-arms” and showed emotion at the state funeral. 

Perhaps a rival took out Kim Yang-gon. However, while he was well-connected, having served “Dear Leader” Kim Jong-il too, it’s not apparent that he is the sort of rival worth killing.

Which leaves everyone outside again looking through the mirror darkly, as the Bible puts it.

The Korean status quo obviously is unsatisfactory. Indeed, it is positively dangerous. While everyone discounts North Korea’s endless threats against both South Korea and the U.S., as the North’s military capabilities grow people are more likely to treat them as warnings to be taken seriously. Proposals for military action against the Democratic People’s Republic of Korea might enjoy a revival.

Of course, the more dangerous Pyongyang perceives the international environment, the more committed it likely will become to building a sizeable nuclear arsenal and missile force. And to the extent that the North can argue that it is responding defensively to America, the less likely Beijing will be to apply more pressure on the DPRK.

An intrepid few have forthrightly proposed military action. But that would be a wild gamble, risking thousands of lives, mostly Korean, on both sides.

Enhanced sanctions look pretty good compared to war. And tighter financial controls would make it much harder for the Kim regime to do business with the world. However, Sudan gets by despite strict financial controls.

Moreover, without Beijing’s acquiescence, the U.S. won’t be able to cut the North’s lifeline. Forcing a national implosion would have unpredictable and potentially violent consequences.

For some the People’s Republic of China is the preferred option. Just get the PRC to force the North into line. That presumes Beijing has the ability to do so.

Moreover, the PRC has good reason to choose the status quo over creating the possibility of chaos and war on China’s southern border. Moreover, Beijing is unlikely to do any favors for the U.S., which would use a united Korea as part of a containment strategy against China.

If none of these, then what?

Some form of engagement with the objectives of moderating regime behavior, easing the threat environment, constraining arms development, encouraging domestic reform, and improving human development. Not because the chances of success seem great, but because there is no better option.

That means the South should continue talks despite Kim Yang-gon’s death. In fact, in his New Year’s Day address, Kim Jong-un expressed his desire to improve bilateral relations.

And as I argue on National Interest online: “the U.S. should open a dialogue, with the objective of initiating official though low-key relations. A diplomatic presence in Pyongyang would provide a small keyhole for peering into this mysterious country. Although expectations should be low, tempering hostilities could lead to additional benefits, especially if Kim Jong-un uses next year’s party congress to modernize.”

Winston Churchill once said of the Soviet Union that it was “a riddle wrapped in a mystery inside an enigma.” That certainly describes the DPRK for the West. Kim Yang-gon’s death only makes the puzzle more complex. Increasing contact with Pyongyang is the best way to begin to understand the North and influence its future.

History weighs heavily on East Asia. To Washington’s enduring frustration, its two most important democratic allies, Japan and the Republic of Korea, have been at odds for decades.

The divergence between the two grew especially sharp over the last couple of years, during which ties between Seoul and the People’s Republic of China notably warmed while those between Japan and the PRC sharply deteriorated, driven by the dispute over the Senkaku/Diaoyu Islands. Moreover, South Korea had its own contentious territorial contretemps with Tokyo.

Both parties deserved blame. The South was determined to hang onto emotional grievances—serious and real, but long past. Japan insisted on justifying indefensible actions whose perpetrators were long dead. Destructive domestic politics ruled.

At the end of December, however, the two countries tried to put the issue of the “comfort women” behind them. Beginning in 1931, with Japanese military operations in China, Tokyo created brothels for its soldiers. For years Japanese officials insisted that the women were prostitute voluntarily engaged, despite evident coercion.

Now Japan has apologized and agreed to create a compensation fund. In return, the ROK promised to drop the matter and “address” the issue of the private statue of a young girl, representing the comfort women, facing the Japanese embassy in Seoul.

It’s an important step forward, but does not yet close the issue. Both leaders have been called “traitors” by domestic critics. South Koreans have protested and termed the accord “humiliating.”

Unsurprisingly, the PRC denounced the agreement. Beijing cited the plight of Chinese comfort women. Japan must “face up to its history and take concrete actions to win the trust of its Asian neighbors and the international community,” said Foreign Ministry spokesman Lu Kang.

Of course, that is precisely what Tokyo has been doing. It previously moved ahead with relations with India. Manilla has publicly urged Japan to do more to promote regional security. Tensions never have been as great with Taiwan and Australia.

Most interesting are the implications for the Japan-Korea-China triangle. An unnamed State Department official called the agreement “strategically consequential.”

While Tokyo and the ROK have been at odds, Beijing and Seoul have ostentatiously embraced, with President Park meeting PRC President Xi-Jinping several times. This has simultaneously hindered U.S. efforts to isolate and contain China and added pressure on North Korea to moderate its behavior.

The PRC’s warm feelings toward South Korea may ebb a bit as a result of the pact, but Beijing cannot easily criticize another government—the sort of interference with internal affairs which it routinely decries when directed in its direction. Moreover, the bilateral economic ties are too important great for the two nations to drift apart.

While the pact opens the way for expanded military cooperation between the ROK and Seoul, President Park is unpopular and nearing the end of her term. More important, the two nations face very different security situations.

In contrast to Japan, the South fears North Korea more than the PRC. The historical and territorial disputes between Beijing and South Korea are very unlikely to lead to war.

Thus, irrespective of Washington’s wishes, it makes sense for Seoul to continue to prioritize its relationship with China over that with Tokyo. In contrast, Japan has little desire to get sucked into a land war on the Korean peninsula, while worrying mightily about Beijing’s naval advances.

Only if the ROK appears to actively join America in seeking to contain the PRC might Chinese-South Korean relations suffer. And Seoul is unlikely to make that mistake. The giant next door will always be there. The U.S. will remain the world’s leading power for years, but no longer can afford to police the globe.

As I point out in National Interest: “The South Korean-Japanese settlement is a positive step. But while it will ease tensions between America’s two top allies, it isn’t likely to turn their relationship into a new anti-China axis. Washington’s job in East Asia has gotten easier, but only somewhat.”

There are no good guys to cheer for in the militia takeover of an Oregon federal office building on January 2. The ostensible issue is the re-sentencing of two Oregon ranchers–Dwight Hammond and son Steven Hammond–for arson, while the underlying issue is federal land ownership of much of the West.

The arson fires lit by the Hammonds in 2001 and 2006 may have actually represented sensible land management, but the Hammonds lost the high ground by their failure to coordinate with the government agency managing the land they burned. Prescribed fire is a tool used to improve wildlife habitat, increase land productivity, and control wildfire. The 2001 fire aimed at improving productivity, but the government says the ranchers didn’t bother informing the Bureau of Land Management (BLM) they planned to burn until two hours after they lit the fire. While they lit the fire on their own land, it escaped and burned 139 acres of federal land, but that burning probably did not do serious damage to the grassland and they put the fire out themselves.

The 2006 fire was more questionable. A wildfire was burning on BLM land near the Hammond’s ranch, so to defend their land they lit a backfire on their own land. That would be standard procedure except, again, they didn’t tell anyone and when their fire crossed over onto federal land it endangered firefighters who the Hammonds apparently knew were located between the wildfire and their backfire. Due to severe fire hazards, the county had a no-burn rule which the Hammonds apparently violated, but this was hardly a terrorist act.

For these actions, they were sentenced to a year in jail, which possibly was appropriate considering they endangered people’s lives. But the federal government, citing an anti-terrorism law that sets a mandatory minimum sentence of five years for arson on federal land, demanded that they be re-sentenced. Having already served the first year, they were scheduled to be re-incarcerated for four more years after the New Year. It is always disturbing when the federal government uses laws aimed at foreign terrorists to oppress citizens who have political differences of opinion with government policy. The Hammonds, who have paid $400,000 in fine related to the fires they lit, probably should not have been re-sentenced to four more years in prison, but that’s a problem with mandatory sentencing laws and overly aggressive prosecutors, not federal land management.

Enter Ammon Bundy, son of Cliven Bundy, the Nevada rancher whose use of BLM land in that state became a hot issue in 2014. The Bundys and their allies believe that federal land should belong to the states or the ranchers themselves since the ranchers have grazed their cattle on it for so many generations. Thus, they ignored limits the BLM placed on the number of cattle they could graze on federal land near their ranch and refused to pay legally mandated fees for grazing those cattle.

Section 8 of the Constitution authorizes the federal government to control land in the nation’s capital, but nowhere else. If you believe that any power not granted to the federal government belongs to the states, then the Bundys are correct. However, the federal government has owned land outside the capital since 1790, when Alexander Hamilton convinced the states to yield land west of the Appalachians in exchange for federal assumptions of state debt. A few years later, Thomas Jefferson himself questioned the constitutionality of the Louisiana Purchase even as he persuaded the Senate to approve it 

The Supreme Court has heard hundreds of cases involving federal land and has never ruled that the Constitution does not allow the federal government to own land in the West. So any battle against federal ownership would have to fought politically, not in the courts.

