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The Trump administration’s 2019 budget would eliminate funding for the Manufacturing Extension Partnership (MEP) run by the Department of Commerce. The Wall Street Journal reported on the proposal the other day, although the article read more like an oped by program supporters.

The MEP shells out $140 million a year of taxpayer money to more than 50 offices around the country that aid local businesses. Tad DeHaven and I discuss some of problems with the MEP here.

One problem is that such corporate welfare necessarily favors some businesses over others. Companies receiving MEP aid are given an unfair edge over competitors. The MEP’s annual report does not actually say which particular companies have been aided. Instead, it is full of dynamic-sounding language such as “technology acceleration,” “learning organization,” “high-performance system,” “technology-centric operations,” “cultivate enduring collaborations,” and “actionable items for implementation.”

The MEP suffers from the usual waste and abuse of federal subsidy programs. In one classic case, the MEP charged taxpayers $1.1 million for a big party (I mean “conference”) at a resort in Orlando, with free food, booze, live music, and a trip to Disney World.

In another taxpayer rip off, the South Carolina director of an MEP-funded group (p. 29) submitted fraudulent documentation for $336,000 of expenses, including “contracts and payments to shell corporations that were controlled by friends, family members, and him/herself for work that was not completed.” She was sentenced to 27 months in jail, and then was charged with trying to cover up a further $1 million in dubious MEP charges.

My assistant, Dave Kemp says, “What do you expect, it’s the government?” True, but the fact that such handout programs are routinely abused is a good reason to terminate them.

If we eliminated the MEP’s handouts, we could also eliminate the MEP bureaucracy. The agency has about 100 employees making an average $160,000 a year in wages and benefits, according to the federal budget.

To its credit, the Trump administration has proposed various cuts to corporate welfare, and it has reduced tax and regulatory burdens on businesses. Unfortunately, the administration’s protectionist trade actions are a form of corporate welfare that undermine the benefits of its pro-growth policies.

The MEP’s 2016 annual report leads off with a paean to Alexander Hamilton’s 1791 Report on Manufacturers, which was a call for economic central planning. Fortunately, the Jeffersonian free-enterprise view mainly held sway in subsequent decades, and American industry rose to greatness not because of Hamilton/MEP-style subsidies, but because of the sacrifices and struggles of generations of bold entrepreneurs.

After a third consecutive day of attacks, the Syrian government has killed over 250 people in Eastern Ghouta, a region near Damascus. The Syrian Observatory for Human Rights stated that the death toll included 58 children and 42 women, and will most likely rise as the attacks continue.

The Assad regime, backed by Russia, claims that the attacks, which include air strikes and barrel bombs, are necessary to rid Eastern Ghouta of terrorists. Eastern Ghouta is the last rebel stronghold and home to both Jaysh al-Islam, a Syrian opposition militia that routinely attacks the Assad regime, Islamic State, and selective Kurdish forces, and the al Qaeda affiliate Hay’at Tahrir al-Sham, which aims to overthrown the Assad regime and replace it with the Islamic Emirate of Syria. Meanwhile, Turkish forces attacked a pro-Syrian government force yesterday in the Afrin district, another contested zone in northern Syria, in order to halt reinforcements to the Kurdish YPG militia.

The Syrian civil war has entered a new, more violent and dangerous phase. Who will come out on top when/if the violence ebbs? It will most likely be the Assad regime because: 1) the regime has strong sponsors in the form of Russia and Iran, and 2) the international community has no coherent practical response to the ongoing violence.

Russia intervened in the Syrian civil war early on in an attempt to protect its key naval base at the Tartus Port in Syria. Last year, Russia signed into law an agreement it made with the Syrian government that would allow nuclear-powered Russian warships to dock at the port. In order to accommodate these large ships, Russia has expanded its port activities and brought in weapons, ammunition, and other materials to secure its activities without any regulation or oversight by the Syrian government.

Iran has vested interests in the Assad regime and has provided weapons and ammunition, arms, oil transfers, lines of credit, and military advisors (and ground forces—though Iran denies this). Iran’s relationship with the Assad regime is connected to their joint sponsorship of Hezbollah, a terrorist group that now functions as a political party in Lebanon—and which Israel considers a grave threat. Iran’s alleged goals for regional primacy, therefore, are somewhat dependent on the Assad regime’s stability.

