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Families Against Mandatory Minimums (FAMM) is celebrating its 25th anniversary this evening.  FAMM’s President and Founder, Julie Stewart, was Cato’s public affairs director in 1991 when she received the bad news that her brother had been arrested on a marijuana charge and would have to go to prison for five years. She was shocked at the severity of the sentence and set out to do something about mandatory minimum sentences.  FAMM has grown steadily over the years and so have its accomplishments–more than 310,000 persons have benefitted from reforms that FAMM has championed.  Congratulations to Julie and all of her colleagues at FAMM!

 

A few related items here, here and here.

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Atmospheric concentrations of methane (CH4)—a greenhouse gas many times more potent than carbon dioxide (at least over shorter time scales)—have begun rising after a hiatus from 1999-2006 that defied all expectations. No one knows for sure why—why they stood still, or why they started up again.

There is a lot of research underway looking into the causes of the observed methane behavior and at least three new studies have reported results in the scientific literature in the past couple of months.

The findings are somewhat at odds with each other.

In February, a study led by Alex Turner, from Harvard University’s School of Engineering and Applied Sciences, was published that examined methane emissions from the US over the past 10 years or so. The researchers compared observations taken from orbiting satellites to observations made from several sites on the earth’s surface. They reported over the past decade “an increase of more than 30% in US methane emissions.” And this increase was so large as to “suggest that increasing US anthropogenic methane emissions could account for up to 30-60% of [the] global increase.”

However, the methodologies employed by Turner et al. were insufficient for determining the source of the enhanced emissions. While the authors wrote that “[t]he US has seen a 20% increase in oil and gas production and a 9-fold increase in shale gas production from 2002 to 2014” they were quick to point out that “the spatial pattern of the methane increase seen by [satellite] does not clearly point to these sources” and added that “[m]ore work is needed to attribute the observed increase to specific sources.”

Perhaps most interestingly, Turner and colleagues note that “national inventory estimates from the US Environmental Protection Agency (EPA) indicate no significant trend in US anthropogenic methane emissions from 2002 to present”—a stark contrast to their findings, and a potential embarrassing problem for the EPA. But, never fear, the EPA is on it. The EPA is now actively re-examining its methane inventory and seems to be in the process of revising it upwards, perhaps even so much as to change its previous reported decline in methane emissions to an increase. Such a change would have large implications for the US’s ability to keep the pledge made at the U.S. 2015 Climate Conference in Paris.

However, the Turner et al. results have been called into question by a prominently-placed study in Science magazine just a couple of weeks later. The Science study was produced by a large team led by Hinrich Schaefer of New Zealand’s National Institute of Water and Atmospheric Research.

Schaefer and colleagues analyzed the changes in the isotopic ratios of carbon in the methane contained in samples of air within ice cores, archived air samples, and more recent measurement systems. Different sources of methane contain different mixtures of methane isotopes, related to how long ago the methane was formed. Using this information, the authors developed a model for trying to back out the methane sources from the well-mixed atmospheric samples. Although such a procedure is somewhat tunable (i.e., you can get pretty much any answer you want (kind of like climate models!)), the authors are pretty confident in their final results. 

What they determined was that prior to the 1999-2006 hiatus, methane emissions largely bore a chemical signature of fossil fuels. This signal diminished during the hiatus, and has not shown much of an increase since, despite the post-2006 renewed growth in global methane emissions. Instead, Schaefer’s team found a strong chemical signal pointing to biogenic sources of methane being behind the current rise—most pointedly, emissions from agriculture (including both rice paddies and animal husbandry). 

Despite the rather surprising nature of this conclusion, the authors are resolute:

The finding of a predominantly biogenic post-2006 increase is robust. Further, it seems likely that fossil-fuel emissions stagnated or diminished in the 1990s. Importantly, they are a minor contributor to the renewed [CH4]-rise. This contradicts emission inventories reporting increases of all source types between 2005 and 2010 with a major (~60%) thermogenic [fossil fuels] contribution… The finding is unexpected, given the recent boom in unconventional gas production and reported resurgence in coal mining and the Asian economy. Our isotope-based analysis suggests that the [CH4]-plateau marks not a temporary suppression of a particular source but a reconfiguration of the CH4-budget. Either food production or climate-sensitive natural emissions are the most probable causes of the current [CH4]-increase. These scenarios may require different mitigation measures in the future.

It is very hard to reconcile the results of Schaefer et al. with those of Turner et al.

Also disturbing is the glib statement on “climate-sensitive natural emissions.” Attention, Schaefer et al.: Your study covers from 2007 through 2014.  The figure below shows annual global surface temperature departures from an arbitrary mean. There is no climate change to be “sensitive” to during this period. Further, the statement is at odds with much of the text of the article, which largely points to an anthropogenic biogenic source for the change. One can’t help but wonder if some crusading reviewer insisted on the climate statement as the price for publication. Such a thing happened to one of us (Michaels) as a condition for publication in the prestigious “EOS—Transactions of the American Geophysical Union” many moons ago, despite the fact that the paper in question specifically determined such a link was not the case. 

And, to keep things interesting, a paper was published just days after the Schaefer et al. Science piece, by a team of researchers led by Petra Hausmann of Germany’s Karlsruhe Institute of Technology. These researchers investigated the growth in atmospheric methane concentrations alongside the growth in atmospheric ethane concentrations –a tracer for methane emission from fossil fuels. By analyzing the increase in ethane, Hausmann et al. concluded that about half of the growth in methane emissions between 2007 and 2014 came from fossil fuel sources correlated to the oil and natural gas fracking boom in the U.S. In their press release, they note that their result fits with the Turner et al. results of a significant increase in US methane emissions and contrasts with the US EPA estimates.  The authors also note the discrepancy with the Schaefer et al. findings.

Pretty clearly, no one knows quite what is going on.

And into this confusion, the EPA has decided (no doubt from the President’s urging) to issue regulations pertaining to the allowable amount of methane emissions from US oil and gas recovery and delivery operations—in the name of mitigating future climate change.

As we pointed out when the regulations were first announced, the impact on future climate change is so tiny as to be immaterial. And now, with the great uncertainty as to what exactly is behind the recent rise in atmospheric methane concentrations, the EPA’s regulations may not only be insignificant, but wrong-headed as well.

What is certain, is that if you don’t understand the cause of a situation, taking steps to “fix” it is probably a bad idea. The Obama Administration’s “While under debate, regulate!” mantra is a poor operating protocol destined to fail. Or worse.  

 

References:

Hausmann, P., R. Sussmann, and D. Smale, 2016. Contribution of oil and natural gas production to renewed increase in atmospheric methane (2007–2014): top–down estimate from methane and methane column observations. Atmospheric Chemistry and Physics, 16, 3227-3244, doi:10.5194/acp-16-3227-2016.

Schaefer, H, et al., 2016. A 21st century shift from fossil-fuel to biogenic methane emissions indicated by 13CH4. Science, doi:10.1126/science.aad2705.

Turner, A.J., et al., 2016. A large increase in US methane emissions over the past decade inferred from satellite data and surface observations. Geophysical Research Letters, doi: 10.1002/2016GL067987.

When the Common Core debate was exploding three or four years ago, a primary pro-Core strategy seemed to be ignoring substantive objections to the Core and dismissing opponents as ignorant, maybe even loony. Over time, that strategy appeared to energize and expand opposition, and many Core supporters shelved it. But not, it seems, the Center for American Progress, which just posted to the website Funny or Die a video mocking Core-concerned parents.

