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Over at KiwiReport, a writer named Serena Carsley-Mann asks a good question: “Why do trains in America function so different from trains in Europe?” Unfortunately, she mistakenly thinks the problem is that “trains in America function so badly.”

In fact, America has the most efficient rail system in the world. It is European trains that function badly. I’ve discussed this before in my blog, but since writers like Carsley-Mann continue to get it wrong, it is worth repeating.

According to a Pew study, freight shipped by truck uses about ten times as much energy, and emits far more greenhouse gases, per ton-mile than freight shipped by rail (see page 2). Because rail cars weigh more, per passenger, than automobiles, rail’s comparative advantages for passengers are much smaller, and unlike trucks it will be very easy for cars to close the gap: a Prius with a average of 1.67 occupants, for example, is more energy efficient than almost any Amtrak train. Thus, to save energy, it is better to dedicate rail lines to freight rather than to passengers.

This is what the United States has done, but it is exactly the opposite of what Europe has done. According to a report from the European Union, 46 percent of EU-27 freight goes by highway while only 10 percent goes by rail, while in the U.S. 43 percent goes by rail and only 30 percent by road. Thus, we’re using our rail system far more effectively than Europe. This is not just from an energy view but also from a consumer-cost view, as rails cost less than trucks for freight but more than cars for passengers.

Carsley-Mann actually sees freight trains as an obstacle to effective use of the railroads because the freight trains slow and sometimes delay the passenger trains. But in reality, it is the nearly useless passenger trains that are the obstacle to an efficient freight system. Europe manages to carry 5 percent of passenger travel on intercity rail lines, at the cost of pushing a huge share of freight shipments onto highways. By yielding most of that 5 percent of passenger travel to highways and airlines, American manages to free up the railroads for a huge amount of freight.

To avoid the freight conflict, some European countries are building rail lines exclusively for passengers. For the most part, the cost is very high and the benefits low. To some degree, subsidies to those rail lines attract people from lower-cost forms of transportation. But overall, rail is losing market share to cars and, especially, low-cost airlines, so Europe is fighting a losing battle. As economist Charles Lave wrote in The Atlantic many years ago, the “law of large proportions” dictates that “the biggest components matter most,” so making the cars that move 85 percent of people a little more energy efficient is more effective than getting a tiny share of those people out of their cars and onto trains that are a little more energy efficient.

Carsley-Mann never does figure out why American trains are so different from European ones. The answer is simple: American railroads are private and based on the profit motive they operate as efficiently as possible. European railroads are public and based on the political motive they operate as visibly as possible. Passenger trains are more visible to the public than freight trains (which are almost invisible to people like Carsley-Mann, who see them only as obstacles), so European politicians give their constituents subsidized trains rather than an efficient rail system.

I love passenger trains, but I prefer an efficient private system to a visible but heavily subsidized public system. Now if only we could privatize our airports and highways.

On his first official trip as secretary of defense, Jim Mattis sent a signal to U.S. allies that American foreign policy in the region will feature more continuity than change. In South Korea, Mattis reaffirmed that the United States would react to a nuclear attack by North Korea with an “effective and overwhelming” response, and stated, along with the South’s defense minister, America’s commitment to proceed with the deployment of the THAAD missile defense system. Mattis also provided clarification on the administration’s position in the South China Sea. In a break with past rhetoric by other administration officials, Mattis said “At this time we do not see any need for dramatic military moves [in the South China Sea],” and emphasized the importance of diplomacy.

Mature foreign policy statements have been a rare commodity since Trump’s election, and Mattis’s reassurance tour brought a deep sigh of relief from friends and adversaries alike. Whether or not Trump will follow through on Mattis’s words is an open question, however.

Initial reporting on the Trump administration’s approach to decision-making reveals two things. First, while his outlook cannot be labeled “restraint,” Mattis has a relatively restrained or moderate outlook on foreign policy. Second, the ability of such moderate voices to influence Trump is challenged by a group of policy advisors centered on Chief Strategist (and National Security Council member) Steve Bannon that has a much more aggressive outlook.

Both Mattis and Bannon have had some success in shaping policy. Mattis was reportedly able to tone down the language that Michael Flynn, the national security advisor, used when putting Iran “on notice” after Iran conducted a ballistic missile test. Bannon’s major policy success was the executive order barring immigrants from seven Muslim-majority countries, which he oversaw the drafting of along with policy advisor Stephen Miller. Mattis was allegedly not consulted while the immigration order was being drafted. He also reportedly did not see the final version of the order until hours before its release. Additionally, the executive order that gave Bannon a seat on the National Security Council was reportedly signed by Trump without the president being briefed on the details of the order. The author of the order is unknown.

It is difficult to predict who will have the president’s ear on issues of foreign policy and national security, but the first few weeks of the Trump administration indicate that Bannon wields significant influence given his central role in the immigration executive order. This influence caused tension with Mattis, and the homeland security secretary John F. Kelly who sparred with Bannon over whether or not Kelly could issue a waiver for green-card holders affected by the immigration ban.

Of course, all administrations have some degree of internal division, and these recent disagreements come as new advisors are getting used to their roles in a new administration.

Nevertheless, there appear to be at least two cliques taking shape among Trump’s foreign policy and national security advisors: the relatively moderate and restrained professionals like Mattis, and the aggressive firebrands like Bannon. It remains unclear which advisors belong to which clique, but the struggle between these two groups will shape future policy decisions in the Trump administration for the foreseeable future. Since both have some small “wins” under their belt, it is also unclear which clique will end up winning the important policy decisions. Watching how these two groups develop and lobby for their policies will be essential to understanding the Trump administration’s approach to foreign policy and national security. 

President Trump’s testy telephone conversation with Australian Prime Minister Malcolm Turnball quickly produced a reaction from one ubiquitous U.S. player on foreign policy issues, Arizona Senator John McCain. He contacted Australia’s ambassador in Washington to assure him of Washington’s undying devotion to the U.S. alliance with Australia and to that country’s security and well-being. The implicit message was that Canberra should not take Trump or his actions seriously. In so doing, McCain basically anointed himself as America’s shadow president, with the right and obligation to bypass the elected president and conduct relations with foreign governments and other parties.

His actions were entirely inappropriate. Granted, Trump’s conduct toward Turnball deserves no praise. During the telephone call, a dispute arose over refugee policy, and an angry Trump reportedly berated the Australian leader and abruptly cut the scheduled one-hour session short after 25 minutes. Such behavior was that of a petulant adolescent rather than the expected behavior of a president of the United States.

Nevertheless, the Constitution empowers the president and his appointees to conduct America’s foreign policy. Even senators are not authorized to undercut their authority by engaging in direct, free-lance diplomacy with foreign leaders. Yet that is what McCain did.

Unfortunately, this was hardly the first time that he has engaged in such disruptive behavior. His record is that of an annoying, and sometimes dangerous, loose cannon. For example, during Ukraine’s political crisis in late 2013 and early 2014, McCain showed up in Kiev to urge on anti-government demonstrators in their bid to unseat President Victor Yanukovych’s elected government before the expiration of its term in 2016. America was on their side, he assured them.

McCain engaged in similar meddling in Syria’s civil war. In May 2013, he met with so-called moderate rebels who were trying to overthrow President Bashar al-Assad, and as in Kiev, conveyed America’s alleged solidarity with their cause. This intrusive action occurred at a time when the Obama administration remained wary of the United States becoming entangled in the bloody, complex conflict, and was at least trying to limit the extent of U.S. involvement. Not only were McCain’s actions complicating official U.S. policy, but they should have been embarrassing to the Arizona senator. The reality is that there were (and are) very few truly moderate Syrian rebels. Most of them are Islamists masquerading as moderates to gain support from gullible Westerners. Even McCain seemed unclear about the specific identities or the nature of his interlocutors in Syria.

Especially in light of his dreadful track record, McCain should tend to his senatorial duties and stop trying to be a shadow president or secretary of state. In fact, given his dreadful, ultra-hawkish views and his advocacy of, and often feverish lobbying efforts for, a lengthy series of ill-advised foreign policy ventures (ranging from the calamitous Iraq War to a new cold war with Russia), it might be better for all concerned if he just concentrated on domestic issues.

A federal judge in Seattle paused enforcement of President Trump’s executive order banning almost all immigration from seven countries in the State of Washington v. Donald Trump. The same judge will also hear a lawsuit brought by American Immigration Council (AIC), which makes the argument that I have made here and in the New York Times that the order is illegal as applied to immigrants coming to live in the U.S. permanently.

Washington’s main claims were constitutional, and it sought to have the entire order overturned. Nonetheless, the government did partially respond to the main argument in the AIC complaint, which is:

Section 202(a)(1) of the Immigration and Nationality Act [INA]…expressly provides for the non-discriminatory issuance of immigrant visas; it mandates that, with limited exceptions not relevant here, “no person shall receive any preference or priority or be discriminated against in the issuance of an immigrant visa because of the person’s race, sex, nationality, place of birth, or place of residence.”