Over the course of the Syrian civil war, other stakeholders have emerged that include the Gulf states, the United States, and Turkey. While the Gulf States (mostly Saudi Arabia) are primarily concerned with what they view as Iran’s quest for regional dominance, the United States has been more concerned with the spread of ISIS. U.S. forces have been successful in preventing the further spread of ISIS into Syria with the help of Kurdish militia groups. As these groups continue to receive U.S. support, U.S.–Turkey relations are experiencing a low point as Turkey defends its campaign against the Kurds.  

This hodgepodge of strategic interests and short-term goals has paralyzed the international community. Each attack on Syrian civilians results in empty rhetoric from leaders unwilling or unable to do anything to improve their lot. On occasion, diplomacy has been used to reduce violence. For example, Eastern Ghouta is technically a part of the “de-escalation zones” that were established under a diplomatic ceasefire initiative between Russia, Iran, and Turkey. But because of Hay’at Tahrir al-Sham’s presence (which is minor at best), whose affiliation with al Qaeda did not make it part of the diplomatic deal, Eastern Ghouta has become fair game for Syrian government attacks again.

The ongoing Ghouta attacks indicate that the Assad regime remains strong. The international community’s inability to halt chemical attacks, ensure availability and access to humanitarian aid to those injured on the ground, and convince the Assad regime and its allies to seek a political settlement over a pure military victory all point to how the world has failed the Syrian people. As the Syrian civil war spirals out of control, each stakeholder is more concerned with safeguarding its own strategic interests rather than finding a feasible solution to end the violence. In the meantime, Syrian civilians will continue to pay the price of this war.

In sports—including the current Winter Olympics in South Korea—the concept of the “home field advantage” is pervasive. But in government, separating powers among three branches is supposed to protect individual liberties when the government pursues someone for an alleged legal infraction.

Well, Raymond Lucia felt that the Securities and Exchange Commission had such an advantage when he was fined $300,000 and barred from working as an investment adviser after an SEC administrator determined that he had misled prospective clients in a quasi-judicial proceeding that the SEC investigated, prosecuted, and adjudicated without any appreciable oversight.

Lucia fought the SEC, because the agency’s administrative law judges (ALJs) are, in fact, “officers” of the SEC and not mere employees, meaning that under the Constitution’s Appointments Clause, they should have been appointed by and be accountable to the president or a department head. As the Supreme Court held in a similar challenge to the Public Company Accounting Oversight Board in 2010, “if any power whatsoever is in its nature executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” The president has a duty to ensure the law is faithfully executed, and to do so he must be able to remove those officers who fail to uphold their duties.

The U.S. Court of Appeals for the D.C. Circuit deadlocked over the issue of whether ALJs are executive officers and thus subject to the removal power. As it stands, they’re protected from control by the electorate because the president currently lacks the ability to remove ALJs who abuse their powers or otherwise act badly. Cato supported Lucia’s successful petition for Supreme Court review. Now we file on the merits, ahead of oral argument.

The duties of an ALJ are similar to other positions the Court has previously held to be officers, including “special trial judges” and court clerks. If anything, ALJs have more power and discretion than STJs or clerks, and thus it’s critical that they be able to be held accountable.

Both Congress and the SEC have recognized that ALJs are officers. That conclusion borders on the obvious considering how much more closely the ALJ position aligns with historical and legal definitions of an “officer,” despite the fact that the name of the position was changed to include the word “judge.” Indeed, the fact that ALJs play a quasi-judicial role does not change the fact that they aren’t judges in the constitutional sense. After all, the Supreme Court established 90 years ago that presidential accountability still applies to officers with a quasi-judicial function.

The Framers knew how to create an independent judiciary; they successfully did so in Article III of our Constitution. This independence, however, can’t constitutionally be extended to officers in the executive branch, no matter what they call themselves. The ALJ corps is not a junior-varsity team of Article III judges. They are executive officers, period. To effectively extend Article III independence to an Article II officer, regardless of the title attached to the particular positions, would be to create a fourth branch of government (or fifth, or sixth, depending on how one counts various parts of the existing bureaucracy).

The Supreme Court should find ALJs to be “officers of the United States” and thus make them subject to presidential appointment and removal. Oral argument in of Lucia v. SEC hasn’t yet been scheduled, but is expected this April, which would mean a decision by the end of June.