You can watch the vid here, but basically two parents are sending their daughter to kindergarten and letting her know that she’ll have no need for books but will need a disguise, an ever-so-hilarious tin foil hat, and a ray gun, among other things, because her school uses Common Core and that means no to book-larnin’, yes to “Pod People” mind-reading. Thankfully, before the little girl sets off, her older sister, about to start her first year of college, walks by the little girl’s room and sets her goofball parents straight. “Common Core is just some standards my teachers use,” she exasperatedly explains. “So, you know, we can get into college, and get a job, and hopefully move out of our crazy parent’s house.”

Oh, is that it?

Not only insulting to Core opponents and dismissive of their concerns, the video is highly misleading. The Core is a specific set of standards – not just “some” standards – and states make teachers use them, quite likely in response to federal coercion. There is also no meaningful evidence that the Core enables students to get a job and leave the house of either their crazy or their sane parents. And a student entering college this year would have had little Core-aligned education – they would not have gone through it many years ago, as the video implies – because classroom implementation only began in the last two or three years.

Now, some opponents certainly ascribe things to the Core they should not. Sometimes these are politicians or education analysts, but often they are regular people with normal lives who cannot spend hours combing through laws and regulations to get all the right information. But CAP and many other Core defenders do, or at least should, know the whole truth, yet like this video they often put out misleading or woefully incomplete information, often with the stated goal of setting opponents straight. Indeed, just last week I responded to such “fact-checking” on the website of The Seventy Four. And what, by the way, did folks at The Seventy Four say about CAP’s video? They called it “hilarious” and reprinted a bunch of their flawed fact-check.

You can judge for yourself, of course, whether the video is hilarious. But there is little funny about dismissing the concerns of real parents and citizens who have had Common Core imposed on them, nor is it chuckle-inducing when, in the name of correcting others, Core fans keep distorting reality.

Coastal marshes are valuable ecosystems that provide important nutrients to coastal waters that help sustain local food webs. They are also increasingly recognized as valuable carbon sinks, sequestering significant quantities of carbon both above and below ground. In recent years, however, concerns have been expressed that these ecosystems are in danger of collapsing in response to rising sea levels that are projected to occur as a consequence of CO2-induced global warming. If such fears are correct, melting ice will increase the rate of sea level rise beyond which these ecosystems can keep up, essentially them to a submerged death, which would have substantial repercussions on surrounding communities.

But how likely is it that this gloomy scenario will occur?

Investigating this very topic, the three-member research team of Ratliff et al. (2015) used a one-dimensional ecomorphodynamic model to “assess the direct impacts of elevated CO2 on marsh morphology, relating to ongoing and emerging environmental change.” According to the authors, previous works have revealed large increases in marsh plant biomass productivity in response to elevated concentrations of atmospheric CO2, yet “direct CO2 effects on vegetation and marsh accretion (as opposed to its indirect effects, e.g., via the increase in temperature) have not yet been incorporated into marsh models. As a result, they note the relative importance of CO2 effects on marsh dynamics “remains unknown” … until now, that is.

Using a meta-analysis of CO2 enrichment data, Ratliff et al. were able to model the impact of CO2 fertilization on coastal marsh vegetation and morphological dynamics for varying rates of relative sea level rise that are projected to occur under future global warming. Accordingly, the authors report “we found that the fertilization effect of elevated atmospheric CO2 significantly increases marsh resilience to drowning and decreases the spatial extent of marsh retreat under high rates of sea level rise.” In addition, they found that the more expansive marshes under elevated CO2 resulted in greater carbon sequestration such that “the fertilization effect may also contribute to a stabilizing feedback within the climate system, where increasing biomass production and organic deposition consequently sequester greater amounts of CO2.”

In light of the above findings, Ratliff et al. conclude that their results “imply that coastal marshes, and the major carbon sink they represent, are significantly more resilient to foreseen climate changes than previously thought.” And that good news should suppress fears of the untimely demise of coastal marsh vegetation due to possible climate change-related increases in sea level. Sadly, such fears could have been avoided altogether, if the models would have included this important direct benefit of CO2 from the get-go.

 

Reference

Ratliff, K.M., Braswell, A.E. and Marani, M. 2015. Spatial response of coastal marshes to increased atmospheric CO2. Proceedings of the National Academy of Sciences, USA 112: 15,580-15,584.

After I published my recent post on “The Myth of the Myth of Barter,” I tweeted the link to it to David Graeber himself, as I thought his response might be interesting.

Was it ever!  Before you could say Jack Robinson, Graeber let loose a fusillade of tweets, each more vicious than the last, calling my post “wildly simple-minded & wrong,” “one of the most embarrassing examples of ideological blindness & arrogant stupidity I’ve ever read,” and that sort of thing.  Graeber even asked, in apparent disbelief, “This guy was a professor somewhere?”  Think what you will of his understanding of monetary economics, or of his scholarship in general: when it comes to vitriolic hyperbole, Professor Graeber is no dilettante.  Indeed, there were a lot more barbs besides these, and there have no doubt been others since.  But as Graeber has blocked me on Twitter, presumably to prevent me from replying, I can no longer retrieve most of them.*

But interesting as Graeber’s response was, it fell rather short of the sort of substantive reply I’d hoped to illicit from him.  The closest Graeber came to that was a tweet claiming that my post was just a rehash of arguments Robert Murphy had made some time ago, to which Graeber had already responded, and another saying that he wasn’t about to waste his time repeating what he’d already said.

In fact I’d read Graeber’s reply to Murphy.  What’s more, I quoted from that reply, to which I supplied a link, in my original post, which I would scarcely have been tempted to do had I believed it answered my own complaints about Graeber’s work.

As a matter of fact, it does nothing of the sort.

My complaints, you may recall, were (1) that Graeber had wrongly accused Smith and Menger of supposing that there was no alternative to either barter or monetary exchange — that is, of supposing that there were no such things as gift-giving and other sorts of non-quid-pro-quo goods transfers, or societies that relied upon such — and (2) that Graeber lacked a proper grasp of some of the most elementary principles of economics, and of the modern theory of value in particular.

Far from defending his work against either of these complaints in his reply to Murphy, Graeber repeats there the very assertions that prompted me to complain in the first place.  Once again he declares that Smith, Menger, and Jevons “[a]ll assumed that in all communities without money economic life could only have taken the form of barter” and that “economists originally predicted all (100%) non-monetary economies would operate through barter.”  Anthropologists, in contrast, “discovered … an at first bewildering variety of arrangements, ranging from competitive gift-giving to communal stockpiling to places where economic relations centered on neighbors trying to guess each other’s dreams.”

Here I cannot resist quoting again the most relevant passage from Menger’s 1892 essay, “Geld”:

Voluntary as well as compulsory unilateral transfers of assets (that is, transfers arising neither from a ‘reciprocal contract’ in general nor from an exchange transaction in particular, although occasionally based on tacitly recognized reciprocity), are among the oldest forms of human relationships as far as we can go back in the history of man’s economizing.  Long before the exchange of goods appears in history, or becomes of more than negligible importance…we already find a variety of unilateral transfers:  voluntary gifts and gifts made more or less under compulsion, compulsory contributions, damages or fines, compensation for killing someone, unilateral transfers within families, etc.

That Menger wrote this more than three decades before the 1924 publication of Marcel Mauss’s The Gift, and therefore well ahead of what Graeber describes in his book as “the vast anthropological literature…starting with” that work’s appearance (p. 90, my emphasis), only makes Menger’s understanding all the more impressive.