That may be what Bundy and his friends think they are doing. Just as tree sitters raised public awareness of issues related to old-growth forests in the 1980s, the “militia’s” occupation of a Fish & Wildlife Service building that was closed for the holidays might be a way to raise public awareness of alleged federal mistreatment of ranchers. The problem with this tactic is that 90 percent of western residents are urbanites who are much more likely to sympathize with spotted owls and sandhill cranes than with cattle and sheep.

Decades ago, ranchers grazing their livestock on public lands paid enough fees to earn the Forest Service a profit. But in 1978, ranchers persuaded Congress to adopt a grazing fee formula on national forests and BLM lands that is designed to guarantee ranchers a profit even as grazing costs taxpayers more than $100 million per year. Thus, many people, including some agency officials, view the ranchers as freeloaders and their livestock as invasive species damaging the habitat for native fish and wildlife.

The Hammonds shouldn’t have lit the 2006 fire without coordinating with the BLM. The federal government shouldn’t have prosecuted them for prescribed burning using an anti-terrorist law. The Bundys shouldn’t have occupied the Fish & Wildlife Service office.

Property rights advocates who want to change public views need to find ranchers more appealing than the Bundys, who want to overgraze other people’s land without paying for the right to do so, or the Hammonds, whose unauthorized fire on federal lands threatened firefighters’ lives. Without better representatives–preferably ones willing to pay their own way and not rely on taxpayer subsidies–they won’t be able to capture the hearts and minds of the American people, which means the future of ranchers who depend on federal lands is dim.

A standard argument for outlawing drugs is that such substances are “addictive.”  As a matter of science, this claim is often over-stated: using alcohol, caffeine, cigarettes, or heroin a few times does NOT generate physiological or psychological dependence; such effects kick in only after repeated, long-term use (and even then, far from universally).  That said, all these substances - and many more - can indeed be addictive.

But a crucial question is: so what?  Take the caffeine example. Hundreds of millions of people around the globe - perhaps billions - are addicted to tea, coffee, or diet coke, yet few consider this an issue for health or policy.  Why? Because long-term, heavy use of caffeine does not seem to have major undesired side effects.  Indeed, much of the world celebrates its coffee and tea habit, praising the culinary enjoyment and social interaction that accompanies or even arises from this addiction.

So for those who believe government should  ban “harmful products,” the question should not be whether a substance is addictive but whether long-term, heavy use harms health, productivity, or other aspects of life.  I will not discuss this issue here for alcohol, tobacco, or heroin, other than to suggest that the two substances with the worst sides effects from regular use (cirrhosis for alcohol and lung cancer for cigarettes) are currently legal while heroin, with much less obvious or dramatic side effects, is not.  So much for rational public policy.

Instead, as illustration of misguided thinking about addiction, consider this passage from a recent New York Times article:

DELRAY BEACH, Fla. — Three shaky months into recovery from heroin addiction, Dariya Pankova found something to ease her withdrawal. A local nonalcoholic bar sold a brewed beverage that soothed her brain and body much as narcotics had. A perfect solution — before it backfired.

Ms. Pankova grew addicted to the beverage itself. She drank more and more, awakened her cravings for the stronger high of heroin, and relapsed. Only during another stay in rehab did Ms. Pankova learn that the drink’s primary ingredient, a Southeast Asian leaf called kratom, affects the brain like an opiate and can be addictive, too.

Nowhere does the article cite evidence that Kratom addiction has large or common side effects; rather, the article takes as given that addiction is undesirable per se.  That makes no sense, as the caffeine example shows.

So if some people prefer Kratom addiction to heroin addiction - or vice versa - why should policy interfere?

After years of embarrassing trade litigation and the threat of imminent sanctions by Canada and Mexico, Congress has finally repealed federal country of origin labeling regulations for meat.  Disguised as a way to help consumers, the COOL law was actually designed to protect a small segment of the U.S. cattle industry at the expense of everyone else.  But as this unfortunate episode comes to an end, it’s important to remember that disguised regulatory protectionism remains a major problem in the United States.

In the olden days, uncompetitive U.S. industries seeking protection from import competition would just lobby Congress for higher tariffs.  It works differently than that today in part due to international trade rules but also because there’s a broad consensus among economists and intellectuals that trade barriers harm our economy.  Still, our government is run by politicians who will always be willing to sacrifice the good of the public to help special interests.

Since transparent pleas for protection have gone out of vogue, businesses achieve the same aim by lobbying in favor of public interest regulation that disproportionately disadvantages their competitors.  This dynamic where altruistic motivation meets rent-seeking cronyism can be a powerful driver of public policy.  And when the biggest losers are foreign businesses, there’s very little organized resistance. 

The consequences of disguised regulatory protectionism are the same as imposing tariffs—higher prices and less variety for consumers, less opportunity and lower wages for workers.  While it may be impossible to count up all instances of regulatory protectionism, the pernicious nature of the problem can be seen clearly if we look at a few high-profile examples.

Dolphin-Safe Fraud

American consumers rely on “Dolphin Safe” labels to ensure that their tuna purchases don’t contribute to harmful fishing practices.  By defining what “dolphin safe” means, the federal government ostensibly ensures that the label is reliable.  In reality, the regulations benefit three major U.S. tuna companies by making it nearly impossible for their Mexican competitors to sell tuna in the United States. 

Hidden within the regulations is a double standard that gives those U.S. companies access to the label without having to meet stringent reporting or verification requirements.  It also prohibits the Mexican tuna companies from using any label that makes claims about how their fishing methods impact dolphins.  The law actually makes it illegal to provide consumers with information that some special interests don’t want them to have.

Big Tobacco’s Favorite Anti-Smoking Law

The 2009 Family Smoking Prevention and Tobacco Control Act greatly expanded federal control over people who smoke.  One of the law’s key features was a ban on flavored cigarettes, which anti-smoking activists claimed were designed to entice “children” to take up smoking. 

At the time the law went into effect, there were in fact only two kinds of flavored cigarettes on the market—menthols, which are predominantly made in the United States by American companies, and clove cigarettes, which come from Indonesia.  The law exempted menthols from the ban, so that the only cigarettes taken off the market were foreign.  The flavored cigarette ban actually benefited the very same tobacco companies that campaigners constantly malign by cementing their dominance of the flavored cigarette market.

To get a sense of just how senseless the menthol exception is from a tobacco control standpoint, it’s worth noting that 30% of American smokers regularly smoke menthols, while cloves are a niche product with miniscule market share.  Every other country with a ban on flavored cigarettes has included menthols.

Both of these protectionist regulations have been the subject of international disputes at the World Trade Organization.  In fact, just like with COOL, the United States lost these cases.  The threat of retaliation from Canada and Mexico prompted Congress to fix the worst parts of its court-of-origin labeling law, but the prospects are not as bright for the others.  Indonesia lacked the economic clout to impose sanctions on the United States, so when Washington refused to comply, Indonesia agreed to “settle” the case by dropping its complaint in exchange for nothing.  The WTO will soon determine the level of sanctions Mexico can impose in retaliation since the United States refused to comply in the tuna case.

Crony Catfish

Perhaps the most obvious example of disguised protectionism in recent years has been the process of moving catfish inspection from the Food and Drug Administration to the U.S. Department of Agriculture.  Why does this matter?  Because the USDA’s inspection service would place a moratorium on catfish imports until it certifies individual farming facilities.  That inspection can take years.  Consumers would face drastically higher prices.  And there’s no evidence that this new catfish inspection regime will improve the safety of catfish, which are not especially unsafe. 

Aside from the lack of scientific justification, what makes the catfish regulations a particularly obvious example of protectionist regulation is that its most ardent supporters are politicians from states with lots of catfish farms.  Those catfish farmers don’t like having to share the U.S. market with their Vietnamese and Chinese counterparts, and they’re willing to undergo more rigorous testing of their own facilities if it keeps out the competition. 

The good news is that the Obama Administration may have solved the catfish problem by agreeing to allow a grace period for Vietnamese catfish as part of the as part of the Trans-Pacific Partnership negotiations.  The grace period will let catfish imports continue for 18 months while the inspections take place.  This significantly reduces the possibility of a “catfish cliff” that would’ve caused a dramatic disruption for U.S. consumers and retailers.  It may also prevent the United States from having to defend another ridiculous regulation in a WTO dispute settlement case, which it would likely lose.

Finding a Solution

Unfortunately, these examples show how political forces are naturally aligned to disadvantage consumers.  When companies are asking Congress to regulate their own industry, you can be certain the result will not benefit consumers.  Trade negotiations and dispute settlement can surely help eliminate some forms of regulatory protectionism, but the results are mixed. 

Regulatory protectionism will persist until the public develops a greater skepticism for regulatory solutions to problems better dealt with in a free market.  Labeling laws impose a monopoly on definitions where competition among different labels would be more beneficial.  Paternalistic product bans are more likely to force consumers to expend extra energy to get what they want than to alter behavior.  And consumers are in a much better position than governments to respond reasonably to potential food safety scares.

As Sallie James and I wrote in our 2012 Cato Policy Analysis about the threat of regulatory protectionism:

Policymakers, commentators, and the public must be more willing to look past altruistic defenses of regulatory proposals to find the true winners and losers. When the winner is not consumers, then it must serve other ends; when the end is consumers, the regulation is probably unnecessary anyway.