[INA section 202(a)(1)] was intended to protect the interests of both U.S. citizen and lawful permanent resident immigrant visa petitioners as well as immigrant visa applicants or holders. The EO discriminates against immigrant visa applicants or holders on the basis of their “nationality, place of birth, or place or residence,” and therefore is discriminatory and violates [INA section 202(a)(1)].

The government responded to these points by pointing to section 212(f) of the Immigration and Nationality Act, which reads:

Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate.

Resolution of Conflict

There is an apparent conflict between the statutes. In the case of conflict, the rule of construction is 1) “to give effect to each but 2) to allow a later enacted 3) more specific statute to amend an earlier, more general statute,” Smith v. Robinson (1984).

On point 1, the government provided no argument that the section 202(a)(1) would still have “effect” as a prohibition if the president could choose to waive it at any time that he felt that a nationality was a detriment. It merely stated that it applies “in the absence of action by the President.” Judge Robart should have asked whether there is any circumstance in which the executive branch chooses to discriminate against a certain nationality in which they would describe those excluded nationals as not “detrimental” to the United States. Of course, no such case exists, meaning that the government’s argument would effectively nullify section 202(a)(1), which is naturally its intention.

On point 2, the government neglects to mention that 8 U.S.C. 1182(f) was enacted in the Immigration and Nationality Act of 1952, which was amended by 8 U.S.C. 1152(a)(1) in the Immigration Act of 1965. Judge Robart at oral arguments considered this point important, stating that this “Congress had to be aware of” 212(f) but chose to enact the sweeping prohibition anyway. On point 3, the government provides the following argument:

Section 212(f) is easily reconciled with section 1152(a)(1)(A): the latter sets forth the general default rule that applies in the absence of action by the President, whereas section 212(f) governs the specific instance in which the President proclaims that the entry of a “class of aliens” would be “detrimental the interests of the United States.”

This analysis cannot be taken seriously. Section 212(f) allows the authority to the president to ban any class of alien for any reason. 202(a)(1) limits this authority only for one small category of aliens, immigrant visa applicants. Moreover, 212(f) is in a general section of the law dealing with inadmissibility for all aliens, not just immigrants, whereas section 202(a)(1) is a section dealing only with immigrants. This argument from the government almost becomes humorous in light of its argument in the very next paragraph, that there is no general prohibition on discriminating based on nationality.

Section [202] generally establishes a uniform annual numerical limit on immigrant visas for nationals of each foreign country. Had Congress intended to enact a general bar against nationality-based discrimination, it would have enacted such a bar as a general provision of the INA, rather than as a subpart of a subsection speaking to the implementation of nationality-based numerical limitation for the issuance of immigrant visas. (Emphasis added)

In other words, the government is using the exact opposite argument here: that section 202(a)(1) is so specific that it cannot apply to the general authority to exclude aliens in section 212(f). The U.S. attorney at oral arguments repeated this line, stating that “we think [202(a)(1) is] a narrow section of the statute” as opposed to the “broader authority” under section 212(f). In other words, section 202 is both too general and specific. The government would like to have its discriminatory cake and eat it too.

The government also ignores a fourth rule applicable here. Inclusion implies exclusion. As Judge Robart said, section 202(a)(1) “makes a number of exceptions, but it doesn’t except” section 212(f). Section 202(a), which was enacted 13 years after 212(f), states that the government may not discriminate against immigrant visa applicants based on their nationality, place of birth, or place of residence “Except as specifically provided in paragraph (2) [allocating visas on equal per country basis] and in sections 101(a)(27) [special immigrants], 201(b)(2)(A)(i) [preferences for immediate family members], and 203 [visa distribution based on family and employment criteria]” (my emphasis). Section 212(f) was specifically left out of the exceptions, which demonstrates that Congress did not want to include it as an exception to the rule (whether the government wants it to be a “general” rule or a “specific” one).

Finally, for good measure, a fifth principle of construction states, as Justice Antonin Scalia stated in United Savings Association of Texas v. Timbers of Inwood Forest Associates, “Statutory construction, however, is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme.” In this case, as the government admits, the statutory scheme is to create a system of immigration that is unbiased, in which every country receives an equal apportionment of the visas for each year. Indeed, the entire 1965 act was written for that express purpose, which President Trump has now undone.

Other Authorities

Perhaps believing their argument on this point insufficient, the government turns to other statutes as providing the president the authority to discriminate against immigrant visa applicants:

Section 202(a)(1)(B) clarifies that subsection (A) is not to be “construed to limit the authority of the Secretary of State to determine the procedures for the processing of immigrant visa applications or the locations where such applications will be processed.” The clarification suggests that the Executive Order, in part or in whole, may not be covered by the restrictions of subsection (A) because the Executive Order governs the procedures for pausing then resuming visa applications.

Even the government could not get this argument out with a definitive “it is not covered” but rather a “suggest that maybe.” Subparagraph (A) pertains to, if nothing else, the decision to issue or not issue a visa, and the decision to not issue is at the heart of this executive order. If subparagraph (B) is read to allow the president the ability to not issue or to revoke a visa based on nationality, then subparagraph (A) has no effect. Aside from ignoring the first rule of construction, this obviously cannot be the case because subparagraph (B) was added to allow President Clinton to require Vietnamese asylum seekers to apply for immigrant visas in Vietnam. Congress specifically chose to leave subparagraph (A) rather than repeal it, demonstrating its intent to have it constrain the executive.

The government further claims that the last Congress’s visa waiver program changes requiring that nonimmigrant nationals of these seven countries travel to the United States only with a visa proves that Congress has approved this discrimination.

The 2015 amendment to the INA…has drawn the exact same nationality-based distinctions as the Executive Order. 

First of all, this is simply incorrect. The amendment specifically included people who had visited those countries. Thus, it was broader than simply nationality. Second of all, these procedures had no impact on immigrant visa applicants who are protected from discrimination. Moreover, the fact that barely a year before the executive order Congress specifically created procedures under which these nationals can enter the country shows that Congress does not agree with the president that these nationals are a “detriment” to the United States. Indeed, it shows just the opposite: that Congress wanted them to have an opportunity to come if they obtained a valid visa.

Finally, the government turns as a last gasp toward its inherent national security powers:

Indeed, under the State’s view, the United States could not suspend entry of a country with which the United States is at war. The INA plainly does not require that result. 

The United States is not at war with any of these countries, so the court need not reach a conclusion about how the INA would impact such a case. But it goes without saying that the government would not be relying on its statutory authority in such a case, and so the question would be irrelevant to such a situation. This is likely what provoked Judge Robart’s eye-rolling response, “You’ve shaken those bones just about as much as you can get out of them.”

Moreover, the Executive Order does not label these immigrants actual threats to the United States. Rather, it claims that the inability to vet them makes them a “detriment,” a seemingly much lower threshold, and the argument is that the INA makes an exception for “detrimental” aliens. This is nowhere expressed in the INA itself and, as previously demonstrated, flies in the face of the plain language of section 202(a)(1)(A), which specifically lists the only exceptions to it.

Importantly, the discriminatory pre-1965 act system was justified partially on this exact claim, that immigrants from certain countries may be threats and thus discriminated against. As Sen. Fisher said on the Senate floor in 1965:

There is a serious security threat which would result in the expected substantial increase in Asiatic migration to these shores. At the present time, the flow of Asiatics to this country is checked by the simple device of quota limitation to which all Asiatics are chargeable. With a substantial increase in immigration of Asiatics, coming not only from the Orient, but from every country in which they reside, the problem of procuring background information to screen out subversives becomes increasingly difficult.

Moreover, most of the background information regarding Communist activities would be located in oriental Communist countries; and hence unavailable to our security officials. Furthermore, the language barriers, with the many dialects unfamiliar to our immigration officers, would only compound the danger inherent in an attempt to screen out security threats; and I have no doubt that the international Communist conspiracy will avail itself of the opportunity to increase its penetration of our country.

The passage of this bill will present an inviting opportunity. It has been argued that because some European countries now have a larger annual quota than others, this country regards the people of the larger quota nations as being better people than those in countries with the lower quotas. That is a ridiculous argument. Immigration laws, like trade laws and the like, come under the normal exercise of sovereign power. (My emphasis).

Sen. Celler, the bill’s author, responded to this concern:

There can be no fear of Communists or subversives entering this country. The same safeguards that are in the law with reference to internal security are maintained. They are not changed one iota; therefore, there should be no fear in that connection.

The idea that President Johnson could have signed the act and then, on the basis the government asserts here, ban all Asian immigrants to the United States flies in the face of the letter of the law and its intent. Yet that is exactly what is being asserted here. The passage of time and the change in the targets of discrimination does not make what would have been illegal then legal now. President Trump is violating the law, and Judge Robart was clearheaded enough to see it. 