Graeber can insult me all he likes.  What he cannot do is pretend that I have not shown one of his most basic claims to be flat-out wrong, at least when it comes to the economist responsible for the most famous and complete elaboration of the theory that money was an outgrowth of barter.  (That Graeber is also wrong about Smith will seem no less evident to anyone who bothers to read that profound and circumspect Scotsman with a modicum of generosity.)

Nor does Graeber’s response to Murphy supply any reason for me to modify my assessment of his understanding of basic economics.  On the contrary:  he repeats here as well his view that “money is simply a mathematical system whereby one can compare proportional values, to say 1 of these is worth 17 of those.”  This, as I said before, is what Aristotle believed;  it is also what economists stopped believing around 1871.

In his reply to Murphy, as in his book, Graeber recognizes that barter does occur, saying that it “typically occurs between strangers,” as if this were an exception of little importance.  But as I said in my earlier post, it is precisely through trade “among strangers” that non-commercial societies give way to commercial ones;  and it is in enabling this transition that money comes to acquire great importance.

But can money really develop, as Smith and Menger suggest it can, as a spontaneous outcome of trade among strangers?  It is regarding this possibility only that Graeber’s reply to Murphy offers some new arguments.  Graeber insists that money can’t emerge this way, because trade among strangers is a matter of “occasional interactions among people never likely to meet each other again,” and “because rare and occasional events won’t lead to the emergence of a system of any kind.”  If, on the other hand, “there are ongoing trade relations between strangers…it’s because each side knows the other side has some specific product(s) they want to acquire — so there is no ‘double coincidence of wants’ problem” for money to overcome:

You don’t cross mountains, deserts, and oceans, risking death in a dozen different ways, so as to show up with a collection of goods you think someone might want, in order to see if they happen to have something you might want.

Really?  If you ask me, that last sentence seems to contain a reasonable description of what countless merchants did in fact do for centuries, and what many still do to this day.  What’s far-fetched is Graeber’s contrary suggestion that traders never crossed mountains etc. unless they were absolutely certain that they could trade whatever they brought with them for whatever was to be had where they were headed.  And it is precisely because trade was risky that traders had reason to “show up” at markets where goods they wanted were on offer equipped with goods of their own that they imagined were relatively “saleable” (to use Menger’s term) in the markets in question.

Now, one has only to introduce the possibility that stranger A might first cross mountain B to acquire good C from stranger D so as to then cross mountain E in the hope of using C to acquire F from stranger G, together with other such possibilities, to have the ingredients it takes to allow Menger’s (or, for that matter, Smith’s) theory of money’s development to go through.  Allowing for the particular salience of certain goods — their popularity as ornament or in ceremonial uses — makes the development all the more likely.**

In short, Graeber’s supposed refutation of the possibility that money can develop through trade among strangers amounts to little more than a completely unwarranted assertion to the effect that, because overcoming the “lack of a double coincidence” hurdle is risky, no one will bother trying, notwithstanding the potential gains to be had by doing so.  That assumption may seem reasonable to one who believes, as Graeber does, that trade is a zero-sum game.  But it is not reasonable in light of economists’ understanding of voluntary exchange as a source of mutual gain. More importantly, it is not what persons who actually venture to engage in trade believe.

I suspect that, if he responds to this post at all, Graeber will simply maintain, by way of another burst of ≤140-character philippics, that I still haven’t undermined any of his book’s more important claims.  Still it would be nice if, instead of pretending to have already answered my arguments, or merely being nasty, he would attempt to offer a substantive reply.  After all that obloquy, I could use a weal tweet.

___________________________________

*Nor can I tweet this post to him.  But that needn’t stop some of you from doing so.

**Don’t get your knickers in a twist, my chartalist friends:  I do not intend to deny that public authorities and other such “big players” may play an important part in influencing this process.

[Cross-posted from Alt-M.org]

The public relations and legal battle between the Federal Bureau of Investigation and Apple over the company’s use of encryption has put the focus on executive branch surveillance in a way not seen since Edward Snowden’s revelations almost three years ago. However, as the historical record demonstrates, the FBI’s domestic spying on the American public dates almost from the Bureau’s creation in July 1908. In the years that followed the FBI’s birth, other federal agencies–some civilian, some military–initiated their own warrantless domestic surveillance operations. Throughout this period, Congress was more frequently aiding and abetting this surveillance and repression, rather than preventing it or reining it in.

As the showdown between Apple and the FBI illustrates, what has changed is the technology used to accomplish the surveillance–technology that now gives federal law enforcement and intelligence agencies the ability to surreptitiously access the computers, smartphones, and even home appliances of tens of millions of Americans.

Today, the Cato Institute is launching a timeline that chronicles the history and implications of these developments: American Big Brother: A Century of Political Surveillance and Repression.

Too often, federal domestic surveillance of citizens was a prelude to government actions aimed at subverting civil society organizations opposed to American involvement in foreign wars, aiding conscientious objectors, advancing civil rights and political autonomy for people of color, the creation of labor unions, and even surveillance of candidates running for or holding office–including members of Congress and presidential contenders.  

As political scientist Robert Justin Goldstein noted in his 1978 book, Political Repression in Modern America: 1870-1976, “American social scientists have not seriously considered political repression as one important factor which helps explain the narrowness of the American political spectrum…” Put differently, through the use of surveillance, agent provocateur’s, and outright violence, federal officials often decided what political views were or were not permissible to hold and practice in the American political system.

Indeed, the theme that emerges clearly from the timeline’s episodes is that in many of these cases, federal surveillance and political repression were directed most forcefully at individuals and organizations that challenged the prevailing political paradigm on the issue at hand. Occasionally, the domestic surveillance was aimed squarely at the political opponents of the president then occupying the White House (FDR ordering surveillance against isolationists, LBJ ordering Goldwater’s campaign plane bugged). In other cases, simply the perception by federal officials that an individual or group might be a “threat to national security” (think Japanese-Americans in World War II or Arab/Muslim-Americans today) was enough to trigger an unwarranted federal attack on the target’s constitutional rights.

The individuals and organizations subjected to these tactics often found themselves either politically crushed or so badly damaged as to be rendered politically marginalized and ineffective. The personal and professional costs of these federal attacks on the constitutional rights of these citizens were usually life-long, and belated apologies by federal officials decades removed from the actions of their predecessors did little if anything to actually right the original wrong, much less preclude a repeat of such surveillance and repression against others.

Indeed, just three years after the passage of the Foreign Intelligence Surveillance act in 1978, then-President Ronald Reagan promulgated an executive order than one recent State Department whistleblower alleged has been used to conduct warrantless surveillance of the overseas communications of Americans in the post-9/11 era. Whether the practice goes back farther is an issue that should be, but currently is not, the subject of a Congressional inquiry–just as all government surveillance activities initiated since the Church Committee should be investigated. 

The timeline endeavors to provide a wide range of examples of federal misconduct in this area. It will be updated regularly on the basis of archival research and new revelations of current federal domestic surveillance and political repression of Americans–citizens whose only “crime” was or is to challenge governmental policies they oppose but that are carried out in their name.

As soon as the terrorist bombings took place in Brussels, President Obama’s many critics demanded that he immediately terminate his state visit to Cuba and abandon the rest of his trip to Latin America.  Instead, Senator John Kasich, Senator Ted Cruz, and other GOP luminaries insisted, the president should return immediately to Washington and go into crisis mode with his national security team. President Obama firmly refused to do so. Instead, he continued his trip as scheduled.  That afternoon, he attended a baseball game with Cuban President Raul Castro and then completed the Cuba leg of his journey with a joint statement and press conference before leaving for Argentina.