On Wednesday January 13 at noon, Leif Wenar will be at Cato to discuss his new book, Blood Oil: Tyrants, Violence, and the Rules that Run the World. The book explores one of the great moral challenges of our time. That is, the massive benefits from development and global connectedness—in which we are all inescapably complicit—also enriched, enabled, and emboldened people who systematically made the lives of others desperate and miserable.

This cycle rolls on seemingly unabated. Indeed, the world’s dependence on oil and other natural resources continues to fuel violent conflicts and fund a large fraction of the world’s autocrats. But Wenar provides hope. After detailing the myriad negative consequences of resource wealth, Blood Oil outlines how “citizens, consumers, and leaders can act today to avert tomorrow’s crises — and how we can together create a more united human future.”

An important and timely book, Blood Oil has caught the eye of highly distinguished scholars. Angus Deaton of Princeton University and the 2015 Nobel Prize Winner in Economics, stated that “Wenar has written the indispensable guide, combining politics, economics, and ethics to tell us just how and why we are all involved, and what we ought to do to make the world a better place.” Harvard’s Steven Pinker, author of The Better Angels of Our Nature, called Blood Oil “one of those rare manifestos that awaken people to a pressing ethical issue by changing the way they see the world.” And while noting that “philosophers rarely write big books that could change the world,” Princeton’s Peter Singer finds that “Blood Oil is such a book.”

Wenar, who is Chair of Philosophy and Law at King’s College, will be joined by Bruce W. Jentleson of Duke University and the Library of Congress, and my Cato colleagues Ian Vasquez and Christopher Preble. The forum is open to public, and we hope that you can join what is sure to be a lively and informative discussion.

Click here to register or to learn more.

Last week, The National Interest (Online) published a critique of U.S. grand strategy in Asia by my friend and colleague John Glaser. Harry Kazianis, a former editor at TNI who now divides his time between the Potomac Foundation and the Center for the National Interest, posted a rejoinder and Glaser has since responded here.

Together, the pieces reveal a useful debate over primacy, writ large, and all three are worth a careful read.

Calling Glaser’s idea “Unthinkable,” Kazianis asked:

And what’s so bad about America’s so-called primacy in Asia in the first place? Glaser, at least in my view, makes it sound like the Asia-Pacific is some large American vassal state that it should relinquish control of. It should be clear for anyone to see that Washington is the provider of many important net public goods—like those all-important security alliances, nuclear umbrellas and protected sea lanes that allow trade to thrive.

His clinching argument, it seems, is that we should continue with our present grand strategy in Asia (and elsewhere, implicitly) because it’s the strategy that we have, and it’s worked fairly well. Why change now?

Kazianis quotes former Under Secretary of Defense for Policy Eric Edelman who, in 2010, offered up this fairly typical defense of U.S. grand strategy. “The concept of Primacy,” Edelman wrote, in a paper (.pdf) for the Center for Strategic and Budgetary Assessments:

has underpinned U.S. grand strategy since the end of the Cold War because no other nation was able to provide the collective public goods that have upheld the security of the international system and enabled a period of dramatically increased global economic activity and prosperity. Both the United States and the global system have benefitted from that circumstance.

I would take issue with two of Edelman’s claims, and, by extension, those of Kazianis and other of primacy’s defenders:

1) Correlation is not causation. While it is true that the long peace has coincided with U.S. primacy, that does not prove that U.S. primacy was the sole (or even main) cause of it. Some attempt should be made to account for the other possible explanations for the absence of great power war since 1945, e.g. nuclear weapons, economic interdependence, and the end of formal empires.

2) Circumstances change. Even if it were true that U.S. primacy was the main factor explaining the security of the international system during the last quarter century, to describe what we have done for the roughly 25 years since the end of the Cold War does not, by itself, justify what we should do for the next 25 years, or more. The U.S. share of global economic output has fallen sharply since the end of the Cold War. When looking at GDP by Purchasing Power Parity in the IMF’s most recent data set, for example, the U.S. share stood at 22.5 percent in 1989; the estimate for 2015 is 15.9 percent. Whatever statistic one chooses to use, it is clear that the burden is growing heavier on a single country. And those trends are unlikely to reverse themselves. The U.S. share is expected to dip below 15 percent by 2020.

I will stipulate that no single country could have done what the United States did in terms of providing global public goods in 1995 – or 1975 or 1955, for that matter. I doubt that a single country – including the United States – can do it forever. Forever is a long time.

It may be true that some number of countries – be it 5 or 10 or 50 – might be able to collectively muster comparable capabilities in the future to ensure that the burdens of global governance don’t fall exclusively on the shoulders of American troops and American taxpayers.

We are unlikely to reach that possible alternative future of greater burden sharing, however, if the United States clings to its present grand strategy and continues to discourage other countries from defending themselves and their core interests.

Nearly 40 years ago, the Supreme Court held in Wooley v. Maynard (1977)—the famous “Live Free or Die” case from New Hampshire—that the First Amendment protects against being compelled to convey a message displayed on a state-issued license plate. Nevertheless, the Denver-based U.S. Court of Appeals for the Tenth Circuit recently held that someone could not object to an image on Oklahoma’s license plate of the Scared Rain Arrow statue, which depicts a young Apache warrior shooting an arrow into the sky as a prayer for rain.

The court’s decision turned on drawing a line between speech in the form of words and other kinds of expression. Keith Cressman had objected to the Oklahoma tag because of the history and origin of the Sacred Rain Arrow statue. The Tenth Circuit held that Cressman’s objection was not entitled to full First Amendment protection because images are not “pure speech” and must be analyzed under the less rigorous “symbolic speech” test.

The term “symbolic speech” may be an unfortunate misnomer—it doesn’t mean speech via symbols—but the Supreme Court has only ever used the phrase to refer to “expressive conduct.” That is, “symbolic speech” is conduct that conveys a message, such as burning one’s draft card in protest of war.

The Supreme Court has always regarded non-conduct forms of expression as “pure speech.” And that’s exactly as it should be: Government has no more ability to ban bumper stickers displaying a cross than ones referencing “John 3:16,” and the same must be true for ones depicting Da Vinci’s painting “The Last Supper.” Despite the Court’s consistency on this point, lower courts are split. While the Ninth Circuit has extended full First Amendment protection to tattoos and even the process of making them and the business of tattooing, other circuits have suggested that “pure speech” is limited to words. And of course the Tenth Circuit has now said that the First Amendment protects as symbolic speech at best.

But the Tenth Circuit’s ruling did even more harm to the First Amendment than that, because the court also held that, regardless of what kind of speech the image was, the First Amendment didn’t support Cressman because he didn’t object to the actual message Oklahoma was sending; his understanding of the image didn’t align with the state’s. That holding is particularly problematic when the speech at issue is visual art, which is inherently open to interpretation and has no authoritative interpretation.

Consider, for example, Cloud Gate—better known as the Chicago Bean—whose sculptor sought to convey themes of immateriality, spirituality, and the tension between the masculine and the feminine. But most people who take selfies in front of the Bean have no idea what it’s meant to convey, or might think it has to do with distorted reflection and the like. The freedom of speech—even the freedom to think—would be threatened if compelled-speech cases hinged on whether plaintiffs “really” disagreed with the “actual” message the government was sending and thus could be compelled to speak because they opposed it for their own “wrong” reasons.

In the quintessential compelled-speech case, West Virginia State Board of Education v. Barnette (1943), the Supreme Court held that the First Amendment protected Jehovah’s Witnesses having to salute the American flag and recite the Pledge of Allegiance. Surely the Constitution would have likewise protected an atheist who opposed the flag salute because the stars represent the heavens and man’s divine goal—even though most people today don’t know that history.

But the Tenth Circuit’s decision said otherwise: The First Amendment would have protected Cressman if he objected to Oklahoma’s Native American message but did not protect him when his objection was based on what it considered to be a misunderstanding about the Sacred Rain Arrow statue. As in religious-freedom cases, courts shouldn’t evaluate the reasons behind an objection to compelled speech.

Mr. Cressman has asked the Supreme Court to review his case, and Cato has filed an amicus brief making the above arguments in support of that petition. 

BEIRUT—“Syrians are everywhere,” an aid worker told me. “Everybody is poor now.” Well over a million Syrians are scattered across Lebanon, many in small “tented settlements.” Almost half live in sub-standard housing; many lack fuel and warm clothes for winter.

Jordan hosts even more Syrians at greater cost. (So does Turkey, though it is much larger and wealthier.) Six of every seven refugees live in poverty.

Almost five years of civil war have killed a quarter of a million Syrians, wrecked the country, created economic catastrophe, displaced millions, and left virtually no one unaffected. As many as five million people have fled to surrounding countries.

Thus, the stampede of Syrian migrants to Europe should not surprise the rest of the world. Americans traditionally have offered sanctuary to those fleeing repression and war. But, apparently, not now.