Unless something unexpected happens, tomorrow the United States Senate will vote on Betsy DeVos to be the next U.S. Secretary of Education. And if you are a Democrat sweating through nightmares over what a Trump administration will do to education, you should be pretty comfy with what DeVos has said she’d like to see happen under her watch. As she stated repeatedly in her confirmation hearing, she would not use federal power—and certainly not secretarial power—to impose anything, including school choice, on unwilling states and districts.

But isn’t the vote expected to be as close as last night’s Super Bowl at the end of regulation, with all Dems voting against DeVos and Vice President Mike Pence delivering the final, overtime vote for her? Yup.

You see, over the decades, Democrats, with copious help from Republicans, have tried to make the U.S. Department of Education what it was not originally intended to be, and what with absolute certainty it cannot constitutionally be: a national school board. This vision was exposed in a comment by Senator Patty Murray (D-WA), ranking member of the Health, Education, Labor and Pensions committee, when she warned all who were suffering through the festival of misinformation and grandstanding that was DeVos’s confirmation hearing, that if approved DeVos would “oversee the education of all of our kids.”

This did not elicit the manufactured giddiness that met DeVos’s suggestion that a school with a grizzly fence might have a gun, and that such decisions should be left to states and communities who know their needs better than Washington. But Murray really ought to know that the Constitution and several laws give the feds no authority to “oversee” American education. Moreover, she had only about a year earlier voted for a law—the Every Student Succeeds Act—intended to cage the education secretary after the Obama administration had employed the position to illegally micromanage American education.

Sen. Murray was, though, soon outdone in her hyperbole. Senate Minority Leader Chuck Schumer (D-NY) took his rightful position in the front of the overstatement pack, declaring that DeVos “would single-handedly decimate our public education system if she were confirmed.”

How, exactly, would she do that?

Some have argued that the apocalyptic scenario Schumer invoked was inconceivable because Washington supplies less than 10 percent all K-12 funding. That’s a dubious conclusion: Washington has called lots of shots with that level of funding because while it may look small in percentage terms, try being the state representative who says “I voted to turn down $500 million federal dollars—your tax dollars, dear constituents—so we could keep control.” $500 million looks like a lot of money, which is why, though some threatened, no state ever just abandoned No Child Left Behind.

What Dems appear to fear most is school choice, in particular private choice that enables people to attend truly independent schools that make their own decisions on everything from staffing to curricula. But here’s why the decimation accusation is nonsensical. First, DeVos said that she would not attempt to expand choice unilaterally, but through Congress, where laws are supposed to be made. Suppose, though, somehow the Trump administration on its own was able to make good on its promise to furnish $20 billion for choice, and it was all directed to private rather than charter or traditional public schools? Divide $20 billion by the roughly 50 million kids in public elementary and secondary schools and you get a voucher of $400 per student. Not nothing, but far from enough to move many kids to private schools.

Of course, giving students real choice—but not through Washington—is what we should want, and that includes for children with disabilities. On that front, the attack on DeVos has been that she somehow did not know about the Individuals with Disabilities Education Act. But there was no meaningful indication of that. DeVos said that governmental decisions about students with disabilities are better made at state and local levels, and the IDEA does not disagree: it only applies when federal dollars are involved. More important, choice, such as through Florida’s McKay scholarship program, empowers families to meaningfully advocate for themselves by giving them control over education funds, rather than forcing them into bureaucratic and legal battles that favor the well-to-do. And it does not make sense to subject to IDEA’s rules any private school a family might choose. Having to attract and keep business is the very real, immediate accountability that such a school faces, which may be why McKay is so darn popular with families who use it.

If Democrats fear what a Trump administration might try in education, they ought to be encouraged by Betsy DeVos, who made one thing clear in her confirmation hearing: she does not think she should be calling the shots. But the Dems may fear Washington losing power even more than Trump, though they tremble at the thought of chickens coming home to roost.  

Despite both the recent release of a set of “GSE reform principles” by the Mortgage Bankers Association and Treasury Secretary Designee Steven Mnuchin’s promise to prioritize reform of Fannie Mae and Freddie Mac, as matters stand such reform seems likely to remain stalled for some time: while there may be a consensus to “do something,” there is far less agreement concerning what that something should be.

To jump start the debate, protect taxpayers, and encourage a more private mortgage market, Mr. Mnuchin, if confirmed, should strongly consider reviving a plan developed by his predecessor, John Snow. That plan would take advantage of the Treasury’s authority to place limits on Fannie and Freddie’s debt issuance to reduce those agencies’ indebtedness. The reduction can and should be done in a controlled manner that could be easily reversed if necessary; a 5 percent monthly reduction, for instance, should work smoothly.

The Treasury’s Authority

Some may be surprised to learn that the Treasury Secretary has such broad, unilateral authority. For those in doubt, the authority is found in the largely identical charters of Fannie Mae and Freddie Mac. According to Section 306(j)(1) of Freddie Mac’s charter, for example,

Any notes, debentures, or substantially identical types of unsecured obligations of the Corporation evidencing money borrowed, whether general or subordinated, shall be issued upon the approval of the Secretary of the Treasury and shall have such maturities and bear such rate or rates of interest as may be determined by the Corporation with the approval of the Secretary of the Treasury (emphasis added).

Section 306(k)(1) of the same document allows for similar Treasury authority over the GSE’s issuance of mortgage-backed securities. In short, neither Fannie Mae nor Freddie Mac can issue debt without the approval of the Treasury. (Those who still doubt this broad interpretation of the Treasury’s powers under Section 306 may wish to consult the Congressional Research Service” (CRS) independent legal analysis supporting the interpretation offered here.)

Under then Treasury Secretary John Snow, the Bush Administration announced its intention to more fully implement this authority. It’s position, as expressed by the Office of Management and Budget in the fiscal 2008 budget (page 75), was that

Fannie Mae and Freddie Mac fund their portfolios by issuing debt, and the U.S. Department of the Treasury has the responsibility to review and approve these GSEs’ debt-issuances. The Treasury Department’s debt approval authority is contained in Fannie Mae’s and Freddie Mac’s Charter Acts, and the Department has approved Fannie Mae and Freddie Mac’s debt on a regular basis. Treasury is developing a more formalized approach to their debt approval authority. As part of that approach, Treasury is developing new debt approval procedures to enhance the clarity, transparency, standardization, and documentation of Fannie Mae’s and Freddie Mac’s debt issuances.

The powers granted to it in Section 306 also allow the Treasury to increase the percentage of GSE debt that is in the form of mortgage backed securities, rather than unsecured debt. By taking this further step, the Treasury would help to reduce the interest rate risk carried on the GSE’s balance sheets.

No Serious Disruptions Likely

Some might be concerned that such a move would cause disruptions in the GSE debt markets.

The primary objection to these suggested reforms relates to a concern about mortgage rates. But one should keep in mind that by reducing the flow of GSE debt, all else equal, the Treasury would be pushing up the price of GSE debt, which, of course, will result in lower interest rates. Given that jumbo mortgage rates are currently very similar to conforming rates, other market players should be able to take any reduction in GSE market share with little impact on overall mortgage rates. The excess reserves in the commercial banking system alone could fund the entire mortgage market for at least a year or more. It is also helpful to note that when the original Snow plan was contemplated no disruptions to the GSE debt markets occurred.

Despite this and the CRS’s favorable review that the Snow plan was an acceptable interpretation of the law, John Snow resigned before it was implemented. Alas, his replacement, Hank Paulson, shelved Snow’s effort. We, of course, know the rest of that story. But if the next Treasury Secretary wants to 1) protect the taxpayer, 2) protect the financial system, and 3) motivate Washington (especially Congress) to do the hard and much needed work of reforming our mortgage finance system, he should take the Snow plan back off the shelf.

[Cross-posted from Alt-M.org]

The House Republican tax plan would cut the federal corporate tax rate from 35 percent to 20 percent, but it would broaden the tax base in a misguided way. It would deny businesses a deduction for their imported inputs to production, but exempt exports from their taxable income.

This base change would raise tax revenues by about $100 billion a year, which is causing major blowback in the business community. It would be a radical change in the structure of business taxes and cause large disruptions in the supply chains and tax liabilities of many firms. No other nation that I am aware of structures their income tax base that way.

I’m for radical change in the tax system, but not radical change that would increase taxes on so many businesses and make the system more complex. Yes, border adjustment would reduce tax avoidance and cut compliance costs related to transfer pricing, but it would create other avoidance and compliance issues by spurring manipulation of imports and exports on tax returns.

Most supporters of border adjustment know that the economics of it are dubious, but support it anyway because it would limit the deficit impact of tax reform. That’s an understandable goal, but there are three better solutions than broadening the tax base in a way that would harm companies.

1) Match a corporate tax rate cut with corporate welfare spending cuts. Romina Boccia, Tom Schatz, and I identify $50 billion in corporate welfare cuts in a new op-ed. And it’s easy to find another $50 billion in cuts in tables 1 and 2 here to match the $100 billion from border adjustment. Unlike the proposed tax base broadening, spending cuts would boost growth by reducing microeconomic distortions caused by federal programs.