In terms of substance, it was the right course of action.  Too many members of America’s political elite, as well as the news media, hype the terrorist threat to absurd levels. Pundits and politicians even have a tendency to compare the severity of the threat posed by such groups as ISIS and Al Qaeda to the dire menace to global peace and American security posed by the likes of Nazi Germany and the Soviet Union, and they warn that we are on the brink of World War III or perhaps are fully engaged already in that conflict. It is a nonsensical comparison. ISIS and similar nonstate actors do not even come close to constituting such an existential threat. 

Instead, radical Islamic terrorism poses a limited threat roughly akin to that presented by radical anarchists in the second half of the nineteenth century. To allow ISIS to disrupt an important presidential visit to Latin America, a crucial and often neglected region in U.S. diplomacy, would have accorded the terrorist group an importance it does not deserve.  The news media makes a similar error when it gives every terrorist incident seemingly endless coverage for days or weeks.  President Obama sent ISIS a clear message that he would not play into their hands in that fashion this time.

However, the president’s handling of the optics surrounding his decision was extraordinarily clumsy.  It would have been one thing to have been in unspecified “meetings” or “discussions” with U.S. or Cuban officials.  Additional meetings with key members of the new U.S. embassy staff in Havana could certainly have been arranged at the last minute.  But attending a baseball game in his shirt sleeves with Castro, relaxing and enjoying the Cuban sunshine, while the bodies of the victims in Brussels were still cooling, presented a horrible image.  It was simultaneously frivolous and insensitive. 

And, unfortunately, that is the image that most people both in the United States and abroad will remember about President Obama’s initial reaction to the events in Brussels. Naturally, his critics pounced and portrayed the action as another manifestation of a feckless foreign policy. The reality is that it was the correct substantive response, but one that was ineptly executed.

In the wake of the terrorist attacks in Brussels this week, presidential candidate and senator Ted Cruz called for increased law enforcement activity in American Muslim communities:

 We must empower law enforcement to patrol and secure Muslim neighborhoods before they become radicalized.

Pressed to clarify his remarks, Sen. Cruz called for the resurrection and nationalization of a now-defunct NYPD surveillance program directed at the Muslim community in and around New York City.  He argued that the “successful” program was shut down due to an excess of political correctness, leaving New Yorkers more vulnerable to the threat of terrorism.

The problem: even ignoring political correctness, the NYPD program was a failure by any reasonable standard.

In the aftermath of 9/11, the NYPD established a surveillance-based Demographics Unit.  The goal of this unit was to “map” certain (almost entirely Muslim) communities in and around New York City, placing them under expansive police surveillance in order to sniff out would-be terrorists before they could launch attacks.   

To achieve this mandate, the police infiltrated mosques, set up surveillance cameras around Muslim-owned businesses and residences, went undercover to monitor everyday conversations, and even infiltrated student groups at schools as far away as Yale and the University of Pennsylvania in order to monitor what students talked about, who they spoke to, and how often they prayed. 

The end result of years of Demographic Unit surveillance on American Muslims was… nothing. 

No convictions, no prosecutions, and, according to Assistant Chief Thomas Galati, not even a single legitimate lead

That’s not to say there were never any terrorist threats in New York during this time period, only that the expansive “patrolling and securing” of Muslim neighborhoods failed to produce any actionable intelligence about them.  A 2013 New York Magazine article contains an illustrative example: 

In September 2009, the National Security Agency intercepted an e-mail from a taxi driver named Najibullah Zazi to an e-mail address linked to one of Al Qaeda’s most senior leaders. The message contained the line “the marriage is ready.”

Marriage and wedding were among Al Qaeda’s favorite code words for attacks, referring to the day that a suicide bomber met his brides, the maidens of the hereafter.

Trying to ascertain the scope of the plot, the NYPD searched the files of the Demographics Unit. Even though the rakers had canvassed Zazi’s neighborhood daily, and had even visited the travel agent where he bought his tickets between New York and Colorado, there was not a single piece of useful information. “There was nothing,” said [NYPD Lt. Hector] Berdecia. 

In 2011, the Associated Press began publishing an in-depth exposé on the program, which spawned calls for reform and a wave of litigation against the city. By the time Bill de Blasio took office as mayor in 2014, the program had largely wound down, and the unit was eventually disbanded entirely.

There is little evidence that program made New Yorkers any safer. What the program undoubtedly did is cost millions of tax dollars and thousands of law enforcement man-hours that could have been spent investigating actual criminal behavior. 

Sen. Cruz’s campaign also claimed that the end of the program made it more difficult for the NYPD to work with the Muslim community: 

In New York City, Mayor de Blasio succumbed to unfounded criticisms and eliminated the efforts of law enforcement to work with Muslim communities to stop radical Islamic terrorism. 

According to the NYPD itself and advocates within the New York Muslim community, the opposite is true. The NYPD program understandably alienated the local Muslim community and generated immense distrust between Muslim Americans and law enforcement.

While there is scant evidence that the NYPD program generated much in the way of actionable intelligence, it did generate civil rights and constitutional litigation against New York City.  Several suits have been settled, with costs ranging in the millions of dollars.

Meanwhile, another suit in New Jersey remains on the docket. Last October, the Third Circuit Court of Appeals issued a strongly worded opinion reinstating a lawsuit against the NYPD surveillance program, invoking several of the darkest civil liberties violations in our history to explain why the suit should proceed:

No matter how tempting it might be to do otherwise, we must apply the same rigorous standards even where national security is at stake. We have learned from experience that it is often where the asserted interest appears most compelling that we must be most vigilant in protecting constitutional rights. “[H]istory teaches that grave threats to liberty often come in times of urgency, when constitutional rights seem too extravagant to endure.”

[…]

Today it is acknowledged, for instance, that the F.D.R. Administration and military authorities infringed the constitutional rights of Japanese-Americans during World War II by placing them under curfew and removing them from their West Coast homes and into internment camps. Yet when these citizens pleaded with the courts to uphold their constitutional rights, we passively accepted the Government’s representations that the use of such classifications was necessary to the national interest. […] In doing so, we failed to recognize that the discriminatory treatment of approximately 120,000 persons of Japanese ancestry was fueled not by military necessity but unfounded fears.

[…]

What occurs here in one guise is not new. We have been down similar roads before. Jewish-Americans during the Red Scare, African-Americans during the Civil Rights Movement, and Japanese-Americans during World War II are examples that readily spring to mind. We are left to wonder why we cannot see with foresight what we see so clearly with hindsight – that “[l]oyalty is a matter of the heart and mind[,] not race, creed or color.” 

Recycling failed, constitutionally-dubious policies is not a solution to terrorism, nor is singling out a largely law-abiding minority community for even more invasive government surveillance than it already endures.  Police are already empowered to investigate criminal activity, and to patrol any neighborhood they like. But the power to select entire neighborhoods or communities for intense police surveillance based solely on the ethnicity or religion is a power the police don’t need and shouldn’t have. 

For its part, the NYPD now seems to agree

Six years ago today, President Barack Obama gave the Affordable Care Act his signature. There is no sense in marking the ACA’s anniversary, however, because the ACA is no longer the law.

Realizing the law he signed was unconstitutional and unworkable. President Obama and the Supreme Court have since made a series of dramatic revisions that effectively replaced the ACA with something we now call “ObamaCare.”