I’ve got the story at Overlawyered

The Equal Employment Opportunity Commission has announced that Mission Hospital in Asheville, N.C. will pay $89,000 for failing to accommodate employees “who declined flu vaccinations based on their religious beliefs.” [EEOC press release] Mission had in fact agreed to exempt employees from the flu shot based on religious objections, but required that they declare their intention ahead of time. And that turned out to be not accommodating enough, since not requiring that extent of advance notice would not in the EEOC’s view have posed an undue hardship on the employer — hence the expensive lesson….

Under the elastic “undue hardship” standard, employers may face much uncertainty as to how much disruption of their business they must put up with in the name of accommodation. The flu-shot example suggests that risks to co-workers, customers, and the general public might sometimes enter the calculus as well — an expensive guessing game at best.

More about obligations of religious accommodation under federal law, including the elastic way they tend to shrink or expand these days based on the ideological uses to which they are put, at the link. Here, however, I’d like to make a different point. Libertarians take a lot of flak because some of our number criticize mandatory government vaccination as an infringement of principles of voluntary association (though many other self-described libertarians do not in fact take this view). But in the case of Mission Hospital – a private, not-for-profit institution – principles of voluntary association lead directly to the view that the hospital should be free to require such measures of its workforce, whether to avoid risks of direct contagion, to set a good example when urging patients to vaccinate, or from other rationales. Yet here the federal government deploys its full force to prevent private and voluntary social mechanisms from being brought to bear to get a potentially high-risk group to undergo vaccination. 

Flu season is not over and this year’s strain has proved particularly deadly, by the way, so please consider protecting your family and loved ones if you have not already. Details here and here

Here’s the great thing about driverless cars: They will need no new infrastructure because the people designing them are making them work with existing infrastructure. All they ask is for cities and states to fill the potholes and do other basic maintenance.

Here’s another great thing about driverless cars: Most congestion results from slow human reflexes, and simulations show that congestion will significantly decline if as few as 5 percent of vehicles on the road are driverless. So, even if you don’t have a driverless car, you will benefit from others being driverless.

So why is Bexar County (San Antonio) Commissioner Kevin Wolff proposing to use federal infrastructure dollars to build new interstate highway lanes open only to driverless cars? On one hand, they don’t need special lanes. On the other hand, separating them from other traffic eliminates the congestion relief benefits they can provide.

Kevin Wolff is the son of Nelson Wolff, San Antonio’s leading streetcar supporter and a long-time proponent of pork barrel in general (among other things, he has a stadium named after him). Kevin opposed the streetcar, but he supported another even more foolish rail-transit proposal.

The state of Texas is planning to add four lanes to relieve congestion on Interstate 35 in San Antonio. All four would be “managed,” meaning tolled to make sure they never get congested. Wolff’s idea is to dedicate two of those lanes to driverless cars, which means two fewer lanes for other people to use.

Kevin says he floated his driverless-lane idea to the Trump Administration, which has proposed to spend $20 billion on “innovative” infrastructure projects. “They told me, ‘This is just the kind of proposal we want to fund,’” he said.

Actually, it is just the kind of proposal they should not fund. It isn’t necessary. It doesn’t relieve congestion and will probably make it worse than having four managed lanes. It doesn’t help restore crumbling infrastructure. It merely adds more infrastructure that won’t have a source of funds to maintain it.

It can be hard to track exactly what is going on with trade negotiations, and when the news reports are actually a big deal. Each round of negotiations generates headlines, but often leads to nothing except for another round of negotiations. But yesterday the 11 governments negotiating the Trans-Pacific Partnership released a revised version of the text of the agreement, which is kind of a big deal, because you never know for sure how much progress governments are making until they show you the final document. Releasing the text indicates that this agreement is definitely going forward, with signing and ratification coming soon. And of most relevance for Americans, it is going forward without the United States, as President Trump withdrew from the agreement soon after he took office.

What’s in this deal? New Zealand has provided a good summary of what it thinks it is getting from the agreement in terms of lower tariffs and other items (and which U.S. businesses won’t be benefitting from). Here are just a few examples:

  • Japan will reduce its 38.5% tariff on beef to 9% over 16 years.
  • Japan’s tariffs on offal and processed meats will be eliminated over 11–13 years with a 50% reduction at entry into force. 
  • Tariffs on most cheese types will be eliminated in Japan over 16 years.
  • Malaysia will eliminate liquid milk tariffs over 16 years. 
  • All tariffs on apples would be eliminated within 11 years.

That’s all very good news for the countries who are part of the agreement. But as the United States is no longer part of the agreement, there are no direct benefits to Americans. It’s also worth noting that the revisions to the TPP which occurred after the United States withdrew, and which provided the basis for the other countries to go ahead, were suspensions of provisions that the United States had wanted in there.