2) Limit individual tax cuts. The GOP tax plan is generally excellent, moving in a pro-growth direction on many fronts. I’ve lauded the great work of Chairman Brady and his team in assembling the plan. However, the individual portion of the plan could be tweaked to limit revenue losses and increase the focus on growth, for example, by reducing the mortgage interest deduction and not expanding the child credit.

3) Slash the corporate rate without a legislated offset. The corporate income tax is the most damaging tax in the government’s revenue arsenal, and so cutting it would generate the most growth. Trump’s 15 percent corporate rate should be the goal. Canada’s federal corporate income tax at 15 percent generates as much revenue as ours at 35 percent—about 2 percent of GDP—partly because of the positive dynamic effects that a low rate has on growth and tax avoidance.

It is true that Canada is a smaller economy and so the dynamic effects are more powerful. But as globalization intensifies, and as corporate tax rates elsewhere fall further, the more economic growth and less revenue loss the United States would experience as it reduces its tax rate.

In sum, America must cut its corporate tax rate, but boarder adjustment is creating a major political barrier to reform. The economics of it are not good, and our trading partners may retaliate by denying their companies income tax deductions for U.S. products.

Spending cuts are a much better offset to tax cuts, and they would generate growth benefits of their own.

Dan Mitchell examines border adjustment here. Alan Reynolds here.

I’ve written previously on this blog regarding stingray devices: powerful surveillance tools which allow law enforcement agents to spy on the cell phones of unsuspecting Americans, often without judicial or legislative oversight.

For a deeper dive into the subject, I’ve put together a policy analysis detailing the past history, present issues, and future prospects of stingray devices and police surveillance more generally.

From the executive summary:

Police agencies around the United States are using a powerful surveillance tool to mimic cell phone signals to tap into the cellular phones of unsuspecting citizens, track the physical locations of those phones, and perhaps even intercept the content of their communications.

The device is known as a stingray, and it is being used in at least 23 states and the District of Columbia. Originally designed for use on the foreign battlefields of the War on Terror, “cell-site simulator” devices have found a home in the arsenals of dozens of federal, state, and local law enforcement agencies.

In addition, police agencies have gone to incredible lengths to keep information about stingray use from defense attorneys, judges, and the public. Through the use of extensive nondisclosure agreements, the federal government prevents state and local law enforcement from disclosing even the most elementary details of stingray capability and use. That information embargo even applies to criminal trials, and allows the federal government to order evidence withheld or entire cases dropped to protect the secrecy of the surveillance device.

The controversy around police stingray surveillance challenges our antiquated Fourth Amendment jurisprudence, undermines our cherished principles of federalism and separation of powers, exposes a lack of accountability and transparency among our law enforcement agencies, and raises serious questions about the security of our individual rights as the government’s technological capability rapidly advances.

The full analysis can be found here.

The interaction of law enforcement and surveillance technology promises to be one of the most important civil liberties issues of the near future. Our current privacy jurisprudence is sorely outdated and often inapplicable to the issues presented by modern technology and law enforcement practices.

Whether we’re talking about cell phone tracking, persistent aerial surveillance, or nationwide biometric databasing, the ability of the government to invade and regulate the most intimate spheres of our lives continues to grow. It is incumbent on policymakers and jurists to ensure that our legal framework and constitutional principles keep pace with these growing threats to our privacy.

 

For more on stingray surveillance, Cato will be hosting a policy forum on February 15, including remarks from Rep. Jason Chaffetz (R-UT), who has authored legislation attempting to rein in surveillance abuses.

The flawed implementation of President Trump’s executive order banning immigration from seven majority Muslim countries brings to mind then-Speaker of the House Nancy Pelosi quip about Obamacare that “we have to pass the bill so that you can find out what is in it.” Now it seems President Trump had to sign the order to find out what was in it.

Every day, the president and the administration appears to be discovering new implications of the vague order, and laws are being made up on the fly with press releases and emails, rather than through our country’s democratic process. The executive order purports to “suspend entry into the United States, as immigrants and nonimmigrants… aliens from [seven] countries.” Nearly every word choice leaves room for uncertainty, creating the inevitable confusion and chaos that followed.

Suspend

Consider the first word, “suspend.” Because the order allowed for case-by-case exceptions, no one knows who is actually “suspended” from entering. The administration is only slowly revealing some criteria for these waivers in press conferences and press releases. The exceptions are also apparently not being applied at consulates where a categorical ban on all visa applications and interviews is in effect.

Entry

The second word, “entry,” would seem not to apply to those already inside the United States, yet the administration is applying the ban to them anyway, formulating the policy in an unpublicized email to employees—many of whom were shocked by the announcement.

In a way, this decision makes legal sense, even if it is not apparent in the order, because a person must be “admissible” or legally allowed to enter to receive “status” in the United States. But it turns out that the ban is actually being applied to “any petition or application” for any benefits, including those that do not confer new status, such as green card renewals. Right now, the administration has said it is still “evaluating” whether it would cancel the status of foreign students who are not even applying for anything and are in the United States. It is a shutdown far beyond anything called for in the order itself.

Immigrants

Then there is the word “immigrants,” which refers to people who come to the United States to live permanently. This could refer to those who have not yet received an immigrant visa overseas, those who have received one but not yet come, to people who have both come and already received their “green cards” to become legal permanent residents (LPRs), or to all three groups.

On day 1 of the order, the State Department publicly announced a moratorium on immigrant visa applications barring the first group, and on day 2, it issued a secret memo to “provisionally revoke” all immigrant visas for those who had received them outside the country. This is more expansive than simply a ban on entry since everyone who had a visa—which could be valid for entry after the 90-day ban ends—would have to reapply now.

For LPRs, security officials on the first day determined that the order would not apply to them and told the airlines to allow them to board. But White House officials secretly overruled them on day 2, leading to chaos for arriving immigrants. In the morning of day 3, White House Chief of Staff Reince Priebus told NBC that it both did and did not apply to LPRs. Finally, by late in the day on day 3, Secretary of Homeland Security Kelly issued a two sentence press release stating that the ban did apply, but that he would allow LPRs to enter using his case-by-case exception authority.

From

We find no more clarity with the word “from,” which could mean residence, birth, nationality, or citizenship. It could potentially include people who have even visited the countries. The 2015 statute from which the president drew his list of seven countries required visa interviews and visa documents for certain tourists who had simply visited Iraq or Syria, making this one plausible view.

On day 1, the State Department announced that “citizenship” would be the determining factor. Then, in another statement on day 2, it said that the person’s “nationality” would determine their eligibility. Then, in an email to its employees, Citizenship and Immigration Services, the agency adjudicating non-visa immigration applications, stated that it applied to any “citizen or national.” In an FAQ online, Customs and Border Protection currently states that “travelers are being treated according to the travel document they present.”

Seven countries

To add to this confusion, someone with two nationalities may or may not be able to apply for a visa and enter. The State Department initially answered that they could not. But then the administration subsequently stated that people with dual citizenship or nationality can enter under their non-banned nationality.  Yet the State Department still has a notice flatly denying any citizen the opportunity to apply for a visa, so it is unclear if this policy applies to applicants for new visas or benefits. The distinction between nationality and citizenship is also relevant here because Iranians, even if they are born abroad, cannot give up their nationality.

Everything about the Trump executive order works against America’s traditions and rule of law. Laws should be made after public debate through a democratic legislature. Americans should not have to discover the meaning of laws days after they are enforced. Conservatives rightly objected to Ms. Pelosi’s comment, but processes that keep the American public in the dark are the problem, whether done by a Democrat or a Republican.

I recently testified at a joint subcommittee hearing held by the House Foreign Affairs Committee about prospects for a US - UK free trade agreement (my written statement is here).  I focused on the possible content of the agreement.  In my view, the lengthy – and so far unsuccessful – US trade negotiations in the Pacific region (the TPP) and with the EU (the TTIP) are an indication that perhaps we have expanded trade agreements to cover too many issues.  If we want the US - UK trade negotiations to be completed any time soon, we need something more modest, focusing on trade liberalization and doing less global governance.

One issue I did not cover in my written statement, but which came up in the questions during the hearing, was how the US should approach its trade negotiations with the EU after Brexit.  Everyone seemed to agree that the US should pursue a free trade agreement with the UK as soon as permitted (although there are disagreements about when that can occur).  But what should happen to the ongoing trade negotiations with the EU?

The Trump administration has not made any official statement on its view of the TTIP, but there are a couple worrying signs.  First, the Financial Times notes the Trump administration’s preference for bilateral trade deals, and quotes Peter Navarro, the head of the White House National Trade Council, saying that he thinks the TTIP is a multilateral deal:

The new president says he prefers bilateral trade deals rather than the broad multilateral accords pursued by Barack Obama, his predecessor. Mr. Trump last week also withdrew from a 12-country Pacific Rim deal negotiated by Mr. Obama. 