ObamaCare–not the ACA–is the law under which Americans now live.

  • Under ObamaCare, the Supreme Court used Congress’ taxing power–a power Congress declined to use under the ACA–to force Americans to purchase government-approved health-insurance plans.
  • Under ObamaCare, the Supreme Court severed the connection between the (ineffective) Medicaid expansion Congress enacted and the rest of the Medicaid program–a bifurcation Congress never contemplated, much less intended.
  • Under ObamaCare, the president imposed and the Supreme Court green-lighted taxes on nearly 100 million Americans whom Congress clearly exempted.
  • ObamaCare gives members of Congress a special exemption from the ACA. (It’s good to be the king.)
  • Under ObamaCare, the president can tax and subsidize whom he pleases. Even if Congress didn’t provide the funding. Even if Congress says he can’t.

The ACA, in effect, is dead. ObamaCare is the law governing Americans’ health care–even if we don’t know what that law is from one day to the next. The ACA had legitimacy. No legislature ever approved ObamaCare. It has no legitimacy.

Unfortunately, ObamaCare doesn’t work much better than the ACA. ObamaCare is still causing Americans to lose their health plans. As one voter pointedly reminded Hillary Clinton, ObamaCare is still driving premiums higher. It is still causing their coverage to erode.

If you want to celebrate something on March 23, celebrate the anniversary of the last time Democrats put the legislative process and political legitimacy ahead of their ideological goal of universal coverage

Today’s argument in Zubik v. Burwell was very different than what we saw two years ago on Hobby Lobby. The focus was almost entirely on whether the “accommodation” offered to religious nonprofits constitutes a substantial burden on those employers’ religious free exercise. Indeed, much of the argument involved a dispute over how exactly the “accommodation” works and whom it burdens – not simply whether adequate alternatives were available.

But getting past these technicalities of instance regulations, the result looks to be the same as what we saw regarding for-profit corporations: the progressive justices are in lockstep for the government, the conservatives support the religious-liberty claimants, and Justice Kennedy is in the middle but almost certainly leaning towards the conservatives. Of course, after Justice Scalia’s passing, that suggests that the vote will be 4-4 – meaning an affirmance of conflicting lower-court rulings and a Schroedinger’s mandate that lives on in some of the country but not the rest.

The Court could avoid this untenable result – as well as the messy casuistry and the culture-war battle – by following the administrative-law line suggested by Cato in our amicus brief. We argued that the Department of Health & Human Services simply lacked the authority to create law in this sensitive area. As Josh Blackman and I write in the current issue of The Weekly Standard:

Conveniently, there’s an alternate argument, based on the Hobby Lobby and King rulings, that could command a majority opinion: The agencies lack both the expertise and power to exempt some religious groups while forcing others—deemed “less” religious—to be complicit in what they consider sin. By rejecting this bureaucratic assertion of executive authority, Zubik can thus be resolved without further politically fraught haggling over RFRA.

In other words, if Congress had imposed this regime, that would’ve been one thing, but we cannot assume that the Congress that passed Obamacare – including especially the pro-life Democrats whose votes were essential – delegated such awesome power to administrative agencies without saying so explicitly.

Alas, the Court didn’t seem at all interested in that nifty solution, and so, rather than releasing that impossible tie, what we’re likely to see is a setting of Zubik for reargument at a time when the Court gets its ninth justice. That means we’ll be doing this all again next year, when it really will be deja vu all over again.

Yesterday at the Washington Post, which I saw just this morning, Radley Balko found two stories that make the blood boil. His headline says it all: “A dead cop, a dead suspect, a wounded cop and a terrified, hospitalized grandmother.” He’s writing, of course, about the war on drugs.

Early Sunday morning, it seems, just after midnight, two Howard County, Indiana, sheriff’s officers tried to serve a warrant in a trailer park in Russiaville, Indiana, by forcibly entering the home. The result? Read the headline again. And what was the alleged crime? Possession of a syringe. That’s right.

So a deputy is dead, a suspect is dead, and a third deputy was seriously wounded because a guy failed to appear in court after he was arrested for possessing a syringeThe Indianapolis Star reports that the suspect had prior arrests for drug possession. Not distribution. Just possession.

Meanwhile, in Chicago, Balko continues, an 82-year-old great-grandmother, Elizabeth Harrison, was given the scare of her life last Friday when cops, guns drawn, broke down her door and ordered her to put up her hands. They had the wrong house, she later told reporters from her hospital bed. “They wanted me to produce this young man that they were looking for. And they would not take no for an answer that I didn’t know him.”

As Balko notes, this case has a bizarre twist (in part, quoting the original story):

The man police were looking for walked up to the officers as they were explaining to Harrison’s family how they can fill out paperwork to file a claim to get her door fixed …

Linda Channel, Harrison’s daughter who lives on the same block as her and rushed over following the raid, said the “target” told cops they had the wrong house …

“You all came to the wrong house. I live at 126, and this is 136,” Channel told ABC, quoting the man.

In the end, the police didn’t even arrest him, due to lack of evidence. Harrison is lucky she’s still alive. She isn’t the first innocent grandmother to be wrongly raided. Or the second. Or the third.

She also wouldn’t have been the first grandmother to be killed in a mistaken drug raid. Or the second. Or the third. Or the fourth.

Read the whole piece here. This insane war on drugs has got to end. 

Republican frontrunner Donald Trump claims he is going to build a wall along the border and get Mexico to pay for it.  This has been laughed off as infeasible, perhaps even a little nutty.  Yet perhaps we should have held back our disdain a little longer.  In 1954, President Eisenhower prompted the Mexican government to deploy troops along the border to stop Mexicans from entering the United States.  While Mexico didn’t build a wall, they attempted to stem the tide of Mexicans emigrating to the United States and their government paid for it.  This might sound great to immigration restrictionists until they realize how Eisenhower did it.    

After months of failed negotiations between the two countries over the terms of the Bracero guest worker visa, the U.S. departments managing the visa issued a press release on January 15, 1954 stating that migrants who entered would be immediately awarded a labor contract and a job.  Outraged by this attempt to cut them out of the negotiations, the Mexican government deployed 5,000 soldiers along the border to threaten, detain, and deter migrants who tried to enter the United States.

Deborah Cohen sums up the resulting chaos:

When the United States actually pulled back the gate and opened the border on January 22, chaos ensued.  Hundreds of hopeful migrants rushed past the barrier, aided by the extended arms of United States Border Patrol agents, even as Mexican soldiers charged the men, trying to prevent them from crossing.  Soldiers grabbed their countrymen, often by the shirt, and yanked them back as they were pulled towards the other side by United States border guards.  [Mexican] Troops pelted men with fists, guns, water, and clubs in a vain attempt to contain this rush of bodies [emphasis added].

Mexicans who avoided their own military and made it across the border found helpful Border Patrol and INS officers who guided them to labor recruiters who gladly transported them to farms for legal work in the United States. 

Negotiations to renew the Bracero program broke down for two main reasons.  The first is that the Mexican government sought a monopoly on the export of labor.  Article 123 of the Mexican Constitution of 1917 controlled the hiring of Mexican citizens abroad.  Cloaked in nationalistic justifications, it was a scheme that created a Mexican government labor monopoly to skim off rents.  To empower Article 123, historian Ernesto Galarza describes a Mexican immigration law passed in 1932 that “authorized the confiscation of vehicles uses to transport persons to the border for the purposes of facilitating their illegal entry into the United States.”  Galarza means “illegal entry” under Mexican law, not U.S. law.  Simply put, the Mexican government wanted higher rents and the U.S. government was reluctant to grant them.          