Of course, the United States could negotiate its own trade agreements with these same countries. But that hasn’t happened. Back in November, I asked: “We are now nine months into the Trump administration, and it’s reasonable to ask: where are all the new trade deals that were promised?” Now we are more than a year into the Trump administration, and the falling behind on trade just keeps falling further.

Last week Robert S. Mueller III, the special counsel, indicted 13 Russians for intervening in the 2016 United States election. Two of the charges  - buying political advertisements and mandatory disclosure - bear on free speech.

Much of the indictment documents activities during the election that would be both normal and protected by the Constitution if undertaken by American citizens. The defendants bought political advertisements, staged political rallies, and even “posted derogatory information about a number of candidates,” Hillary Clinton in particular. Lacking all scruples, they are said to have “solicited and compensated real U.S. persons to promote or disparage candidates” which means paying an actress to impersonate Hillary Clinton in jail. The defendants tried to create “political intensity through supporting radical groups, users dissatisfied with [the] social and economic situation and oppositional social movements.” Overall the Russians hoped “to sow discord in the U.S. political system.”

As it happens, all this activity may be illegal because the Russian government supported these activities. The Federal Election Commission concisely explains regulation 110.20: , “The Federal Election Campaign Act (FECA) prohibits any foreign national from contributing, donating or spending funds in connection with any federal, state, or local election in the United States, either directly or indirectly.”  The Commission notes that this ban “was first enacted in 1966 as part of the amendments to the Foreign Agents Registration Act (FARA), an “internal security” statute.  The goal of the FARA was to minimize foreign intervention in U.S. elections by establishing a series of limitations on foreign nationals.” FARA also required agents of foreign principals to register with the federal government presumably, as the indictment says, so “the people of the United States are informed of the source of information and the identity of persons attempting to influence U.S. public opinion, policy, and law.” (It should also be noted that the defendants are charged with several counts of fraud and identity theft).

These two parts of the law establish different rules for different audiences. Voters in an election are prohibited from hearing speech funded by a foreign power. Arguably, they are prevented from hearing any speech by an employee of a foreign government; such speech would  involve indirect spending on an election. Other listeners, unnamed in the law, need not be prevented from hearing speech of foreigners “attempting to influence U.S. public opinion, policy, and law.” The public, apart from electoral appeals, and public officials, including above all members of Congress, may hear foreign speech assuming disclosure of its source. Voters, however, should be, and are protected from such speech.

The law seems informed by the following assumptions. Public officials need to hear foreign views, especially about international affairs. They have the ability to sort out the false from the true if they know who is behind the arguments. In contrast, voters might be moved by foreign speech to the detriment of the nation. Hence, voters must be prevented from hearing such speech even if its source is disclosed. To put it mildly, this distinction between officialdom and voters is contrary to the foundations of freedom of speech. If voters lack this basic capacity of citizenship, why protect speech through the First Amendment? The distinction seems paternalistic.

There’s little evidence that the Russian efforts had much effect on the voters in 2016. The New York Times indicates that the Russians may have persuaded a few people to show up at a small anti-Muslim rally in Texas. Speculation about others effects does abound, as the Times article shows. However, as Brendan Nyham indicates, political science research shows how hard it is to change votes even with significant spending. The Russian effort was a miniscule portion of overall spending in 2016.

The law is the law, and the indictment made a good enough case against the defendants that at least 12 grand jury members endorsed the charges. But the indictment comes at a difficult time for free speech. Facebook and other tech giants have been put on the defensive in DC. For some, only foreign malevolence could propel a man like Donald Trump to the White House. Fears about national security can foster public actions that otherwise would be rejected.  This might be one of those moments when something must be done and the “something” that is selected does real harm to freedom of speech. That outcome could easily be worse than whatever threat the Russians pose to American democracy.  

New York Attorney General Eric Schneiderman demands out-of-state charities disclose all donors for his inspection. He does not demand this of all charities, only those he decides warrant his special scrutiny. Schneiderman garnered national attention for his campaign to use the powers of his office to harass companies and organizations who do not endorse his preferred policies regarding climate change. Now, it seems he seeks to do the same to right-of-center organizations that might displease him. Our colleague Walter Olson has cataloged Schneiderman’s many misbehaviors.