“A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an ‘implicit Deutsche Mark’ that is grossly undervalued,” Mr. Navarro said. “The German structural imbalance in trade with the rest of the EU and the US underscores the economic heterogeneity [diversity] within the EU — ergo, this is a multilateral deal in bilateral dress.”

While this is not a definitive statement of US policy, it may suggest reluctance among some people in the Trump administration to continue the negotiations with the EU.

In addition, Inside US Trade reports that someone in the White House has been contacting individual EU member states about bilateral trade talks:

Several EU member states believe that Trump administration requests to negotiate bilateral deals with individual countries – requests that have been rebuffed in deference to the European Commission – stem from White House advisers acting without secretaries and full staffs at key agencies that might have influenced the U.S. approach, EU sources said.

Because member states have ceded the competence to negotiate trade deals to the Commission, they have told the Trump administration they cannot work on bilateral deals, these sources said.

Member states have greeted the Trump administration’s requests in mixed ways, with some chalking them up to the administration’s unfamiliarity with the EU system of government and others viewing them as an affront to the European Commission’s competence over trade policy.

This may be a simple misunderstanding, but it also may be a conscious effort to undermine the EU.

Whatever you think of the EU as a force for trade liberalization (you may like its internal free trade; you may not like its agriculture subsidies), I think it is clear that the US government should let the EU and its member states decide how they want to participate in world affairs.  If the UK wants to leave the EU, and negotiate its own trade agreements, that is fine.  If all of the other EU members want to stay in the EU and participate in trade negotiations as a single entity, that is also fine.  Thus, the US should definitely negotiate a trade agreement with the UK.  But the US should also continue its negotiations with the EU, and not get hung up on the question of whether a deal with the EU would be “bilateral” or “multilateral.”

The leaders of the University of California at Berkeley lacked power to prevent Milo Yiannopoulos from speaking on their campus yesterday. A subset of the university’s faculty urged their Chancellor to do just that. His spokesman replied, “Our Constitution does not permit the university to engage in prior restraint of a speaker out of fear that he might engage in even hateful verbal attacks.

Most protesters opposed the event peacefully. Some did not: “security officials claim about 150 ‘masked agitators’ joined the demonstration, setting fires, throwing molotov cocktails and rocks and attacking some members of the crowd.” Yiannopoulos’ speech was cancelled in the interest of public safety.

The faculty members seeking to censor Yiannopoulos did not cover themselves with glory, but the people resorting to violence were the true villains in this narrative. They achieved through violence what could not be achieved by law.

Of course, it is possible the university did not try very hard to hold the event. But the Chancellor faced down a part of his own faculty, and the Berkeley College Republicans thanked the university police and the administration “for doing all they could to ensure the safety of everyone involved.” It does not appear the administration came up short. To the contrary, they appear to have fulfilled their obligations. They deserve praise.

This morning President Trump tweeted “If U.C. Berkeley does not allow free speech and practices violence on innocent people with a different point of view — NO FEDERAL FUNDS?”

Notice U.C. Berkeley is the subject of both actions. But the Berkeley Chancellor supported the speech, and we have no evidence that he or any other person acting on behalf of Berkeley incited violence yesterday.

I do not see how attacking people who have observed constitutional norms will encourage others to also respect free speech.

Walter Olson has more on the federal funds aspect of all this.

On Friday, February 3, at noon, Cato will host a discussion of President Trump and free speech. You can register here or walk in tomorrow.   

A President may not find it simple or straightforward to use direct executive orders to cut off funds to universities that tolerate disruption of speech or exclude speakers based on the content of their speech. (That’s this morning’s Presidential tweet story, if you slept in.) But the power that the Department of Education and allied agencies have gathered to themselves over university life has steadily mounted, often against feeble resistance from the universities themselves, as in the Title IX instance. That gives an administration plenty of handles to make its will known, a process previewed in October, as to Trump, by Chronicle of Higher Education correspondent Steve Kolowich, who also spoke to me for the story. He quotes Alexander Holt, an education-policy analyst at New America, saying: “I could see a Trump administration going crazy on these ‘Dear Colleague’ letters.”

Two years ago I cited several examples of rule by Dear Colleague letter, as I called it, in this area. (More here.) And I noted one big problem with invoking judicial oversight to check the federal government’s power:

It may be difficult to persuade a college to serve as a test case, given the annihilating possibility of a federal funds cutoff as the penalty of its presumption.

University administrators have submitted meekly for years now to rule by federal “Dear Colleague” letter. Now it will be Trump appointees writing those letters. If the administrators wish to retain some measure of independence from control by Washington, D.C., they may need to grasp that the hour is growing late – and that it wasn’t such a good idea to grow dependent on the federal dollar in the first place. (adapted from Overlawyered). 

Last Friday, President Trump issued an executive order temporarily barring entry of refugees, visitors, and immigrants—including those with green cards—from Syria, Iraq, Iran, Libya, Somalia, Sudan, and Yemen. During this delay, the government is tasked with making its screening process more extensive. The order indefinitely bans refugees from Syria.

As Henry Enten notes, we’ll have to wait until we have more polling data to ascertain how the public will judge the action, but polling over the past year gives us some clues.

Slim but Shy Support Most polls throughout 2015-2016 found about 56% of Americans opposed Trump’s call to temporarily ban Muslim immigrants from entering the United States. However, these polls tended to be conducted by live telephone interviewers. In contrast, polls conducted online by reputable firms like YouGov and Morning consult, find a plurality of Americans in support.

Aggregating over 40 telephone and online polls conducted over the past two years finds Americans opposed to the ban 56% to 39% in surveys conducted by phone, but a plurality in support 49% to 39% in surveys conducted online. This suggests that people taking surveys by phone feel uncomfortable sharing their true feelings and thus fib to the live interviewers. But, privately taking a survey online encourages people to share what they really think. In the polling world, this is called “social desirability bias” evoked by social pressure to not appear prejudiced to the live interviewer.

Of course, the difference cannot be entirely attributed to survey mode since the questions weren’t worded the exact same way. Nonetheless, it’s suggestive that there is a “shy immigration restrictionist” effect going on. (Remember the shy Trump voter?)

Americans Don’t Support an Outright Ban on Refugees Existing data suggest Americans do not support a permanent ban on refugees. Most telephone and online surveys found that Americans oppose not taking any refugees at all and a plurality (46%) say the “US should open our borders to refugees of foreign conflicts” according to an Ipsos/Reuters Jan 2017 online survey. At the same time, Americans tend to support taking fewer refugees rather than more, when given the option. For instance, both an Ipsos/Reuters Jan 2017 online survey and a Marist Apr 2016 telephone survey found 53% of Americans want the US to take in fewer refugees.

Wording Impacts Support Strength As you can imagine, survey question wording impacts responses. Support for immigration restriction increases when refugees and immigrants are described as coming from “terror prone regions” or when respondents are told that government needs time to enhance security measures. For instance, Rasmussen, measures the highest degree of support (57%) when it asked if respondents support or oppose a “temporary ban on refugees from Syria, Iraq, Iran, Libya, Somalia, Sudan, and Yemen until the federal government improves its ability to screen out potential terrorists from coming here.” This question presupposes the government screening system is already poor and the new administration could meaningfully improve it. If these are the assumptions going in, support will be higher. When national security concerns are invoked and at the top of people’s minds they are more supportive of immigration restrictions.

Support for immigration restriction decreases, however, when the described policy implies a religious test. Surveys register lower support (48%) if the policy is described as a “temporary ban on all Muslims traveling to the United States” (from Morning Consult).

Support Changes with Global Events We find that support for accepting refugees and immigrants varies with what’s happening in the news and the level of threat Americans perceive. For instance, support for banning refugees jumped from 24% in September 2015 to 38% in December 2015 after the San Bernardino attack, two NBC/WSJ telphone surveys found.

Support for a Temporary Immigration Ban Varies by Country of Origin A Morning Consult survey found that majorities of Americans support a “temporary ban on immigration” from Syria (56%), Iraq (55%), and Libya (53%). However, less than half support such a ban on immigrants from Egypt (46%), and Mexico (46%). This indicates that security fears associated with particular countries are an important factor behind people’s attitudes.

Longstanding Opposition to Accepting Refugees Frank Newport has shown using Gallup data over the past 80 years that Americans have a longstanding opposition to accepting refugees. Back in 1939, about two-thirds of Americans opposed accepting German children refugees. In 1947 after World War II, 57% opposed accepting 10,000 European refugees. A similar share in 1979 also opposed accepting Vietnamese refugees. A rare exception was a majority (66%) who supported bringing in a couple hundred refugees from Kosovo in 1999.

Americans are Conflicted A new report published by Democracy Fund Voice, Stranger in My Own Country, finds that Americans are conflicted over immigration. Longform interviews and a national survey (conducted online) found that Americans believe that our country is a melting pot, a nation of immigrants, but at the same time expressed concern that immigration from certain regions could pose a security threat and could also risk changing the culture of America.