The second reason negotiations broke down is that Eisenhower wanted the Mexican government to contribute to migration control by patrolling their side of the border.  The Bracero program had existed since 1942 as a bilateral labor agreement between the two countries but unlawful Mexican immigration persisted.  The Mexican government’s failure to control illegal Mexican emigration and never ending American demand for workers lulled them into a position of salutary neglect so that by the early 1950s almost 2 million Mexican unauthorized immigrants were working in the United States.  Eisenhower wanted that stopped and thought the Mexicans could help.  The Americans eventually solved it themselves

The negotiations broke down in 1953 and 1954, prompting the Eisenhower administration’s January 1954 announcement that any Mexican who showed up would be granted a work visa.  Mexico quickly acceded to American demands and soon Bracero workers were flowing freely back and forth across the border again - to the economic benefit of everybody involved. 

Eisenhower’s opening of the border with Mexico in January 1954 was only possible because of the Bracero guest worker visa program that tied the two government’s together.  If a future President Trump negotiated a large scale guest worker visa program that allowed many temporary Mexican guest workers in annually and legalized most of the unauthorized immigrants in the United States, he could gain the diplomatic leverage to prompt Mexico to build a wall – or at least deploy some troops in a fancy show.

A legalization and the creation of a large scale guest worker visa program would make such a wall even more irrelevant than it would currently be (unlawful immigration from Mexico has essentially stopped) but at least we’d have a more functional immigration system. 

This post was written with the help of Andy Yuan

In a third-act twist worthy of M. Night Shyamalan, the FBI has announced that it has just discovered a method, provided by an unnamed “third party,” of breaking into deceased San Bernardino shooting suspect Syed Farook’s iPhone without help from Apple.  As a result, the hearing at which Apple and DOJ lawyers were scheduled to square off today has been postponed for at least two weeks while the Bureau tests out this “new” approach, potentially rendering the legal battle with Cupertino moot.

The scare quotes in the previous sentence are there to signal my skepticism that there is a genuinely novel in play here—which matters because the FBI has been consistently representing to the courts that Apple’s assistance, and an order to compel that assistance, was “necessary” to access the data—which is to say, that the FBI had no viable alternative methods to decrypt the contents of the phone.  Yet from the beginning of the public debate over this case, the technical experts I’ve consulted with have consistently pointed to two distinct approaches the Bureau might employ that wouldn’t require Apple to write or authenticate a line of code. 

First, there are potential methods of extracting the phone’s UID—a secret master encryption key physically embedded in the processors of iOS devices.  With that key, which is designed to be difficult to read and unknown even to Apple, the FBI  could crack the encryption protecting the iPhone data in a matter of minutes.  Though cumbersome, time-consuming, and expensive, these methods would almost certainly still be cheaper than a protracted legal battle with a deep-pocketed tech titan—though they would also inherently carry some risk of destroying the key information, rendering the iPhone data permanently inaccessible.

The second and more plausible method was described in some detail weeks ago by ACLU technology fellow Daniel Kahn Gillmor, and even referenced by Rep. Darrell Issa at recent hearing with FBI director James Comey. Read Gillmor’s post for the details, but in essence it involves removing the phone’s “effaceable storage” to make a backup copy of the key material that is erased to render the phone’s data permanently inaccessible after too many incorrect passcode guesses. When FBI hits their guess limit, they “re-flash” the backed-up data to the phone and get another round of guesses.  Security researcher Jonathan Zdziarski’s argues cogently that this is the most probable option. 

If that’s the case, the bureau ought to have some explaining to do, because this alternative surely should not have been unknown to FBI’s forensic experts.  It would imply that the government either chose to obscure the real range of options from the courts, or more charitably, did not make a very serious effort to explore alternatives before pleading “necessity.”   A high profile terrorist attack, after all, must have seemed like an ideal test case for the proposition that technology companies can be compelled, under existing law, to hack their own security on the government’s behalf—which might have sapped enthusiasm at Main Justice for abandoning it in favor of an attack that would give them this data, but be unlikely to work on newer model phones.  Of course, that cost-benefit calculus might look different once it became clear that this would be a long legal slog with Silicon Valley more generally lining up to back Apple—not a quick and easy PR win for the government. No doubt the FBI will plead reluctance to disclose too much about their “sources and methods” of accessing data on the phone, but they should at least be pressured to confirm, generally, whether they’re using a general approach they ought to have known about well before this past weekend.  If so, that ought to affect the credibility their representations of necessity are afforded by future courts in similar cases.

And, of course, there will be no shortage of similar such cases: There are a dozen underway already,  and hundreds more locked iPhones in the hands of various law enforcement agencies.  Since the method outlined above will (probably) not work on newer iPhones, the underlying legal questions raised by this case will still need to be resolved—though perhaps by courts that have learned to regard FBI’s technical affidavits with bit more skepticism.

 

While most U.S. allies seem happy to continue their free-riding ways, Japan is exhibiting a different sort of behavior. The long-time U.S. ally is taking steps to shoulder a greater share of the burden for its own defense and regional stability. Last year, the Japanese Diet reformed its national security laws allowing the country to play a more active role in East Asia. The reforms prompted many observers to declare an end to Japan’s post-World War II pacifism.

Jennifer Lind, author of a recent Cato Policy Analysis, disagrees:

Such pronouncements are misguided; these reforms are only the most recent recalibration of Japan’s postwar grand strategy…[Japan] prefers to “buck-pass” to the United States, but—at times of growing threat and uncertainty about the U.S. commitment—Tokyo has built greater military capabilities and accepted more roles within the alliance. The recent security reforms represent continuity, rather than change…

Lind, who is an associate professor at Dartmouth College, goes on to argue that Japan’s new posture may not be permanent. She explains, “Japan does less when it can; more when it must.” The new security posture is motivated by two factors: the military threat posed by China and uncertainty about the U.S. commitment to Japan. Tokyo could return to free riding if either the threat from China is reduced or the United States shores up its commitment.

Yet, while many welcome Tokyo’s reform efforts, others fear that a more assertive Japan will only increase tensions in the region. But what are the implications for U.S. security of a more assertive Japan? And does Japan’s acceptance of more responsibility suggest that other U.S. allies would act accordingly if Washington were to step back?

Please join Jennifer Lind, myself, and two distinguished panelists as we discuss these and other important questions. The event will be held at noon on March 29, 2016 at the Cato Institute. You can register here.

Just four days after Salah Abdeslam, the mastermind of last fall’s Paris attacks, was finally captured, the Islamic State (ISIS) has claimed responsibility for this morning’s terrorist attacks in Brussels. The attacks, which have killed more than 30 and wounded almost 200, provide another chilling reminder of how dangerous the world can be.

As Brussels tends its wounds, the simple question looms: How should Europe and the United States respond?

In and around official Washington, the script is becoming sadly predictable. Immediately following the news, administration officials assert their resolve and commitment to combatting terrorism: “Attacks like these only deepen shared resolve to defeat terrorism around the world

Close on their heels, administration critics line up to fear monger, launch cheap insults at Obama for not paying enough attention the terrorism, and to talk tough about striking back at ISIS. All the Republican candidates criticized Obama for staying in Cuba. Donald Trump took the opportunity to point out that he has long been in favor of closing up the border while Ted Cruz called on the president to recognize that “Radical Islam is at war with us” and for “empowering law enforcement to patrol and secure Muslim neighborhoods before they become radicalized.”