He’s currently set his sights on Citizens United, a Virginia non-profit that produces conservative documentaries. While Citizens United has solicited donations in New York for decades without any problem, Schneiderman now demands that they name names, telling him who has chosen to support the group. Citizens United challenged this demand in court, arguing that to disclose this information would risk subjecting their supporters to harassment and intimidation.

These fears are not mere hyperbole. If the name Citizens United rings a bell, it’s because the organization, and the Supreme Court case of the same name, has become the Emmanuel Goldstein of the American left, complete with Democratic senators leading a ritualistic two minutes hate on the Senate floor. In 2010, the Supreme Court upheld its right to distribute Hillary: The Movie, and ever since “Citizens United” has been a synecdoche for what Democrats consider to be the corporate control of America. Is it unwarranted to think that their donors might be subjected to the sort of targeted harassment suffered by lawful gun owners, or that Schneiderman might “accidentally” release the full donor list to the public, as Obama’s IRS did with the confidential filings of gay marriage opponents?

The Supreme Court has long recognized the dangers inherent in applying the power of the state against the right of private association. The cornerstone here is 1958’s NAACP v Alabama. For reasons that hardly need be pointed out, the NAACP did not trust the state of Alabama, in the 1950s, to be good stewards of its membership lists. “Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs,” wrote Justice John Marshall Harlan II, who went as far as to compare such demands to a “requirement that adherents of particular religious faiths or political parties wear identifying arm-bands.” More recently, Justice Alito pointed out in a similar context that while there are undoubted purposes served by reasonable, limited disclosure requirements, the First Amendment requires that “speakers must be able to obtain an as-applied exemption without clearing a high evidentiary hurdle” regarding the potential harms of disclosure.

But the Second Circuit Court of Appeals has decided it knows better than the Supremes. On Thursday, it ruled that Citizen United’s challenge should be thrown out without even an opportunity to prove their case. In the process, it effectively turned NAACP into a “Jim Crow” exception to a general rule of unlimited government prerogative to panoptic intrusion into citizen’s political associations. While there can be no doubt that the struggle for civil rights presented a unique danger for its supporters, this should not mean that only such perils warrant First Amendment protection.

The marketplace of ideas is often fraught with contention, and those who support controversial causes must shoulder some risk. As the late Justice Scalia argued, that “running a democracy takes a certain amount of civic courage.” But anonymity in such pursuits serves important purposes, and the premise that concealment of one’s identity is a sign of ill-will would have surprised James Madison, who published numerous defenses of the new constitution, convincing his fellow citizens of the virtue of the endeavor; he signed them “Publius.”

In our schismatic political climate, many people could suffer if their political views were made widely known. This could include everything from adverse employment actions to outright violence. Some groups, such as those in the “antifa,” have openly advocated violence against political opponents. It’s odd that some on the modern left find themselves on the same side as the state of Alabama in 1958: arguing that those who support some political views should be disclosed to the state, even if violence might result. Although an appeal has not yet been filed, the Supreme Court should take the case and reverse the Second Circuit, making it clear that a compelling government interest is required before the government can force the disclosure of people’s political affiliations.   

The Maryland Transit Administration suddenly shut down the Baltimore Metro last week, forcing commuters and other riders to find alternatives with less than 24 hours’ notice. The state said an inspection had found unexpectedly excessive wear on the rails that could have caused a derailment, and it plans to keep the line closed for a month while it fixes the problem – and then to close it again this summer for further work.

The coincidence that the shut-down took place the same day the White House announced its infrastructure plan led the Washington Post to call the metro the latest poster child for the need for more infrastructure spending. In fact, it is a poster child for less infrastructure spending, as it should never have been built in the first place.

 Productivity of United States Metro Systems

Thousands of Trips Per Year

  Trips/mile Trips/station Subsidy/Trip New York Subway 3,211 5,699 $1.64 NY-NJ Path 2,049 6,794 1.60 Boston 1,615 3,231 2.66 Los Angeles 1,349 2,875 7.82 Philadelphia-SEPTA 1,020 1,358 16.05 Washington 852 2,738 1.96 Chicago 900 1,645 4.56 Atlanta 693 1,893 6.08 Oakland 510 3,105 3.48 Miami 368 933 5.18 Baltimore 359 872 6.92 San Juan 322 513 9.17 Staten Island 271 391 2.34 Philadelphia-PATCO 277 819 3.23 Cleveland 168 356 3.11

“Subsidies” equal operations & maintenance divided by fares. Source: 2016 National Transit Database.