Private relief groups offer the best means for Americans to help Syrians in need. There are many worthy organizations. Earlier this year, I traveled with International Orthodox Christian Charities to Lebanon and Jordan to view several aid projects. Since 2012, the charity has helped more than 3.2 million Syrians throughout the Middle East.

Much of IOCC’s work is conducted in Syria. More than half Syria’s population now is estimated to require outside aid.

Assistance runs the gamut, starting with emergency food, infant care, clothing, and bedding. IOCC repairs sanitation and water systems, helps provide shelter, and supports education.

Alas, the longer the war rages, the greater the destruction. One aid official lamented: “Buildings can be rebuilt. You cannot rebuild human beings.”

In Lebanon, I visited a project focused on mother-child nutrition, from conception up to five years of age. The “public health system was overwhelmed by refugees,” explained Rana Hage of IOCC.

Children are screened, regularly measured and weighed, and provided with nutritional supplements, high-protein foods, and milk. Tens of thousands of children have been screened and hundreds have been rescued from malnutrition.

I visited a community kitchen, one of two that helps feed 1750 people. IOCC underwrote a large, efficient cooking facility and hired local women to cook. Pots of food are distributed to needy refugee and resident families.

The charity also runs the Water, Sanitation, and Hygiene program (WASH) at two refugee encampments with more than 7,500 people. I went to one of the settlements where IOCC is seeking to develop efficient and safe water and waste systems.

The agency also was establishing water/wash facilities while providing hygiene education to reduce disease. Here, as elsewhere, the IOCC hires staff from areas being served. Unfortunately, the job is never done. Another aid worker said that the camp is “constantly changing as more people come.”

Jordan may be less fragile than Lebanon, but it suffers greatly as well. Some 80,000 people are crowded into Jordan’s Zaatari Refugee Camp, sitting only a few miles from Syria.

IOCC runs a program to prevent and treat lice, especially affecting children. The charity has distributed anti-lice kits to more than 20,000 kids. There’s nothing glamorous about this sort of work, but it meets a critical need. Health coordinator Samer Makahleh explained: “To fill gaps we go to outside partners like IOCC.”

With most refugees living outside the camps, IOCC works outside as well, even making home visits for those unable to travel. The group provides everything from school uniforms—required to attend Jordanian schools—to infant supplies and household items. IOCC also provides vocational training and English instruction.

IOCC’s identity is Christian, but it serves the needy without discrimination. In the Middle East, the charity mostly aids Muslims.

Of course, even the best humanitarian efforts can only do so much. One top IOCC official worried: “Funding is going to diminish next year. Donors are not going to be there.”

As I wrote in Forbes: “Unless more Americans and other people of good will around the world step up to address Syria’s humanitarian disaster. Centuries ago Christ called on his listeners to help the ‘least among us.’ We must meet that challenge today.”

(WASH)

Christians in America remain free to celebrate Christmas, but not tens or perhaps hundreds of millions of believers abroad. Murder by groups such as the Islamic State and Boko Haram topped pervasive persecution and discrimination in many nations.

On Christmas Eve, senator and presidential contender Marco Rubio penned an article decrying the lack of “attention paid to the plight of these Christian communities in peril.” He criticized the Obama administration and called for action.

Undoubtedly, Rubio’s concern is genuine. However, the GOP’s policies have hurt and will continue to hurt Christians around the world.

No single action was as injurious to Middle Eastern Christians as the invasion of Iraq. American intervention triggered a sectarian conflict which displaced hundreds of thousands of Christians, spawned a new al-Qaeda organization which morphed into the Islamic State, and tolerated ruthless Shia rule which encouraged Baathists and Sunnis to support ISIL. Absent George W. Bush’s Iraq folly, backed by Rubio and most of his competitors, the Islamic State wouldn’t exist.

Most of the usual GOP suspects, starting with Rubio, also backed the Obama administration’s decision to intervene in the Libyan civil war. This misbegotten policy left two competing governments and multiple armed militias in its wake. Worse still, it left a vacuum partly filled by the Islamic State, which publicly murdered Egyptian Copts who were working in Libya.

Syria is engulfed by a hideous civil war. Bashar al-Assad is a secular dictator who uses fear of potential religious persecution for his political benefit. But Christians and other religious minorities have good reason to be terrified about Syria après Assad. After all, many of them fled Iraq where they’ve seen the ending of the movie: it isn’t pretty.

Should Rubio & Co. succeed in ousting Assad, the likely fate of Christians is grim. The State Department noted: In Syria “ISIL required Christians to convert, flee, pay a special tax, or face execution in territory it controls, and systematically destroyed churches, Shia shrines, and other religious sites.”

On a recent trip to Jordan and Lebanon, I met with several Christian aid workers active in Syria. Most complained about U.S. policy targeting Assad. One said simply, “You Americans don’t know what you are doing.”

Washington’s reflexive support of ruthless Islamic regimes throughout the Middle East–endorsed by Rubio and the rest of the GOP presidential gaggle–is almost as bad. For instance, despite complaining about foreign blasphemy laws, Rubio declared that the U.S. must “reinforce our alliances.” Some of his Republican competitors are even more insistent.

Yet Saudi Arabia is essentially a totalitarian state, without a single operating church (or synagogue or temple) for non-Muslims. The State Department wrote, “the government harassed, detained, arrested, and occasionally deported some foreign residents who participated in private non-Muslim religious activities.”

Coptic Christians remain victims of persecution, discrimination, and violence in Egypt, even after the military ouster of the Muslim-dominated government of Mohamed Morsi.

I wrote in Forbes, “Americans should remember the plight of Middle East Christians. At the same time, voters should remember that Republican support for promiscuous military intervention and Islamic dictators did much to bring down disaster upon Middle Eastern Christians.”

Unfortunately, doing more of the same in the Mideast, as Rubio proposed, would only yield the same result. He should put helping persecuted Christians before promoting misbegotten neoconservative crusades.

, endorsed by Rubio and the rest of the GOP presidential gaggle,

In this past summer’s controversy over whether Alexander Hamilton’s image should be replaced on the $10 bill, outraged commentators made many extravagant claims on behalf of Hamilton’s wisdom in matters of money and banking policy. For example, Ben Bernanke blogged that “Hamilton was without doubt the best and most foresighted economic policymaker in U.S. history,” citing among other evidence that “over the objections of Thomas Jefferson and James Madison, Hamilton also oversaw the chartering in 1791 of the First Bank of the United States, which was to serve as a central bank and would be a precursor of the Federal Reserve System.”

Now that the controversy has cooled we can take a more informed perspective. There is no denying Hamilton’s importance and influence, or that his life story is compelling, as evidenced by the sold-out hip-hop musical Hamilton currently running on Broadway. But the wisdom of his policy advice, and the merits of the First Bank of the United States (BUS), are another matter.

To describe Hamilton’s Bank accurately, one should note that Congress owned one fifth of its shares, and chartered it exclusively, that is, made it the only bank allowed by law to branch nationwide. (State governments chartered banks, but each state denied entry to banks with charters from other states.) The BUS monopoly franchise was among the chief of the objections of Jefferson and Madison, and deservedly so. One nationwide bank is better than none, but many is better than one. Creating a legal monopoly where open competition could and should prevail is hardly a mark of good or foresighted economic policy.

Many modern-day historians miss this point, and laud Hamilton as a man of unerring financial genius. Robert E. Wright and David J. Cowen, in their 2006 book Financial Founding Fathers: The Men Who Made America Rich, write of Hamilton’s “creative genius, as he became the architect and chief advocate of a powerful national bank.” They claim that “Hamilton’s thought was often far in advance of that of most of his contemporaries,” as when he was early to advocate a national bank. They quote Hamilton’s 1781 statement that “in a National Bank alone we can find the ingredients to constitute a wholesome, solid and beneficial paper credit,” and add: “He was correct.” They call Hamilton’s 1790 Report on the Bank “a masterpiece that cogently explained the importance of banks in a capitalist economy.” They credit Hamilton with the following argument, as though it made good sense: “Next, he stressed that all the great powers of Europe possessed public banks and were indebted to them for successful trade and commerce. The implications of the comparison were clear: if young America wanted to join the ranks of the elite powers, it too would have to create a banking infrastructure.” In much the same way, Hamilton would elsewhere argue that if the leading European nations have protective tariffs, we should have them too. The error should be plain.

Hamilton modeled the Bank of the United States after the Bank of England. But in truth, the monopoly privileges of the BOE and other national banks of Europe were badges of mercantilism, and drags on financial and economic activity by comparison with free competition in banking services. A more wholesome, solid, and beneficial credit system could be observed in Scotland at the time, with free entry into nationwide branch banking. Hamilton’s “masterpiece” was oblivious to the benefits of competition in banking, much less the separation of banking and state. In his banking policy views, as in his tariff policy views, Hamilton was a retrograde mercantilist.