Finally, both Europe and the United States are likely to ratchet up the war on the ground against ISIS. To date this approach has born decidedly mixed fruit. On the one hand ISIS has certainly lost significant ground over the past year. On the other hand, very little of that success can be traced directly to U.S. or French military efforts.

Rather than go through the motions focused on short-term political gains, both Europe and the United States should pursue a long-term strategy. That strategy might take many forms but at heart a sound long-term approach needs three fundamental components.

First, a long-term strategy requires an enduring commitment to openness and tolerance. Both Europe and the United States benefit tremendously from immigration, both economically and socially, and from a vigorous marketplace of ideas sustained by diverse religious, racial, and ethnic populations. The costs of closing borders, polarizing society along ethnic and religious lines, and limiting civil liberties will far outweigh whatever benefits they might bring in the short run.

Second, a long-term strategy must emphasize a law enforcement approach to combatting terrorism rather than a military one. The notion that Europe and the United States can fight a “war” against terrorism is ridiculous. Terrorism is a tactic, not a disease or an organization. No amount of military adventurism will eliminate the ability of violent individuals to cause pain. Nor will destroying the Islamic State (ISIS) be enough to ensure some kind of victory. The root causes of violence in France, Belgium, and San Bernardino stem from the sweeping unhappiness and anger within the Arab and Muslim worlds. Until those issues are settled Europe’s and America’s entanglement in Middle East affairs will continue to spawn terrorist attacks in the West. This is why destroying Al Qaeda didn’t solve the problem but instead just produced the next incarnation of the threat. Simply put, killing more terrorists will not produce long-term security in Europe and the United States.

The third component is to pull back from the region.  Our over-involvement in the Middle East has not only engendered anger among many Muslims in the region; it has also worked directly against our own security in other ways. ISIS, let us not forget, is an outgrowth of the Sunni insurgency that rose up to fight U.S. forces in our war of choice in Iraq (2003-2011). They are an unintended, albeit not unforeseeable, consequence of that wrong-headed war. More bombs and boots now may have similarly counterproductive results down the line. In addition, our deep engagement in the region has resulted in a pernicious, long-standing relationship with Saudi Arabia, which is the foremost exporter of the radical Wahabist ideology that drives al-Qaeda, ISIS, and other anti-American terrorist groups.

The strategic importance of the Middle East has been greatly exaggerated. And pulling back from the region, although it would not necessarily yield positive results in the immediate term, is likely to have hugely beneficial long-term effects as far as securing us from the minor but real threat of terrorism.

Recently a friend of mine sent me a picture of a diagram she saw at her son’s pre-school, created around Presidents’ Day. It shows what the students (3 year-olds) would do if they were president.

I’ve often heard it said that libertarianism is much like what we teach kindergartners: keep your promises, don’t take other people’s stuff, and keep your hands to yourself. But clearly these toddlers are getting other, more maximalist messages about presidential power, because the list of things they would do reads like…well, like the promises made during campaign speeches: “Give you ice-cream!”, “I will make it rain” (clearly on the opposite end of the ideological spectrum from Benjamin, who would “Stop the rain!”) and the refreshingly candid “Give myself lots of presents.” Even the teachers, who one would hope to have a firmer grasp of the constitutional limits on executive power, get in on the act: Miss Wendy promises “Rainbows everywhere” and Miss Kelly “Pizza lunch every day!”.

On a positive note, young Yarden has the right idea: he/she would simply “Go home”. Sounds like a libertarian in the making. Yarden for President, 2066!

Update: David Boaz had a similar take on “Our Magical President” back in 2001.

According to Gary Gorton and Ellis W. Tallman, in their  recently released NBER Working Paper, some were.

For several decades prior to the Fed’s establishment, Gorton and Tallman note, “private bank clearinghouses provided lending facilities and assisted member banks when they needed help.”  The pattern of such assistance, they say, reflected a privately-adopted TBTF policy that “was a reasonable response to the vulnerability of short-term debt to runs that could threaten large banks and thereby the entire banking system.”

These clearinghouse bailouts appear, furthermore, to have succeeded in averting more serious crises.  Since, according to Gorton and Tallman’s understanding, “[t]he logic of modern bailouts is the same” as that adopted by 19th-century clearinghouses, they conclude that TBTF remains a reasonable policy today, and not, as many suppose, an invitation to excessive bank risk taking.

But there’s a flaw in Gorton and Tallman’s reasoning, and I’m afraid it’s a lulu.  The flaw consists of their failure to understand what “Too Big to Fail” means.  That meaning has been clear from the time  Congressman Stewart McKinney first popularized the notion during a hearing concerning the Continental Illinois bailout.  “Mr. Chairman,” McKinney said, “Let us not bandy words.  We have a new kind of bank.  It’s called too big to fail.  TBTF, and it’s a wonderful bank.”

In case it isn’t obvious, Congressman McKinney was being sarcastic.  What was “wonderful,” in the sense of “amazing,” was the fact that Continental would remain a going concern despite it’s having been rendered insolvent by bad loans it had made or purchased.  The point is that, if TBTF means anything, it means that certain financial institutions are exceptions to Walter Bagehot’s “classical” rule according to which last-resort loans and other kinds of emergency aid should be confined to solvent financial firms.  It is precisely because TBTF can mean putting insolvent firms on government life-support that critics of the policy see it as a source of moral hazard.

All of this appears, somehow, to have escaped Gorton and Tallman’s attention.  For otherwise they could not have failed to note the crucial difference  between “the logic of modern bailouts” and that underlying the private pre-Fed bailouts that their paper describes.  For while clearinghouses did occasionally rescue “big” banks, they never rescued insolvent ones.  Instead, as is clear from the evidence that Gorton and Tallman themselves muster, clearinghouses went to great lengths to assure themselves of a bank’s solvency before they’d lend it a nickel.  “If a bank possesses good assets and is merely temporarily embarrassed,” a 1901 source cited in the paper explains, “it is good policy of the [clearinghouse] association to prevent [its] failure.”  That’s not too big to fail.  It’s too sound to fail.

And while it’s true that, according to the same source, clearinghouses were especially concerned to prevent “important” members from failing, because such failures try “the weak points of all the banks,” such banks still had to have plenty of  “good assets” to qualify for help.  During the Panic of 1884, for example, the failure of the Metropolitan National Bank might have had disastrous consequences for its many correspondents.  Yet the New York Clearing House agreed to offer it support in the form of clearinghouse loan certificates only after its examiners determined that the Metropolitan “had sufficient assets in good condition” to warrant that support.  In short, “Bigness” (or “interconnectedness”) may have been a necessary condition for clearinghouse support.  But it was never a sufficient condition.

In a TBTF regime, in contrast, “bigness,” or “interconnectedness,” can suffice.  Hence Continental Illinois.  Hence other bailouts of larger, insolvent financial firms since them, including the Fed’s rescues of Citigroup and AIG during the recent crisis.  As Tom Humphrey points out,

the Fed ignored the classical advice never to accommodate unsound borrowers when it helped bail out insolvent Citigroup and AIG.  Judging each firm too big and interconnected to fail, the Fed argued that it “had no choice” but to aid in their rescue since each formed the hub of a vast network of counterparty credit interrelationships vital to the financial markets, such that the failure of either firm would allegedly have brought collapse of the entire financial system.  Fed policymakers overlooked the fact that Bagehot already had treated this argument, and had shown that interconnectedness of debtor-creditor relationships and the associated danger of systemic failure constituted no good reason to bail out insolvent firms.