As the above table shows, Baltimore’s metro is one of the least-productive and most subsidized heavy-rail lines in the country. It’s even worse when stacked up against metro’s worldwide. Of 158 metros for which data is available, Baltimore’s ranked 150th in trips per station and 152nd in trips per mile.

A 1990 US DOT report found that the first 7.6-mile segment was supposed to cost $800 million to build but actually cost $1.3 billion (about $1.5 and $2.4 billion in today’s dollars). It was supposed to carry 103,000 riders per weekday, but in its early years it only carried about 43,000. Maryland has since extended the line to 17 miles, yet weekday ridership in 2016 was less than 41,000, effectively meaning the extensions attracted no new riders.

To make matters worse, Baltimore bus ridership declined from 106.1 million trips the year the Metro opened to 75.6 million trips in 2016. Since Baltimore light-rail and Metro lines together carried less than 20 million trips in 2016, transit ridership would have done better if the state had put a much smaller amount of money into bus improvements.

Baltimore Metro cars have 76 seats yet carry an average of just 11.5 riders over the course of a day, which is fewer than the 13.5 passengers carried by Maryland Transit buses. Buses also cost less to operate: in 2016, MTA spent $15.73 per vehicle-revenue mile on operations and maintenance for its buses but $17.60 per mile for its Metro railcars.

In other words, buses could have performed the job of the metro for a lot less money. Now that the line is more than 30 years old and worn out, it should be replaced with buses. Instead, they are going to spend millions of dollars making token fixes and let passengers suffer increasing reliability problems.

Naturally, Maryland Governor Larry Hogan blames previous administrations for underfunding maintenance. Yet he has been in office now for more than three years, so he can’t really blame the problems on previous administrations. Why didn’t the transit authority detect the track wear sooner? Why weren’t they able to fix the problem when they were recently single-tracking the line for maintenance work?

One answer is that Hogan and his Department of Transportation have been focused on new projects rather than maintaining old ones. He was the one who decided to build the Purple Line, which will cost more than $2 billion and make congestion worse. He is also pushing for a ridiculously expensive mag-lev line from Baltimore to Washington.

This is what politicians, even supposedly fiscally conservative ones like Hogan, do: go for the glory rather than the mundane. That’s why Trump’s infrastructure plan should, but doesn’t, dedicate funds to maintenance rather than new construction. That’s why infrastructure should be funded out of user fees rather than taxes. Unfortunately, for too many the only lesson of the Baltimore Metro line is that someone else ought to pay more money to keep it running.

Many Puerto Ricans are still without power after Hurricanes Irma and Maria knocked out the island’s electric grid in the Fall. The federal government has poured in resources, but there are still hundreds of thousands of people without power. The sad episode has highlighted the gross failings of Puerto Rico’s government-owned electricity infrastructure. 

Even before the hurricanes, the power grid in Puerto Rico was in bad shape. A 2016 audit of the state-owned Puerto Rico Electric Power Authority (PREPA), found that “transmission and distribution systems are falling apart quite literally: they are cracking, corroding, and collapsing.” The audit found very old and dilapidated assets, and also that the utility has inexperienced staff, terrible record keeping, and a vastly bloated bureaucracy. PREPA has had a poor environmental record, and its power systems have constantly broken down, causing costly forced outages.

Before his resignation in November, the head of PREPA indicated that a “transformation plan” was in progress. But the bankrupt government company has no way to pay for modernization since it is heavily indebted and its finances are a shambles.

The good news is that Puerto Rico’s Governor, Ricardo Rossello, has unveiled a plan to privatize PREPA. Calling the company “a heavy burden on our people, who are now hostage to its poor service and high cost.” PREPA, he said, “does not work and cannot continue to operate like this.”

Rossello’s plan should be good news for Puerto Ricans, who are sick and tired of high-cost and unreliable power. Vast experience around the world since the 1980s shows that privatizing infrastructure, including electric utilities, increases operational efficiencies, improves capital investment, and enhances customer service. Moving PREPA’s assets to the private sector, within an appropriate regulatory framework, should reduce costs and lead to efficient new investment in Puerto Rico’s electric system.

Puerto Rico’s electric utility is not the only one that should be privatized. President Trump’s new budget proposes privatizing the Tennessee Valley Authority and the federal Power Marketing Administrations. Those reforms are long overdue, as privatization of state-owned businesses has swept the world outside of the United States since the Thatcher reforms of the 1980s.