Wright and Cowen note that in drafting his plan for the Bank, “Hamilton also drew on Adam Smith’s seminal work, An Inquiry into the Nature and Causes of the Wealth of Nations, where financial matters, including the advantages of banks and bank money, were amply and ably discussed. Hamilton must have brimmed with excitement as he read Smith declare that ‘the trade of Scotland has more than quadrupled since the first erection of the two publick banks at Edinburgh.’” They should also have noted that in his able discussion Smith — the penetrating Scottish critic of mercantilism — did not defend monopoly privileges in banking, but argued for free competition (see below). The “publick” banks of Edinburgh were chartered non-exclusively (note that Smith refers to the two earliest; later there would be a third plus dozens of non-chartered joint-stock banks that were similarly sized and equally branched nationwide), and were completely privately owned. Nor were they great engines of the state, as the Bank of England was according to Smith. Unlike the BOE or the BUS, which were created in large part to lend the national government money, the Bank of Scotland was actually prohibited by its 1695 charter from lending to the government.

The policy conclusion of Smith’s chapter on banking (Book II, chapter II of the Wealth of Nations) bears quoting here:

The late multiplication of banking companies in both parts of the United Kingdom, an event by which many people have been much alarmed, instead of diminishing, increases the security of the public. … By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things, must sometimes happen, becomes of less consequence to the public. This free competition, too, obliges all bankers to be more liberal in their dealings with their customers, lest their rivals should carry them away. In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so.

In light of Smith’s clarity and correctness here, it is actually a telling criticism of Hamilton to note that he read Smith on banking, because it means that he ought to have known better when he promoted monopoly privileges. Although Hamilton’s Report on the Bank alludes to Smith’s understanding of how banking promotes the wealth of a nation, Hamilton either didn’t understand Smith’s policy message — the more banks competing the better — or rejected it as not helpful to his own mission of empowering the federal government, for which his chosen means was to forge an alliance between the government and a new privileged financial elite.[1] Smith’s policy here was wise, and Hamilton’s not.

In brief, contrary to what is nearly the conventional wisdom, Alexander Hamilton was not “far in advance” of contemporary thinking on banking. He was decidedly retrograde in pushing for an exclusive nationwide bank with a sweetheart government deal. He was not a creative policy genius so much as a persuasive second-hand dealer in discredited mercantilist ideas.

____________________________
[1]
Here I draw upon a dissertation chapter, unfortunately not available online, by Nicholas Curott.

[Cross-posted from Alt-M.org]

Shortly before Christmas, the Department of Homeland Security (DHS) released a report detailing deportations (henceforth “removals”) conducted by Immigration and Customs Enforcement (ICE) during fiscal year 2015.  Below I present the data on removals in historical context – combined with information from the Migration Policy Institute and Pew.  See my previous writing on this topic here, here, and here.       

ICE deported 69,473 unauthorized immigrants from the interior of the United States in 2015, down from a peak of 188,422 in 2011.  Removals from the interior are distinct from removals of recent border crossers.  Removals from the interior peaked during the Obama administration and have since fallen to a level similar to that of 2005 and 2006. 

Source: MPI and DHS.

The number of interior removals during the last six years of the Bush administration (the first two years are unavailable so far) was 475,103. The Obama administration has removed unauthorized immigrants about 1,019,637 from the interior of the United States during the seven full years of his administration.  

President Bush’s administration removed an average of about 276,000 unauthorized immigrants per year for the years available and an average of 79,000 of them annually were interior removals.  President Obama’s administration has removed an average of 381,101 unauthorized immigrants a year, an average of 145,662 of them annually were interior removals.  There were a large numbers of unknowns during the Bush administration that decreased as the years progressed. 

 

Source: MPI and DHS.

The Obama administration’s expansion then slashing of interior enforcement is not the whole story.  The best way to measure the intensity of immigration enforcement is to look at the percentage of the unauthorized immigrant population removed in each year.  Based on estimates of the total size of the unauthorized immigrant population that I updated to reflect Pew’s most recent estimates, 0.61 percent of that population was removed from the interior of the United States in 2015 – down from 0.9 percent in 2014.  Interior removals as a percent of the unathorized population peaked at 1.64 percent in 2011.  That is a substantial decrease in interior removals down from President Obama’s previous high. 

Source: MPI, Department of Homeland Security, Pew, Author’s Calculations.

For every year for which data was available, the Bush administration removed an average of 0.71 percent of the interior unauthorized immigrant population.  President Obama’s administration has removed an average of 1.29 percent of the interior unauthorized immigrant population every year of his presidency – less than twice the rate as under the Bush administration.  Even when focusing on interior removals, President Obama’s entire administration has out-deported President Bush based on the data available. 

The unauthorized immigrant population increased under the Bush administration from 9.4 million in 2001 to a peak of 12.2 million in 2007 and then declined to 11.7 million in 2008.  During Obama’s administration, the number of unauthorized immigrants has, so far, stayed at or below 11.5 million.   The slow economy during the Obama years as well as a shift of would-be unauthorized Mexican immigrants onto temporary work visas stopped the growth of the illegal population. 

Obama’s interior removal statistics show a downward trend beginning in 2012 through to 2015 with the number of interior removals falling by over 63 percent.  The Obama administration has also focused immigration enforcement on criminal offenders (not all unlawful immigrants are criminals).  During the Obama administration, 56.7 percent of all removals have been those convicted of a criminal offense, including immigration crimes.  In 2015, 92 percent of criminal removals were either priority 1 (threats to national security, border security, and public safety) or priority 2 (misdemeanants or new immigration violators).  Many of those “criminals” removed fit the strict legal definition of the word but hardly comport with the popular image of criminals.

Only the last year of the Bush administration is available for comparison but it shows that only 31 percent of those removed were criminals in 2008. 

The Obama administration has cut interior immigration enforcement down to the level of enforcement that existed from 2005 to 2006 but has refocused removal efforts to target criminals.  President Obama’s expansion of interior immigration enforcement effort that peaked in 2011 has reversed and is returning to Bush-era levels.         

I wrote yesterday that governments want to eliminate cash in order to make it easier to squeeze more money from taxpayers.

But that’s not the only reason why politicians are interested in banning paper money and coins.

They also are worried that paper money inhibits the government’s ability to “stimulate” the economy with artificially low interest rates. Simply stated, they’ve already pushed interest rates close to zero and haven’t gotten the desired effect of more growth, so the thinking in official circles is that if you could implement negative interest rates, people could be pushed to be good little Keynesians because any money they have in their accounts would be losing value.

I’m not joking.

Here’s some of what Kenneth Rogoff, a professor at Harvard and a former economist at the International Monetary Fund, wrote for the U.K.-based Financial Times.

Getting rid of physical currency and replacing it with electronic money would…eliminate the zero bound on policy interest rates that has handcuffed central banks since the financial crisis. At present, if central banks try setting rates too far below zero, people will start bailing out into cash.

And here are some passages from an editorial that also was published in the FT.

…authorities would do well to consider the arguments for phasing out their use as another “barbarous relic”…even a little physical currency can cause a lot of distortion to the economic system. The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy.

Meanwhile, Bloomberg reports that the Willem Buiter of Citi (the same guy who endorsed military attacks on low-tax jurisdictions) supports the elimination of cash.

Citi’s Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. …the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction? Cash therefore gives people an easy and effective way of avoiding negative nominal rates. …Buiter’s solution to cash’s ability to allow people to avoid negative deposit rates is to abolish cash altogether.

So are they right? Should cash be abolished so central bankers and governments have more power to manipulate the economy?

There’s a lot of opposition from very sensible people, particularly in the United Kingdom where the idea of banning cash is viewed as a more serious threat.

Allister Heath of the U.K.-based Telegraph worries that governments would engage in more mischief if a nation got rid of cash.

Many of our leading figures are preparing to give up on sound money. The intervention I’m most concerned about is Bank of England chief economist Andrew Haldane’s call for a 4pc inflation target, as well as his desire to abolish cash, embrace a purely electronic currency and thus make it easier for the Bank to impose substantially negative interest rates… Imagine that banks imposed -4pc interest rates on savings today: everybody would pull cash out and stuff it under their mattresses. But if all cash were digital, they would be trapped and forced to hand over their money. …all spending would become subject to the surveillance state, dramatically eroding individual liberty. …Money is already too loose - turning on the taps would merely further fuel bubbles at home and abroad.

Also writing for the Telegraph, Matthew Lynn expresses reservations about this trend.

As for negative interest rates, do we really want those? Or have we concluded that central bankers are doing more harm than good with their attempts to manipulate the economy? …a banknote is an incredibly efficient way to handle small transactions. It is costless, immediate, flexible, no one ever needs a password, it can’t be hacked, and the system doesn’t ever crash. More importantly, cash is about freedom. There are surely limits to the control over society we wish to hand over to governments and central banks? You don’t need to be a fully paid-up libertarian to question whether…we really want the banks and the state to know every single detail of what we are spending our money on and where. It is easy to surrender that freedom – but it will be a lot harder to get back.

Merryn Somerset Webb, a business writer from the U.K., is properly concerned about the economic implications of a society with no cash.