The difference between the “logic” of the private-market financial firm rescues of the pre-Fed era, in which the rescuers themselves had “skin in the game,” and today’s taxpayer-supported rescues, is a difference of no small importance.  It is why we worry about TBTF these days, while no one worried about it back then.

I hope I won’t be misunderstood as intending to suggest that there’s no merit in Gorton and Tallman’s research, because that isn’t my intention at all.  In fact I consider their inquiry into clearinghouse rescues of the pre-Fed era quite valuable.  The problem isn’t the research itself, but the fact that Gorton and Tallman draw the wrong lesson from it.  The lesson isn’t that TBTF is a dandy doctrine, and that those looking for the causes of financial-system fragility today should look elsewhere.  It’s that private, 19th-century financial actors appeared to have managed last-resort lending more responsibly than their modern, government-appointed counterparts.

[Cross-posted from Alt-M.org]

Tom Friedman had an op-ed last week in which he argued that if Donald Trump – who has been complaining that the U.S. government negotiates bad trade deals – were negotiating the Trans Pacific Partnership (TPP), he would negotiate pretty much the same deal that President Obama negotiated. But I think that Friedman misunderstands how Trump and some other businessmen, especially various high profile investors, think about trade. And the reason I mention investors is that’s who Trump seems to have in mind as trade negotiators:

I take a guy like Carl Icahn, you take Henry Kravis, you take so many of the guys that I know, and you say, “You know what? I’d like you to watch over the deals that are being made with China because we’re getting killed on trade.”

Believe me, we will be so good. You should get a guy like Carl on, very smart, great negotiator. We will be so good.

Now, I don’t know exactly what  Carl Icahn thinks about trade policy, trade deficits, etc. I looked around the internet a bit, but did not see anything.  (As for Henry Kravis, he signed this letter in support of Trade Promotion Authority and the negotiation of the TPP, although that was before the final TPP text was made public).  But I do know what another famous investor, Warren Buffett, thinks.  In the past, he has argued for a program that manages exports and imports to keep them roughly in balance. Here’s what he proposed a while back:

… My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and might well lead to increased overall world trade. And it would balance our books without there being a significant decline in the value of the dollar, which I believe is otherwise almost certain to occur.

We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties—either exporters abroad or importers here—wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance. 

Warren Buffett is a great investor, but with regard to trade policy, he is in over his head. The idea of balanced trade completely misunderstands how trade works. A trade deficit is not like a budget deficit, where you borrow money from someone and have to pay it back. If the U.S. has a trade deficit with Mexico, for example, it just means that Americans are buying more from Mexicans than Mexicans are buying from Americans; it does not mean that Americans now owe Mexicans the deficit money. There are a variety of ways these things work themselves out, but the main one is that the money gets reinvested in America, which most people would agree is good for America. Thus, a trade deficit is not something that needs to be fixed with some sort of government intervention.

So, I think Friedman is wrong that Trump would have negotiated the TPP just like Obama would. My best guess is that Trump, like Buffett, wants trade deals that lead to trade balance. In effect, he wants guaranteed import and export outcomes, rather than deals that reduce protectionist tariffs (which is what trade agreements are mainly about). From a business perspective, an outcome-based approach to negotiations may make sense, but it is total nonsense in terms of trade policy. You could, in theory, make an outcome-based deal where U.S. companies sells $1 billion of goods and services to Mexicans, and Mexican companies sell $1 billion of goods and services to Amercians. But that does not remotely resemble free trade, and it’s not what we want out of a trade agreement. Unfortunately, it’s how Trump and a few business folks who don’t understand economic policy appear to view the world of trade. 

Dan Baum has a lengthy article in the latest Harper’s titled, “Legalize It All: How to Win the War on Drugs.” 

Here is an excerpt:

Experiments in alternatives to harsh prohibition are already under way both in this country and abroad. Twenty-three states, as well as the District of Columbia, allow medical marijuana, and four — Colorado, Washington, Oregon, and Alaska — along with D.C., have legalized pot altogether. Several more states, including Arizona, California, Maine, Massachusetts, and Nevada, will likely vote in November whether to follow suit. Portugal has decriminalized not only marijuana but cocaine and heroin, as well as all other drugs. In Vermont, heroin addicts can avoid jail by committing to state-funded treatment. Canada began a pilot program in Vancouver in 2014 to allow doctors to prescribe pharmaceutical-quality heroin to addicts, Switzerland has a similar program, and the Home Affairs Committee of Britain’s House of Commons has recommended that the United Kingdom do likewise. Last July, Chile began a legislative process to legalize both medicinal and recreational marijuana use and allow households to grow as many as six plants.

Check it out–it’s a very good piece on recent developments.

For related Cato work, go here, here, and here.

This morning the Supreme Court declined to take up a lawsuit by the states of Nebraska and Oklahoma challenging Colorado’s Amendment 64 measure that legalized the sale and use of marijuana. Not just medical marijuana, but recreational use as well.

We detailed the arguments involved in the case last year:

The Nebraska/Oklahoma argument: because the federal government, through the Controlled Substances Act, has banned marijuana, states are not allowed to contradict that ban by creating a regulatory framework for legalization.  Further, Colorado’s official regulation of recreational marijuana imposes a nuisance burden on surrounding states due to an alleged increase in drug trafficking.  While Nebraska and Oklahoma disclaim any intent to force Colorado to “re-criminalize” marijuana, the suit argues that Colorado’s official efforts to regulate the legal marijuana industry bring the state into conflict with federal and international drug laws.

Colorado’s response: there is no conflict.  Federal marijuana prohibition is still in effect, and the decision not to prioritize enforcement in states that legalize marijuana came from the federal government, not Colorado.  If Nebraska and Oklahoma object to the manner in which the federal government is discharging its law enforcement duties in Colorado, they should be suing the federal government.  Colorado’s regulation of the marijuana industry is within its prerogatives under the CSA. As to the nuisance claim, Colorado argues that mere policy differences between states that don’t directly injure the sovereignty of other states are not actionable nuisances.

The legal basis for the lawsuit has been questionable from the beginning, with legal commentators both challenging its merits and pointing out the irony in two of America’s “reddest” states taking a legal posture that overruns state sovereignty in favor of federal power.

And, of course, if prohibition states are concerned with the costs, they could always legalize and regulate marijuana themselves and spare their justice systems the immense costs of prohibition.  

Today’s result is not surprising, especially after the Obama Administration urged the court to decline the case, and the outcome fits with our analysis of the case’s prospects in 2014:

Will the Supreme Court accept this case for review? That’s impossible to predict. However, the constitutional argument being advanced by Nebraska and Oklahoma is weak and so would likely fail. Just because the federal government enacts a law against marijuana, it does not follow that all the states have to enact laws against marijuana. And just because the federal police (FBI and DEA) have grown accustomed to having state and local police conduct marijuana raids and arrests, it does not follow that the local authorities can’t stop doing that. So long as the local police are not arresting or threatening to arrest federal agents for trying to enforce the federal law, there is no “conflict.” Thus, the Supremacy Clause does not come into play.

Today’s action at the Supreme Court amounts to a big boost to the marijuana legalization movement, which continues to gather strength and momentum.

For those interested in a deep dive into the legal issues, check out the Cato Policy Analysis by Robert A. Mikos, On the Limits of Federal Supremacy: When States Relax (or Abandon) Marijuana Bans.

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