Read more about privatizing the TVA and PMAs here and here, and more about the general benefits of privatization here.

Cato intern Johnathan Postglione helped assemble this post.

A recent New York Times article discusses an exemption for heavy-duty diesel truck emissions standards. First enacted by the Clinton administration, the standards include a provision that exempts truck engines built before 1999. Some entrepreneurs are taking advantage of this provision to circumvent the regulations by installing rebuilt pre-1999 engines in new truck bodies. According to the article, the rebuilt trucks sell for at least 10 percent less than compliant new trucks and also cost less to operate.

The focus of the article is the lobbying directed towards maintaining the exemption, but I want to focus on the real underlying problem: the exemption of existing sources from more stringent emission standards, also called grandfathering. If emissions and degraded ambient air quality have negative effects on morbidity and mortality, then those effects occur regardless of whether the emissions come from “existing” or “new” sources. So there is no public health or scientific rationale for grandfathering. Emissions are emissions regardless of their origin.

Instead, grandfathering eliminates the expense of retrofitting or scrapping existing durable equipment and imposes the cost of compliance gradually. This reduces the explicit cost of compliance and thus limits political opposition to emission control.

The downside of grandfathering is that it incentivizes the retention and operation of old equipment. In the cover story of the spring 2006 issue of Regulation, Shi-Ling Hsu describes the thirty-year struggle over the imposition of emission controls on coal-fired electricity power plants. When the Clean Air Act was amended by Congress in 1977, existing plants were exempted from the pollution control measures that were required of new power plants. Ever since, much ink has been spilled, and large legal fees and campaign and lobbying expenditures have been spent in the struggle over whether emission controls would ever be imposed on such plants because the right to emit without controls is very valuable.

The emissions loophole for trucks is similarly valuable, and old trucks are also exempt from excise taxes on new trucks and other regulations increasing the value of the exemption. 

What should be done about grandfathering? One possibility is emission taxes rather than regulation, but that works only if the politics of tax exemption differ from the politics of regulatory exemption. A second possibility is to set a certain end date to the grandfathering exemption. But that requires the legislature to resist the temptation for a grandfathering extension in return for political support, the subject of the Times article. Experience suggests this temptation is large.

Assuming that limiting emissions is a worthy goal, emission standards or taxes should be applied equally to all sources of emissions. So good public policy would not grandfather, but instead would require Congress to impose explicit costs on all existing emitters or explicit taxes on the rest of us to pay for emission reduction. And that appears to be as difficult as it sounds.

Written with research assistance from David Kemp.

Ballotpedia asked five redistricting buffs to comment on how the Supreme Court might rule on the two gerrymandering cases it is considering, Gill v. Whitford from Wisconsin and Benisek v. Lamone from Maryland. My response

One clue is timing. Rather than fast-track consideration of Benisek v. Lamone, the Court instead set an oral argument date of March 28. That leisurely pace ensures that any decision will come late enough in the term to wreak havoc on this year’s [election] cycle if it announces the imposition at once of a new constitutional standard. Few if any Justices wish to wreak such havoc avoidably. From which I deduce that the Court either 1.) does not expect to announce a new standard, or 2.) expects to do so only in a staged or prospective way that allows states time for compliance or kicks in with the next Census cycle.

While I believe Justice Kennedy remains open to the development of some constitutional standard in this area, I also think he is looking for a fix that is objective and mechanical enough that 1.) it yields the same results from state to state and from Republican-appointed as from Democratic-appointed lower court judges, and 2.) the clarity of what it calls for and how to comply cuts off a need for continual massive litigation and judicial supervision (compare here the success of the one-person, one-vote revolution). Kennedy’s having joined with the conservatives to stay the Gill ruling leaves me thinking that as of then he wasn’t convinced that the “efficiency gap” standard fit that demanding bill.

I’m also pleased to note that my essay on gerrymandering from a libertarian/classical liberal perspective, which appeared originally in Cato Unbound, is featured in the latest Cato Policy Report. You can read it here

Terrible mass shootings like the one at a Parkland, Florida high school are so shocking that it is easy to get the impression that mass shootings are increasingly common.  The number of deaths from mass shootings has been unusually high since 2007, because of five horrific incidents – Las Vegas (58), the Orlando nightclub (49), Virginia Tech (32), Sandy Hook (27), and the Texas First Baptist Church (26).  Statisticians would never try to fabricate a trend from such a small sample, even though the untrained eye may want to.