…at the beginning of the financial crisis, there was much talk about financial repression — the ways in which policymakers would seek to control the use of our money to deal with out-of-control public debt. …We’ve seen capital controls in the periphery of the eurozone… Interest rates everywhere have been at or below inflation for seven years — and negative interest rates are now snaking their nasty way around Europe… This makes debt interest cheap for governments…and it and forces once-prudent savers to move their money into the kind of risky assets that are supposed to drive growth (and tax receipts).

Amen. She’s right that low interest rates are good news for governments and not very good news for people in the productive sector.

Last but not least, Chris Giles wrote a column for the FT and made one final point that is very much worth sharing.

Mr Haldane’s proposal to ban cash has all the hallmarks of a public official confusing what is convenient for the central bank with what is in the public interest.

Especially since the central bankers are probably undermining long-run economic prosperity with short-run tinkering.

Moreover, the option to engage in Keynesian monetary policy also gives politicians an excuse to avoid the reforms that actually would boost economic performance. Indeed, it’s quite likely that an easy-money policy exacerbates the problems caused by bad fiscal and regulatory policy.

Let’s conclude by noting that maybe the right approach isn’t to give politicians and central bankers more control over money, but rather to reduce government’s control over money. That’s one of the arguments I made in this video I narrated for the Center for Freedom and Prosperity.

The $1.83 billion arms sale package to Taiwan that the Obama administration announced to Congress in mid-December won’t change the military balance across the Taiwan Strait. Hawkish American commentators criticized the arms sale for not doing enough to provide for Taiwan’s security, but this misses the point. The most important aspect of the arms sale is not the kind of equipment being sold but the message sent by the transaction.

From a military perspective, the equipment in the arms sale is nothing to get excited about. The most prominent items are two refurbished Oliver Hazard Perry-class frigates and 36 AAV-7 amphibious assault vehicles. Guided missiles, Phalanx ship defense systems, and communications equipment make up the rest of the package. None of these capabilities will significantly change the balance of power between Taiwan and mainland China.

What does it accomplish?

First, the timing of the arms sale announcement is important. On January 16th, voters in Taiwan will go to the polls to select a new President and legislators. The period of rapprochement between Taiwan and mainland China championed by President Ma Ying-jeou since 2008 will likely come to an end. It is too early to tell how the election will impact cross-strait relations, but announcing an arms sale so close to the election demonstrates a continued U.S. commitment to Taiwan’s defense.

Second, the modest size of the sale is a signal to Taiwan to get serious about self-defense. Taiwan’s military spending has increased in recent years after a deep decline in the late 1990s and early 2000s, but spending is well under three percent of GDP despite a 2008 campaign pledge by Ma to hit the three percent target. The Democratic Progressive Party (DPP), the presumptive winning party, has issued a series of policy papers outlining a wide-ranging plan to improve Taiwan’s defenses. The problem with announcing a large arms sale before these policies are implemented is that it could serve as a disincentive for the DPP to follow through with its defense policy.

Third, the arms sale signals the Obama administration’s willingness to push back against Chinese assertiveness in East Asia. America and its regional allies and partners are modestly balancing against the threat posed by China by increasing military spending, adding ships to their fleets, and increasing defense cooperation. The arms sale to Taiwan is a continuation of this trend. Whether or not pushing back is going to succeed is a different question, but the arms sale was likely announced with this trend in mind.

The December 2015 arms sale to Taiwan gives off more light than heat, but that light is significant. While the material side of the sale is modest, it sends a message to Taiwan and mainland China for Obama’s last year in office. In 2016, the United States will likely be more involved and more assertive in East Asia.

In a recent blog post, St. Louis Fed Vice President David Andolfatto suggests that central banks “consider offering digital money services (possibly even a cryptocurrency) at the retail and wholesale level.” His reasoning is straightforward. Bitcoin, he observes, offers a host of benefits, most of which relate to its role as a payment device. It enables individuals to transfer funds more cheaply than traditional payment mechanisms. But it also has shortcomings, the chief of which, Andolfatto claims, is its short-run price volatility.

As an alternative, Andolfatto points to “Fedcoin” — a central bank-issued cryptocurrency proposed earlier by J.P. Koning. In theory, Fedcoin would employ the same blockchain ledger technology as bitcoin to transfer funds between accounts. However, as Koning explains, “One user — the Fed — would get special authority to create and destroy ledger entries, or Fedcoin.” To what end? According to Koning, “The Fed would use its special powers of creation and destruction to provide two-way physical convertibility between both of its existing liability types — paper money and electronic reserves — and Fedcoin at a rate of 1:1.” Hence, Fedcoin would offer the payment system advantages of bitcoin — the ability to transfer funds cheaply — without its excessive purchasing power instability.

In an earlier post on the topic, Andolfatto goes even further by claiming that “the Fed is in the unique position to credibly fix the exchange rate between Fedcoin and the USD.” And, lest one think his claim applies exclusively to Fedcoin, he clarifies that “the Fed has a comparative advantage over some private enterprise” issuing a distinct cryptocurrency “backed by USD at a fixed exchange rate.”

Although Andolfatto is right to claim that the Fed — or any central bank for that matter — has a comparative advantage in issuing substitutes that are accepted at par with its other liabilities, it is certainly not in a unique position to issue a digital, P2P (peer-to-peer or person-to-person) cryptocurrency that is accepted at par. There are all sorts of par-valued, dollar-denominated private digital monies. In the US, private banks issue electronic balances that exchange at par with the dollar. There are also P2P monies that trade at par. The notes and coins issued by a currency board are P2P (in the sense of person-to-person and that they need not be cleared by a central authority). And, since an orthodox currency board holds sufficient reserves by definition, it will maintain par acceptance. Private banks in Scotland and Northern Ireland issue circulating notes that exchange at par with the British pound. Clearly, private providers are capable of supplying either a digital or P2P money that trades at par with an established official currency.

In fact, there is even today at least one dollar-based, privately-provided digital, peer-to-peer cryptocurrency. Billed as the world’s first stable digital currency, NuBits (an altcoin governed by the Nu protocol) has only deviated from its $1 par value by $0.025 or more on fourteen days — and only twice for two consecutive days — since it was launched on September 23, 2014. In other words, NuBits are remarkably stable in terms of the dollar. Figure 1 tells the whole story:

How does the Nu protocol maintain a fixed exchange rate between its NuBits and the dollar? In brief, its owners (“NuShareholders”) vote to adjust the supply of NuBits in circulation to equal current demand for NuBits at exactly $1. Those interested in all the details should consult the original white paper and discussion forum. I sketch out the basics below.

The Nu protocol relies on the premise that demand for NuBits will tend to grow over time. For a fixed-supply cryptocurrency, like bitcoin after it reaches the 21-million-coin cap, an increase in demand increases its price and market capitalization (i.e., price times quantity of coins). The increase in the market capitalization, or network value, of a fixed-supply cryptocurrency accrues to coinholders as their coins appreciate. For NuBits, in contrast, an increase in demand only increases the market capitalization — not the price. The increase in the market capitalization, or network value, of NuBits accrues to NuShareholders, who (through custodial grants) create and sell new NuBits for $1. Revenues generated through the sell of these newly created NuBits are used to cover operating expenses and pay dividends to NuShareholders. Hence, NuShareholders are residual claimants on the network value of NuBits and, as such, have an incentive to maximize the value of the NuBits network.

NuShareholders stand ready to create and sell NuBits anytime demand increases because it generates the revenue used to pay their dividends. In other words, we can be pretty confident there will be sell side liquidity in the market for NuBits. Any buyer will be able to find a seller at $1. But how and why would NuShareholders produce buy side liquidity? Or, to state the matter another way, how and why do they contract the supply of NuBits in circulation when demand decreases?

NuShareholders have several mechanisms to decrease the supply (or effective supply) of NuBits in circulation when demand decreases, thereby offsetting a reduction in price. Originally, NuShareholders would simply vote to pay interest to NuBit owners who agree to “park” a balance of NuBits for a period of time. When a user agrees to park a balance of NuBits, the balance is marked as parked on the blockchain and cannot be spent for the agreed upon park period. When the agreed park period expires, control of the balance is returned to the owner along with the interest earned. Park rates vary by duration and are adjusted regularly by NuShareholders to ensure that enough NuBits are effectively (if only temporarily) removed from circulation when needed.

Recent updates offer additional mechanisms to reduce the supply of NuBits. NuShareholders can vote to increase the transaction fee, which, rather than being distributed to participants (as is the case with bitcoin and most other cryptocurrencies), is permanently destroyed. They might also vote to convert some NuBits to NuShares. This process, known as “NuBits burning,” is described as follows:

In the event of parking rates being offered for a prolonged period of time, NuShareholders can vote to create new NuShares that are sold through auction. The proceeds from this auction would then be used to purchase NBT on the open market, at which point the purchased NBT would be destroyed permanently by the custodian. The net result would be a dilution of equity value for all NuShareholders in order to reduce the outstanding supply of NBT in circulation. This price support mechanism allows NuShareholders to reduce the supply of NBT to match periods of contracting demand.

With these mechanisms, NuShareholders are able to manage the supply of NuBits in circulation to maintain par acceptance with the dollar.