For instance, looking at President Donald Trump’s core supporters, we find that 66% agreed that “we should follow the Golden Rule and treat others as we’d like to be treated, including people of different races, and countries.” Moreover, 4 in 10 also expressed concern that anti-immigrant sentiment could lead to violence against immigrants residing in the U.S. At the same time 58% feared that “America’s culture has been influenced by other cultures too much” and 78% felt the US was far less safe from foreign threats compared to when they were growing up.

Similarly among Americans overall, a Marist Apr 2016 survey found that a plurality (50%) of Americans thought the U.S. was morally obligated to take in refugees. But in the same survey, 53% also revealed they thought the US should “take in fewer refugees than it does now.”

Education Changes Attitudes We find that concerns over immigration tend to decline as people attain higher levels of education. For instance, the Democracy Fund Voice report found that Americans with more education were far less likely to agree that the US should “stop or strictly limit Syrian refugees coming to the US.” Among those with high school diplomas, 57% thought the US should limit or stop accepting Syrian refugees, compared to 49% of those with some college experience, and 40% with college degrees.

In a media experiment I ran for the Democracy Fund Voice report, I found that videos and print media that conveyed the following significantly reduced fears over immigration and increased support for accepting Syrian refugees: showing that immigrants want to join the American way of life rather than change it, are relatable, and once they get here think of themselves as patriotic Americans. Furthermore, showing the harmful consequences of prejudice also calmed fears over immigration. For instance, this video of Muslim American millennials reading mean Facebook comments increased favorability toward Muslim Americans from 34% in the control group to 52% in the treatment group, an 18-percentage point change. Among strong Trump supporters, favorable attitudes increased from 11% to 38%, a 27-percentage point change.

The chart to the right presents more results from the experiment finding a variety of different digital and print media significantly reduced nativist attitudes among respondents.

Implications

In sum, online surveys reveal Americans are concerned about the national security risks they believe might result from the U.S. accepting refugees and immigrants from Syria, Iraq, Iran, Libya, Somalia, Sudan, and Yemen. However, Americans are unlikely to support a permanent ban on accepting refugees into the US. Support for immigration restriction increases when the issue is framed around national security risks and giving the government additional time to enhance security measures. However, support declines if such a policy is framed as a religious test for entry into the country.

The difference between telephone and online polls should trouble both journalists and policymakers alike. If Americans feel they cannot express their true opinions on important policy matters it makes it difficult for journalists, policy experts, and lawmakers to respond to these opinions, and at times push back. People won’t have a chance to change their minds if they keep their opinions to themselves and thus no one can provide countervailing evidence.

In addition, political elites would be unwise to assume that these views are simply due to nativism, xenophobia, or some other label. Some people are driven by such concerns, but others are unclear of the risks posed by refugees and immigrants from war-torn countries. Evidence suggests that respectfully explaining the risks, benefits, and showing that immigrants assimilate into US society can effectively persuade people (although not all people) to consider a more liberalized immigration policy.

For more public opinion analysis sign up here to receive Cato’s upcoming digest of Public Opinion Insights and public opinion studies. You can follow Emily Ekins on twitter @emilyekins.

Global Science Report is a 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.”

There is a new paper out in the journal Climatic Change that takes a look into the issue of publication bias in the climate change literature. This is something that we have previously looked into ourselves. The results of our initial investigation (from back in 2010) were written up and published in the paper “Evidence for ‘Publication bias’ concerning global warming in Science and Nature” in which we concluded that there was an overwhelming propensity for Nature and Science—considered among the world’s leading scientific journals—to publish findings that concluded climate change was “worse than expected.” We noted the implications:

This has considerable implications for the popular perception of global warming science, for the nature of “compendia” of climate change research, such as the reports of the United Nations’ Intergovernmental Panel on Climate Change, and for the political process that uses those compendia as the basis for policy…

The consequent synergy between [publication bias], public perception, scientific “consensus” and policy is very disturbing. If the results shown for Science and Nature are in fact a general character of the scientific literature concerning global warming, our policies are based upon a unidirectionally biased stream of new information, rather than one that has a roughly equiprobable distribution of altering existing forecasts or implications of climate change in a positive or negative direction. This bias exists despite the stated belief of the climate research community that it does not.

In their investigation into publication bias, the authors of the new paper, Christian Harlos, Tim C. Edgell, and Johan Hollander, looked more broadly across scientific journals (including articles from 31 different journals), but a bit more narrowly at the field of climate change, limiting themselves to a sub-set of articles that dealt with a marine response to climate change (they selected, via random sampling, 120 articles in total).

Harlos et al. were primarily interested in looking into whether or not there was a bias in these articles resulting from an under-reporting of non-significant results. This bias type is known as the “file drawer” problem—in which research findings that aren’t statistically significant are rarely published (and therefore sit in a “file drawer).  This leads to an over- (and non-robust) estimate of the number of truly significant results. The “file drawer” problem has received a lot of attention in recent years (see here for example) and it continues to be an active research area.

From their examination, however, the Harlos team did not find firm evidence that the file-drawer-type bias was strongly manifest. But, importantly, they did find that several other types of bias were manifest, including bias in how scientific findings were being communicated:

However, our meta-analysis did find multiple lines of evidence of biases within our sample of articles, which were perpetuated in journals of all impact factors and related largely to how science is communicated: The large, statistically significant effects were typically showcased in abstracts and summary paragraphs, whereas the lesser effects, especially those that were not statistically significant, were often buried in the main body of reports. Although the tendency to isolate large, significant results in abstracts has been noted elsewhere (Fanelli 2012), here we provide the first empirical evidence of such a trend across a large sample of literature.

The authors note that, in particular, this bias was worst in the high impact journals (like Science and Nature), and that:

[O]ur results corroborate with others by showing that high impact journals typically report large effects based on small sample sizes (Fraley and Vazire 2014), and high impact journals have shown publication bias in climate change research (Michaels 2008, and further discussed in Radetzki 2010).

Ultimately, importantly, and significantly, they conclude:

…[M]ost audiences, especially non-scientific ones, are more likely to read article abstracts or summary paragraphs only, without perusing technical results. The onus to effectively communicate science does not fall entirely on the reader; rather, it is the responsibility of scientists and editors to remain vigilant, to understand how biases may pervade their work, and to be proactive about communicating science to non-technical audiences in transparent and un-biased ways. Ironically, articles in high impact journals are those most cited by other scientists; therefore, the practice of sensationalizing abstracts may bias scientific consensus too, assuming many scientists may also rely too heavily on abstracts during literature reviews and do not spend sufficient time delving into the lesser effects reported elsewhere in articles.

Despite our sincerest aim of using science as an objective and unbiased tool to record natural history, we are reminded that science is a human construct, often driven by human needs to tell a compelling story, to reinforce the positive, and to compete for limited resources—publication trends and communication bias is a proof of that.

These findings are yet another impelling reason (recall the problem with the bias in climate model tuning) why a re-examination of our government’s previous assessment reports of climate change (such as those underlying the EPA’s endangerment finding) should be undertaken by the new Administration at the soonest possible opportunity.

References

Harlos, C., T.C. Edgell, and J. Hollander, 2017. No evidence of publication bias in climate change science, Climatic Change, 140, 375-385, doi:10.1007/s10584-016-1880-1

Michaels, P.J., 2008. Evidence for “Publication bias” concerning global warming in Science and Nature. Energy and Environment, 19, 287–301, doi:10.1260/095830508783900735

Yesterday, the New York Times ran a column that claimed to illustrate the issues at the heart of the current debate over the so-called “fiduciary duty rule,” which is slated to affect retirement accounts in the coming months. Except the column completely avoided one of the most important issues—access to financial advice—and instead ruminated on the troubles afflicting movie star Johnny Depp. Mr. Depp may be profligate and his money managers may have been asleep at the wheel, but the fiduciary duty has nothing to do with the ultra rich or their expensive advisors. Quite the opposite. Its impact will be felt almost exclusively by moderate income Americans precisely because they have only moderate incomes.

The rule was proposed and implemented in 2015 and 2016; if left unchanged, it will become effective in April 2017. Its stated intent is to ensure that investors receive quality financial advice by requiring that brokers selling certain retirement savings products conform to a “fiduciary duty” standard. In legal terms, acting as a fiduciary means handling another person’s business with the care that a prudent person would take in handling his or her own affairs. Specifically, the rule is intended to address situations in which brokers act as advisors, providing information to investors about the pros and cons of different types of retirement accounts.

This sounds good. Why wouldn’t we want advisors to act in investors’ best interests? Isn’t that just good business? It may be, but there is a difference between deciding to act in your clients’ best interests and abiding by a regulation that imposes a legal standard. The first is essentially costless and may actually benefit the broker by promoting a reputation for customer service. The second is anything but costless. Aside from the expense of implementing necessary compliance procedures to ensure that everything adheres to the law, imposing a legal duty raises the specter of litigation. Litigation, even baseless litigation, is always extremely costly.