Why would NuShareholders incur the costs to maintain par acceptance in the face of a negative, transitory shock to the demand for NuBits? Essentially, NuShareholders believe that, as Nu protocol developer Jordan Lee states in the original white paper, “Temporarily losing peg will harm the value of the network.” They are surely right. After all, there are a lot of alternative cryptocurrencies available. The unique feature of NuBits is that it has a fixed exchange rate with the dollar. Abandoning that commitment would render NuBits no better than the competition. To boost the network value — and maximize their dividends — NuShareholders must protect the fixed exchange rate.

Is the Nu protocol the answer to all our monetary economic prayers? Absolutely not. First, it would not seem to meet the robustness standards of a “real monetary rule,” as outlined by George Selgin. Unlike the automatic (if crude) supply protocol of bitcoin and most other cryptocurrencies, the NuBits supply protocol depends on voting NuShareholders. Second, it can — by definition — be no more stable than the dollar. Widespread adoption of NuBits would provide no refuge from the Fed’s monetary mismanagement.

Nonetheless, one might appreciate that the Nu protocol offers the advantages of transferring funds with blockchain ledger technology, like bitcoin, without the disadvantages of bitcoin’s short-run price volatility. Although the Fed has a comparative advantage in issuing substitutes that are accepted at par with its other liabilities, it is far less likely, as Andolfatto acknowledges, to offer a permissionless, privacy-protecting cryptocurrency. The Nu protocol provides a pseudonymous cryptocurrency that trades at par with the dollar. In other words, it is already doing precisely what advocates of FedCoin hope a central bank-issued cryptocurrency would do.

[Cross-posted from Alt-M.org]

Politicians hate cash.

That may seem an odd assertion given that they love spending money (other people’s money, of course, as illustrated by this cartoon).

But what I’m talking about is the fact that politicians get upset when there’s not 100 percent compliance with tax laws.

They hate tax havens since the option of a fiscal refuge makes confiscatory taxation impractical.

They hate the underground economy because that means hard-to-tax economic activity.

And they hate cash because it gives consumers an anonymous payment mechanism.

Let’s explore the animosity to cash.

It’s basically because a cashless society is an easier-to-tax society, as expressed by an editorial from the U.K.-based Financial Times.

…unlike electronic money, it cannot be tracked. That means cash favours anonymous and often illicit activity; its abolition would make life easier for a government set on squeezing the informal economy out of existence. …Value added tax, for example, could be automatically levied. …Greece, in particular, could make lemonade out of lemons, using the current capital controls to push the country’s cash culture into new habits.

And some countries are actually moving in this direction.

J.D. Tuccille looks at this issue in an article for Reason.

Peter Bofinger of the German Council of Economic Experts…wants to abolish the use of cash… He frets that old-fashioned notes enable undeclared work and black markets… So rather than adjust policy to be more palatable to the public, he’d rather leave no shadows in which the public can hide from his preferred policies. The idea is to make all economic activity visible so that people have to submit to control. Denmark, which has the highest tax rates in Europe and a correspondingly booming shadow economy, is already moving in that direction. …the Danmarks Nationalbank will stop internal printing of banknotes and minting of coins in 2016. After all, why adjust tax and regulatory policy to be acceptable to constitutents when you can nag them and try to reinvent the idea of money instead?

By the way, some have proposed similar policies in the United States, starting with a ban on $100 bills.

Which led me to paraphrase a line from the original version of Planet of the Apes.

Notwithstanding my attempt to be clever, the tide is moving in the wrong direction. Cash is beginning to vanish in Sweden, as reported by the New York Times.

…many of the country’s banks no longer accept or dispense cash. Bills and coins now represent just 2 percent of Sweden’s economy, compared with 7.7 percent in the United States and 10 percent in the euro area. This year, only a fifth of all consumer payments in Sweden have been made in cash, compared with an average of 75 percent in the rest of the world, according to Euromonitor International. …Cash machines, which are controlled by a Swedish bank consortium, are being dismantled by the hundreds

Though the article notes that there is some resistance.

Not everyone is cheering. Sweden’s embrace of electronic payments has alarmed consumer organizations and critics who warn of a rising threat to privacy and increased vulnerability to sophisticated Internet crimes. …The government has not sought to stem the cashless tide. If anything, it has benefited from more efficient tax collection, because electronic transactions leave a trail; in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem. Leif Trogen, an official at the Swedish Bankers’ Association, acknowledged that banks were earning substantial fee income from the cashless revolution.

What matters, by the way, is not the degree to which consumers prefer to use alternatives to cash.

That’s perfectly fine, and it explains much of what we see on this map.

The problem is when governments use coercion to limit and/or abolish cash so that politicians have more power. And this is why the French (gee, what a surprise) are trying to crack down on cash.

Writing for the U.K.-based Telegraph, Matthew Lynn mentions the new policy and France and also explores some worrisome implications of this anti-cash trend.

France is banning the use of cash for transactions worth more than €1,000…part of a growing movement among academics and now governments to gradually ban the use of cash completely. …it is a “barbarous relic”, as some publications loftily dismiss it. The trouble is, cash is also incredibly efficient. And it is a crucial part of a free society. There is no convincing case for abolition. …When it comes to creeping state control, it is no surprise to find the French out in front. …A cashless economy would be far easier to both tax and control. But hold on. …cash is far too valuable to be given up lightly. …While terrorists and criminals may well use cash to buy weapons, or deal in drugs, it is very hard to believe that they would not find some other way of financing their operations if it was abolished. Are there really any cases of potential jihadists being foiled because they couldn’t find two utility bills (less than three months old, of course) in a false name to open an account?

Amen. Banning cash to stop terrorists is about as foolish as thinking that gun control will thwart jihadists.

In any event, we need to consider trade-offs. Chris Giles highlighted that issue in a piece for the Financial Times.

…an unfortunate rhetorical echo of Maoist China. It is illiberal… Some argue there would be beneficial side effects from abolishing notes and coins through the regularisation of illegal activities. Really? …Cash would have to be abolished everywhere and the BoE does not have those powers, thankfully. The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty.

Though I suppose we should grudgingly give politicians credit for cleverly trying exploit fear to expand their power.

But never forget we’re talking about a bad version of clever. If they succeed, that will be bad news for freedom.  J.D. Tuccille of Reason explains in a second article why a growing number of people prefer to use cash.

Many Americans happily and quietly avoid banks and trendy purchasing choices in favor of old-fashioned paper money. Lots of business gets done that way…the Albuquerque Journal pointed out that over a third of households in the city either avoid banks entirely (the “unbanked”) or else keep a checking account but do much of their business through cash, check-cashing shops, pawn shops, money orders, and other “alternative financial products” (the “underbanked”). A few weeks earlier, the Kansas City Star reported a similar local situation… Twenty-six percent cite privacy as a reason for keeping clear of banks – bankers say that increased federal reporting and documentation requirements drive many customers away. “A lot of people are afraid of Uncle Sam,” Greg Levenson, president and CEO of Southwest Capital Bank, told the Albuquerque Journal. …most people aren’t idiots. When they avoid expensive, snoopy financial institutions, it’s because they’ve decided the benefits outweigh the costs.

Very well said, though I’d augment what he wrote by noting that some of these folks probably would like to be banked but are deterred by high costs resulting from foolish government money-laundering laws.

More on that later.

Let’s stay with the issue of whether cash should be preserved. A business writer from the U.K. is very uneasy about the notion of a society with no cash.

…tax authorities have become increasingly keen on tracking everything and everyone to make absolutely certain that no assets slip under their radars. The Greeks have been told that, come 2016, they must begin to declare all cash over €15,000 held in safes or mattresses, and all precious stones, gold and the like worth more than €30,000. Anyone else think there might be a new tax coming on all that stuff? …number-crunchers…are maddened by the fact that even as we are provided with lots of simple digital payment methods we still like to use cash: the demand for £20 and £50 notes has been rising. …They are maddened because “as untraceable bearer instruments, it is not possible to locate where banknotes are being held at any one time”… Without recourse to physical cash, we are all 100% dependent on the state-controlled digital world for our financial security. Worse, the end of cash is also the end of privacy: if you have to pay for everything digitally, every transaction you ever make (and your location when you make it) will be on record. Forever. That’s real repression.

She nails it. If politicians get access to more information, they’ll levy more taxes and impose more control.

And that won’t end well.

Last but not least, the Chairman of Signature Bank, Scott Shay, warns about the totalitarian temptations that would exist in a cash-free world. Here’s some of what he wrote in a column for CNBC.

In 2010, Visa and MasterCard, bowed to government pressure — not even federal or state law — and banned all online-betting payments from their systems. This made it virtually impossible for these gambling sites to continue operating regardless of their jurisdiction or legality. It is not too far-fetched to wonder if the day might come when the health records of an overweight individual would lead to a situation in which they find that any sugary drink purchase they make through a credit or debit card is declined. …there is…a sinister risk…a cashless society would certainly give governments unprecedented access to information and power over citizens.

And, he warns, that information will lead to mischief.

…the U.S. government is already using its snooping prowess and big-data manipulation in some frightening ways. …the U.S. government is becoming very fond of seizing money from citizens first and asking questions later via “civil forfeiture.” Amazingly, the government is permitted by law to do this even if it is only government staff members who have a suspicion, not proof, of wrongdoing. …In recent years, it made it increasingly difficult for companies to operate or individuals to transact by adding compliance hurdles for banks wishing to deal with certain categories of clients. By making it too expensive to deal with certain clients or sending the signal that a bank should not deal with a particular client or type of client, the government can almost assuredly keep that company or person out of the banking system. Banks are so critically dependent on government regulatory approval for their actions… It is easy to imagine a totalitarian regime using these tools to great harm.

Some folks will read Shay’s piece and downplay his concerns. They’ll say he’s making a slippery slope argument.

But there are very good reasons, when dealing with government, to fear that the slope actually is slippery.

Let’s close by sharing my video on the closely related topic of money laundering. These laws and regulations have been imposed supposedly to fight crime.

But we’ve slid down the slope. These policies have been a failure in terms of hindering criminals and terrorists, but they’ve given government a lot of power and information that is being routinely misused.

P.S. The one tiny sliver of good news is that bad money laundering and know-your-customer rules have generated an amusing joke featuring President Obama.

P.P.S. If politicians want to improve tax compliance in a non-totalitarian fashion, there is a very successful recipe for reducing the underground economy.

Most would probably agree that this year’s race has already exceeded expectations in terms of sheer entertainment value, but as we head into January the presidential campaign season will really start to heat up. Foreign policy is poised to play an even bigger than expected role in this election, thanks to the many fires burning across the globe. In particular, of course, every candidate will have to explain how he or she intends to grapple with the mess in the Middle East. Unfortunately, as we heard during the most recent debates, most of the answers so far involve more American military intervention.

Over at the Council on Foreign Relations, Micah Zenko has started keeping track of all the candidates’ calls for the use of force. The Presidential Candidates Use of Force Tracker, as he calls it, is a wonderful public service, providing voters with an easy way to compare the candidates’ proposals for intervening in Iraq, Syria, and elsewhere. What’s missing, however, is an even quicker way to compare just how interventionist one candidate is compared to the others.

In order to simplify the data provided by Zenko and his research associate, Amelia M. Wolf, I have created a scoring system so we can compare the candidates more easily. I call it the “Presidential Candidate Intervention Meter.” The Intervention Meter is based on an analysis of proposals made between August and December 14, 2015 and quantifies each candidate’s interventionist position by scoring each proposal for the use of force according to how expansive, expensive, or entangling it is. A call for the major use of ground force, for example, earns more points than a call for the limited use of Special Forces. Likewise, carpet-bombing proposals score higher than calls for air support of Iraqi troops (the scoring rules follow at the end of this post).

Admittedly, the Intervention Meter is a simple and not entirely scientific tool. Reasonable people will disagree on exactly how many points to assign each type of proposal as well as how to categorize each of the proposals. Nor can a single score encompass all the complexity and consequences of a policy proposal. Nonetheless, by applying the same scoring process to each candidate’s policies the Intervention Meter contributes to the conversation about what level of military intervention each candidate would pursue as president.

So, what do we find when we run the analysis? There have been 67 calls for the use of force to date, an average of four per candidate; 25 for the use of ground forces, 17 for airstrikes, 20 for no fly/safe zones, and 5 for non-specific action to combat terrorism globally. The average candidate score was 181. Unsurprisingly, Senator Graham topped the chart, scoring 360 points in our inaugural edition thanks to his appeal for sending U.S. ground troops to the Middle East. More surprising, perhaps, is the fact that Hillary Clinton took the second spot. This was due in large part to the fact that although Clinton has called for a somewhat less interventionist approach to the Middle East (i.e. no major use of ground troops), she has called for the unlimited global pursuit of terrorists, which earned her an extra 100 points in our scoring system. With Graham out of the race Clinton now leads the field over the not much less hawkish Senator Marco Rubio.

At the other end of the spectrum, Senator Rand Paul unsurprisingly brings up the rear as the least interventionist candidate, along with Governor O’Malley. Governor Christie also scores quite low given the hawkish tone he has struck in all of the Republican debates thus far. It seems likely that as the campaign progresses and he continues to press his case as the counterterrorism expert that we will see his score go up. Senator Sanders, on the other hand, may not deserve quite as high a score as he gets. Although he has called for air support for Iraqi forces in the fight against ISIS, most of his score comes from a half-hearted call to combat terrorism worldwide in response to a question in the last Democratic debate.

Things will shift as the campaign moves forward. It will be interesting to see how the Republican candidates do or don’t shift their interventionist rhetoric as they approach the primaries and then again when the eventual nominee launches into the general election. Meanwhile, Hillary Clinton is already running as the most hawkish and interventionist Democrat in a very long time. Having staked out such a position as she appeals to Democratic primary voters, it is hard to see her becoming any less interventionist in the general election as she begins to appeal more energetically to moderate voters.

2016 Presidential Candidate Intervention Meter

 

Scoring Rules:

Calls for ground forces

High (i.e. thousands of troops): 100 points
Medium (i.e. embed with Iraqi forces): 50 points
Low (i.e. Special Forces): 25 points

Calls for Air Power

High (i.e. carpet bombing): 50 points
Medium (i.e. air support for Iraqi forces): 25 points
Low (i.e. drone strikes to kill terrorists): 10 points

Calls for No Fly/Safe Zones: 10 points

Calls for global/unlimited action against terrorism: 100 points

Philip Bump of the Washington Post, still in thrall to the labor theory of Congress’s value, declares, “The 112th Congress, you might remember, was the least productive in modern times.” That is to say, it passed fewer bills than other recent Congresses. But all is not lost!

After the first year of this 114th Congress, more bills have been enacted than in the 112th or 113th, according to data compiled by GovTrack.us. So far, the 114th is tracking more closely with the more-productive 110th and 111th.

So good news for those of you have been worrying that you didn’t have enough new laws to discover, understand, and obey. Bump’s article is full of charts and data, all organized around the theme that a good, “productive” Congress is one that produces bills.

But as I’ve written before, journalists may well believe that passing laws is a good thing, and passing more laws is a better thing. But they would do well to mark that as an opinion. Many of us think that passing more laws – that is more mandates, bans, regulations, taxes, subsidies, boondoggles, transfer programs, and proclamations – is a bad thing. In fact, given that the American people pondered the “least productive Congress ever” twice, and twice kept the government divided between the two parties, it just might be that most Americans are fine with a Congress that passes fewer laws.

Is a judge “less productive” if he imprisons fewer people? Is a policeman less productive if he arrests fewer people? Government involves force, and I would argue that less force in human relationships is a good thing. Indeed I would argue that a society that uses less force is a more civilized society. So maybe we should call the 112th and 113th Congresses the most civilized Congresses since World War II (the period of time actually covered by the claim “least productive ever”), and the first session of the 114th Congress slightly less civilized.

As before, I wonder if congressional reporters would applaud the productivity of such Congresses as

The 31st Congress, which passed the Fugitive Slave Act in 1850

The 5th Congress, which passed the Alien and Sedition Acts in 1798

The 21st Congress, which passed the Indian Removal Act in 1830

The 77th Congress, which passed Public Law 503, codifying President Franklin D. Roosevelt’s Executive Order 9066 authorizing the internment of Japanese, German, and Italian Americans, in 1942

The 65th Congress, which passed the Eighteenth Amendment (Prohibition), the Espionage Act, and the Selective Service Act, and entered World War I, all in 1917

And hey, fans of legislation: If you’re really disconsolate over the passage of barely more than 100 new federal laws a year, take heart: According to my former colleague Ryan Young, now with the Competititive Enterprise Institute, federal regulators are on pace for the most pages in the Federal Register in a single year. They’ll need a strong final week, but Ryan thinks they can break the old record of 81,405 pages of new regulations. Will the Washington Post hail the regulators’ “productive” year? How about the Americans who have to comply with those regulations?

After the Supreme Court blocked Hawaii’s race-based election pending appeal, its organizers—a government contractor named Na’i Aupuni—canceled it and decided instead to seat all the candidates as delegates to a special constitutional convention for the purported new nation of “native Hawaiians.” The plaintiffs have asked the Supreme Court to find the election/convention organizers in contempt of its earlier order. Meanwhile, the appeal of the district court’s earlier denial of an injunction proceeds in the U.S. Court of Appeals for the Ninth Circuit. Cato has joined the American Civil Rights Union on a brief supporting the challengers. We point out that this is the second time that Hawaii has attempted to conduct a discriminatory voter-registration procedure to facilitate a racially exclusionary election. The first time this occurred, the Supreme Court held that such elections violate the Constitution. Rice v. Cayetano (2000). Things are no different this time. The voter qualification requirements here again make eligibility contingent on ancestry and bloodlines, which are nothing more than proxies for race. (There’s a further requirement that voters affirm a belief in the “unrelinquished sovereignty of the Native Hawaiian people,” which is an ahistorical assertion.) Such a discriminatory scheme is per se unconstitutional under the Fifteenth Amendment.

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