Which gets us to the real issue. The problem is not that brokers might have to incur additional expense. The problem is that they might decide the extra expense is just not worth it. And here’s why Mr. Depp and his problems are a terrible lead-in to the debate. I would bet a considerable amount of money that Mr. Depp’s advisors are not brokers being paid on commission. I would bet that instead they are advisers paid a fee based on a percentage of the assets they manage, and that they already abide by a fiduciary duty standard. They are willing to do that because they make huge amounts of money managing rich people’s assets.

Typical rates for this type of service are about 1 percent of assets under management. The New York Times article estimates that Mr. Depp has earned about $650 million throughout his career. If his advisers were managing even just half that amount, that would mean he was paying them $3.25 million a year to manage his money. By comparison, the average U.S. retirement account holds only $5,000. The work involved in managing $325 million is more than the work involved in managing $5,000, but not much more. Certainly not 65,000 times as much work. Considering that an account with $325 million would pay $3.25 million and an account with $5,000 would pay just $50 per year, based on a 1 percent fee, which account would you take if you were an adviser?

The risk the new rule presents is that average investors will lose the access they currently have to financial advice from real people. (There are some computer algorithms that can devise investment strategies and these services will likely pick up much of the slack, but there are still things only a human being can do—have a phone conversation and answer questions, for one.)

It’s not that the column was entirely wrong-headed. It did highlight one of the central questions of the debate, which is whether average people are smart enough to deduce that advice from someone paid on commission must be taken with the appropriate level of salt. But by focusing on someone who will be unaffected by the rule, whose wealth insulates him almost entirely from such “protective” measures, it obfuscates the real problem. The problem is that regulation aimed at “helping” or “protecting” investors usually just protects them right out of the market. Which is to say that it’s no protection at all.

In an op-ed for the Boston Herald last week urging the Trump administration to uphold the Iran nuclear deal, I noted that the precise posture that the Trump White House will have toward Iran is not yet known. Today, we got our first insight into just how confrontational that posture will be. And it doesn’t look good.

Trump National Security Advisor Michael Flynn said in a White House briefing that, “As of today, we are officially putting Iran on notice.” According to Flynn, Iran’s recent test of ballistic missiles, which he said is “in defiance of UN Security Council Resolution 2231,” along with an alleged attack on a Saudi naval vessel “conducted by Iran-supported Houthi militants” in Yemen, serve as evidence of “Iran’s destabilizing behavior across the entire Middle East” and make clear that the nuclear agreement signed by Iran and the P5+1 has “emboldened” Iran to act nefariously in the region, “plac[ing] American lives at risk.”

Flynn’s statement amounts to heated, combative rhetoric over rather trivial issues. Only one of the incidents cited by Flynn was an Iranian action. While it’s true that Iran supports the Houthi rebels in Yemen, it has never been clear exactly how much support they give and it is doubtful Iran has the kind of leverage over the militants that make them qualify as strategic proxies. At the end of the day, whatever instability is caused by Iranian support for the Houthis, it doesn’t hold a candle to the regional instability caused by Sunni jihadists, like al-Qaeda-linked groups and ISIS, that have been supported with funds coming out of Saudi Arabia and other Arab Gulf states. Rather than berate the Saudis with threatening bombast in a White House briefing, though, Washington continues to aid the Saudi military as it relentlessly bombs Yemen, killing thousands of civilians, putting millions at risk of starvation, and committing acts that a United Nations panel said could amount to crimes against humanity

With regard to Iran’s ballistic missile test, the reality is far less alarming than Flynn’s words suggest. The nuclear deal itself doesn’t prohibit these missile tests. And as Dan Joyner, professor of international law at the University of Alabama School of Law, explains, “the assertion that Iran’s ballistic missile tests…violate UN Security Council resolutions is incorrect because, as of Implementation Day, all UNSCR’s adopted prior to that date regarding Iran are terminated except for Resolution 2231. And the language that Resolution 2231 employs in addressing Iran’s ballistic missile activity is legally nonbinding language…[T]here can thus be no violation of a legal obligation that doesn’t exist.”

As The Wall Street Journal reports, “UN Security Council Resolution 2231, which endorsed the deal, ‘called upon’ Iran to avoid any activity related to missiles designed to be capable of carrying nuclear warheads.” It’s hard to confirm one way or the other, but for what it’s worth Iranian Foreign Minister Javad Zarif told the Journal that none of Iran’s missiles are designed to carry a nuclear warhead and the tests involved “conventional warheads that are within the legitimate defense domain.” Given that Iran has verifiably rolled back its nuclear enrichment program over the past year, it makes sense that they would have little interest in designing missiles that can carry nuclear warheads, especially given the added international scrutiny it would needlessly attract.

Flynn’s statement indicates an eagerness to stir up tensions with Iran over relatively innocuous issues. This will undoubtedly be perceived in Tehran as threatening, thereby bolstering the more hawkish voices in Iran and undermining the future viability of the Iran nuclear deal, despite the fact that, as the International Crisis Group recently reiterated, “It has delivered so far on its narrow objective: effectively and verifiably blocking all potential pathways for Iran to race toward nuclear weapons.” 

At an AEI forum this week, Naomi Schaefer Riley discussed her insightful new book on Indian policies, The New Trail of Tears. I was pleased to take part in the forum alongside Robert Doar of AEI, Rep. Rob Bishop, and Keith Moore, who headed the Bureau of Indian Education (BIE).

I focused on the bureaucratic failures of the BIE and Bureau of Indian Affairs (BIA), as well as the institutional factors that deter growth on reservations. All of the panelists agreed that the lack of individual property rights on reservations is a key problem.

Keith Moore’s comments impressed me. Keith grew up on, and nearby, the Rosebud reservation in South Dakota. He served as BIE head from 2010 to 2012. Here are a few of his observations:

  • On the effects of subsidies: “Ingenuity, and the innovative, and creative parts of life have been pretty squelched for a long time because the government has provided.”
  • On reservation land being held in trust: “We’re not going to get where we need to go in Indian country until we have freedom, autonomy, and the ability to buy land and own it and create wealth.”
  • On the federal bureaucracy: “You look at the BIA system, it’s a nightmare. Bottom line, I lived it, I was in it, I left it … I don’t know how you move this bureaucratic titanic to get to a spot where it could have a positive effect. ”

The answer, as I think Keith would agree, does not lie in the BIA/BIE, but in Congress and the tribes making fundamental institutional reforms in areas such as property rights and education.

For background on how federal policies toward American Indians have been failing for two centuries, see this study.

My first choice from the president’s fabulous list of terrific judges – they’re all winners, believe me (no really, solid list) – was probably the judiciary’s twitter laureate, Texas Supreme Court Justice Don Willett, but Judge Neil Gorsuch of the Tenth Circuit was right up there. As you can see by my statement to CNN, I’m pleased as punch with the selection. 

There’ll be time enough to analyze Judge Gorsuch’s work, but after reading a stack of his opinions over the weekend, the most salient parts of his judicial record are as follows:

  1. A keen appreciation for constitutional structure as a guarantor of our rights and liberties.
  2. A real devotion to originalism – probably more than the self-described “faint-hearted originalist” Antonin Scalia – and textualism.
  3. Strong support for the freedom of speech and religion, and the First Amendment more broadly.
  4. Skepticism of the administrative state.
  5. Like Scalia, he construes criminal statutes narrowly, so people aren’t convicted and punished without the government’s meeting its evidentiary burden or establishing that it didn’t violate constitutional rights in arresting and prosecuting defendants.
  6. Really, really good writing, which even Justice Elena Kagan has praised.

Gorsuch also maintains a good relationship with Cato and has published a Policy Analysis with us. In short, Donald Trump has managed to pick a nominee who should please everyone other than progressives: social conservatives, libertarians, legal elites, and I imagine the populists who trust him to pick “the best judges.” Left-wing activists are already talking about how Gorsuch is extreme and is anti-women, workers, yada yada – they have to raise money somehow – but I find it hard to see how Senate Democrats will muster 40 votes to sustain a filibuster against someone who was unanimously confirmed in 2006, particularly with a tough 2018 map.

For more analysis, see my short piece in the New York Post, plus Andrew Grossman and David Rivkin in the Wall Street Journal, as well as these excellent essays by Ramesh Ponnuru and Ed Whelan.

There are numerous causes of federal government expansion, including special-interest pressures and the ability to borrow-and-spend endlessly.

Another cause was highlighted in a recent story about a Bush-Obama education program: politicians are excessively optimistic and hopelessly naïve about their ability to solve society’s problems top-down from Washington.

Neal McCluskey mentioned the failure of the School Improvement Grant program the other day, but I wanted to highlight the Washington Post summary because this is such a classic failure:

One of the Obama administration’s signature efforts in education, which pumped billions of federal dollars into overhauling the nation’s worst schools, failed to produce meaningful results, according to a federal analysis.

Test scores, graduation rates and college enrollment were no different in schools that received money through the School Improvement Grants program — the largest federal investment ever targeted to failing schools — than in schools that did not.

The Education Department published the findings on the website of its research division on Wednesday  hours before President Obama’s political appointees walked out the door.

The School Improvement Grants program has been around since the administration of President George W. Bush, but it received an enormous boost under Obama. The administration funneled $7 billion into the program between 2010 and 2015 — far exceeding the $4 billion it spent on Race to the Top grants.

The school turnaround effort, he told The Washington Post days before he left office in 2016, was arguably the administration’s “biggest bet.”

He and other administration officials sought to highlight individual schools that made dramatic improvements after receiving the money. But the new study released this week shows that, as a large-scale effort, School Improvement Grants failed.

It is excessively optimistic and hopelessly naïve to think that a new federal spending effort would turn around the nation’s schools after that approach has not worked for five decades. But the Post reveals how deep the blind optimism was in this case:

Some education experts say that the administration closed its eyes to mounting evidence about the program’s problems in its own interim evaluations, which were released in the years after the first big infusion of cash.

The latest interim evaluation, released in 2015, found mixed results, with students at one-third of the schools showing no improvement or even sliding backward.

Even then, Duncan remained optimistic about the School Improvement Grants, which he said had — along with the Race to the Top grants — unleashed innovation across the country.

For more on the causes of government growth and failure, see here and here.

First Doubts” dealt with predictions that a 25% rise in the dollar could make a 20% tax on imports disappear with only temporary effects on trade but a $1.2 trillion increase in tax revenues (which would supposedly be paid by foreigners, and without complaint).  

Second Doubts will focus on a key claim that border adjustability is needed because “exports from the United States implicitly bear the cost of the U.S. income tax while imports into the United States do not bear any U.S. income tax cost.”   And we’ll question whether border adjustability is justified because corporate “cash flow” taxes under the House GOP plan are more like value-added taxes than corporate income taxes in other countries.

A Better Way” (a House Republican discussion document of June 24, 2016) says, “In the absence of border adjustments, exports from the United States implicitly bear the cost of the U.S. income tax while imports into the United States do not bear any U.S. income tax cost. This amounts to a self-imposed unilateral penalty on U.S. exports and a self-imposed unilateral subsidy for U.S. imports [emphasis added].”  

That statement makes the case for “border adjustment” – which means the costs of imports (unlike equivalent domestic costs) would cease to be tax-deductible for business and rewards from selling exports would cease to be taxable.  

Since all countries have corporate income taxes, what could it possibly mean to say only our own corporate income tax is an “implicit” tax on exports?  Who pays this “implicit” tax?

What could it mean to say that failure to impose U.S. income tax on foreign factories is a “subsidy to imports?”  

To claim U.S. exports “implicitly bear the cost of the corporate income tax” suggests the incidence of the corporate tax falls on consumers (foreign and domestic) in the form of higher U.S. prices.  Were it not for corporate taxes, the argument implies, cheaper U.S. exports could easily undercut the competition.  This is terrible economics. It makes no more sense that saying workers can avoid income and payroll tax by demanding a higher wage.

 The notion that businessmen simply charge extra to cover the cost of income taxes is rejected by all academic studies of who bears the corporate tax.  The Congressional Budget Office, for example, estimates that owners of capital bear 75% of the corporate tax and labor bears 25% through reduced productivity and real wages.  The Tax Policy Center estimates capital bears 80% of the corporate tax, labor 20% and consumers zero.  

The other Better Way complaint – that “imports into the United States do not bear a U.S. income tax cost” – is true yet strange.  It is likewise true that Australian imports of U.S. goods do not bear an Australian income tax. 

Corporations exporting from other countries have their own national income taxes to pay. It is bizarre to describe failure to tax profits of foreign firms as a “subsidy” to imports. Countries don’t tolerate foreign taxation of their businesses income unless occupied by a foreign army. 

Any alleged pro-import or anti-export bias of U.S. taxes clearly has nothing to do with corporate taxes, except that our high tax rate hurts business. But what about those Value-Added-Taxes (VAT) the border-adjusters seem to covet?

Just as all countries tax income of their corporations, all countries also impose “border adjusted” sales taxes on their consumers.  U.S. federal excise taxes and state sales taxes are border-adjusted just as foreign VATs are, and they bring in about 4% of GDP.  

VATs in Europe are typically near 10% of GDP.  But high taxes are nothing to envy.  Some our biggest trading partners collect only 5-7% of GDP from VATs – including Japan, Australia, Korea, Canada and Mexico.

Sales and excise taxes amounted to 3.7% of GDP in the U.S. from 2010-2014, according to the OECD, while Mexico’s VAT amounted to 4.6% of GDP.  Neither country imposes such sales taxes on exports, and both impose them on imports.  Yet Trump advisers complained, mysteriously, that Mexico’s VAT gave it some sort of unfair trade advantage over the U.S.

The House GOP plan tries to argue that two hoped-for changes in the corporate income tax – immediate expensing for investment and denial of interest deduction – magically transform their border-adjustable corporate tax (BACT) into a consumer sales tax, like the VAT.

 Tax Policy Center economist Bill Gale says the BACT “is essentially a value-added tax (VAT), but with a deduction for wages.”  No, it isn’t. 

A VAT taxes each firm’s revenue from sales minus the cost of goods bought from other companies.  Like a corporate income tax, by contrast, the GOP’s “cash flow” tax falls on revenue minus virtually all the usual business expenses except interest.  Call it what you like, this is essentially an income tax with a quicker write-off for capital investments (not land), and no deduction for interest expense (just as there is no deduction for dividends).  It’s no VAT.

Disallowing a deduction for imports would raise more tax revenue for the same reason disallowing a deduction for wages would raise more revenue. But for firms with high import costs, the Better Way tax bill could be higher than it is now, despite the deceptive 20% rate.

According to Carolyn Freund of the Peterson Institute, “The cash-flow tax proposed in the House is discriminatory. The tax on domestically produced goods would be less than the tax on imports, and it would vary across sectors. Unlike the sales tax, the cash-flow tax with border adjustment would favor domestically produced goods. In particular, it would have the odd feature that home goods would be taxed on total value added, less the wage bill; in contrast, foreign goods will be taxed on total value added.”  A football produced in the U.S. with imported leather would face a tax, while a football produced with U.S. leather would not.

Whatever the logic behind the proposed Border-Adjustable Corporate Tax (BACT), the politics of getting it enacted look doubtful.  What BACT economists dismiss as an ignorant belief that import taxes will injure import-dependent companies nevertheless motivates those companies to lobby hard against it.  And they include the largest private employers in the country, such as Wal-Mart and Target.

Regardless whether World Trade Organization official could be cajoled into approving this scheme (quite unlikely), what would our best trading partners say and do? Could anyone suppose Canada would sit back and smile if U.S. oil refiners had to pay 20% extra for Canadian crude?  Is Canada expected to feel happier about that deal if our greenback then rose 25% against the Canadian dollar?

This Border Adjustable Corporate Tax is not just a technical challenge for professional Treasury Department tax obfuscators, it would also pose huge diplomatic problems for the Commerce and State Departments.

Suppose the textbook model worked perfectly and the import tax and export subsidy left imports and exports just the same, sooner or later. Then why do it?  Because it’s a huge tax increase disguised as a tax cut.

Martin Feldstein has repeatedly advocated a lower dollar every couple of years, such as here and here and here.  Yet he now counts it a blessing that the dollar would rise by 25% with border adjustability. Why? He argues that because trade supposedly remains unaffected, the tax on U.S.  importers exceeds the subsidy to exporters, generating a huge tax windfall which is supposedly painless.   “Because U.S. imports are about 15% of GDP and exports only about 12%,” writes Feldstein, “the border tax adjustment gains revenue equal to 20% of the 3% trade imbalance or 0.6% of GDP, currently about $120 billion a year.” 

In the Feldstein view, future trade deficits are assumed stuck at 3% of GDP for a decade –regardless of tax incentives for investment or saving– and Congress is advised to use the BACT to manipulate the currency and thereby raise $1.2 trillion over a decade, ostensibly at other countries’ expense.

If the BACT shrinks the trade deficit as its supporters claim, then the Feldstein and Tax Policy Center estimates of a $1.2 trillion 10-year revenue windfall are wrong.  Proponents can’t have it both ways: The 20% tax or tariff on imports and matching subsidies for exports either reduces future trade deficits or it raises $1.2 trillion – it can’t do both.   

“The burden of the $120 billion annual revenue gain is not borne by U.S. consumers or companies,” says Feldstein.  That’s a hard sell for U.S. consumers and companies, and they’re unlikely to buy it.  

The corporate tax rate is much too high, producing nothing but corporate relocation, excess tax-deductible debt and accounting tricks to move expenses here and profits offshore. There is no need to devise bad tax increases to “pay for” a lower tax rate. Other countries collect much more revenue with much lower rates.  Try it. It works.

Keep it simple: Prioritize lower marginal tax rates on new investment.

Utopian tax reforms that become too pushy and divisive always fail.  

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