Last November, however, a Wall Street Journal essay by Ari Schulman claimed,

It isn’t your imagination: Mass shootings are getting deadlier and more frequent. A recent FBI report on “active shooters” from 2000 to 2015 found that the number of incidents more than doubled from the first to the second half of the period. Four of the five deadliest shootings in American history happened in the past five years, and 2017 already far exceeds any previous year for the number of casualties.

That FBI report “identified 160 active shooter incidents that occurred in the United States between 2000 and 2013,” with 486 people killed. The authors literally drew a straight line between just one incident in 2000 (after many in 1999) and 13 incidents in 2013, and called that a “rising trend.”

It is interesting, however, that schools have been the second-highest risk location. The FBI data show that the largest number of active shooting incidents from 2000 to 20016 were in workplaces and other commercial buildings (43%), followed by education facilities (22%), then open spaces (13%), government buildings (11%), residences (5%), health care facilities (3%) and houses of worship (4%).

The cited FBI data from 2000 to 2015 omit the two biggest mass shootings after 2015 and others before 2000.  In addition to Columbine, there were four other mass shootings in 1999, bringing yearly fatalities to 42 fatalities. We can’t be sure which mass shootings were “the worst in American history,” because (1) history didn’t begin with 2000, and (2) Congress didn’t define mass shootings as 3 killed until 2013, and (3) systematic data about such incidents were not collected until 2012.  

Schulman mentioned a longer time series from Mother Jones, but not any data from it, so I created the graph below from the Mother Jones data. This project began in 2012 and attempted to recreate earlier years from news records going back to 1982. Early years report at most one or two incidents per year, which may indicate “headline bias” – finding only those incidents that were sufficiently sensational to attract national news coverage.  

Importantly, the Mother Jones figures define mass shootings as public attacks in which the shooter and victims were generally unknown to each other, and four or more people were killed.  Unlike the FBI’s “active shooting incidents,” where gangs and drugs are frequently involved, Mother Jones excludes all multiple murders related to drugs, gangs or domestic violence. They do include mass shootings by jihadist terrorists, however, which accounted for only 4 of their 98 incidents by my count.

The Mother Jones writers claim that “A recent analysis of this [Mother Jones] database by researchers at Harvard University, further corroborated by a recent FBI study, determined that mass shootings have been on the rise.”  We already questioned the FBI trend.  What about those “researchers at Harvard University”?   Unlike the FBI, who compared the number of incidents between 2000 and 2013 to suggest such a rise, the trio of Harvard and Northeastern University researchers settled for only three years.  

Rather than counting annual changes in a small number of mass shootings as the FBI did, the Harvard-Northeastern team instead counted the average period of time between incidents, and found them more frequent from 2011 to 2013 than the average from 1982 to 2010 (although the journalists’ count before 2012 is doubtful). 

“The rate of mass shootings in the United States has tripled since 2011, according to an [October 15, 2014] analysis [of Mother Jones’ data] by researchers from Harvard School of Public Health and Northeastern University.”  That press release was not from the Department of Criminology, but from a subsection of the School of Public Health, which specializes in thinly-veiled advocacy of tough gun control laws.  “Since 2008,” they note, “we have received funding from the Joyce Foundation to write dozens of scientific articles on firearms issues, to disseminate findings through press releases, and Bulletins.” 

It seems more transparent to simply examine annual estimates from the graph. Adding a preliminary estimate of 17 deaths from Parkland to the Mother Jones list brings the total number of deaths up to 816 from 98 mass shootings between 1982 and early 2018 – or just 23 deaths per year.  That makes this sort of random mass shooting one of the rarest mortality risks imaginable. Falling or the flu are far more dangerous. Even when it comes to guns, 23 deaths a year pales next to the number of homicides by firearms in 2014 alone, which was 11,208 (69% of all homicides)  and the number of suicides by firearms, which was 21,386 (50% of all suicides).

Every time one of these random mass shootings occurs, journalists and legislators invariably seize on the tragedy to lecture about the need for artfully unspecific changes in federal gun control laws. Of all the risks posed by guns or knives, however, random mass shootings are among the least likely.

The Senate is currently debating many competing proposals that would legalize some Dreamers, enhance border security, and reform legal immigration.  This morning, the Department of Homeland Security (DHS) issued a press release criticizing the bipartisan Rounds-Collins proposal that has more support in the Senate than any other amendment.  This DHS press release was accompanied by a veto threat from President Trump.  Most of DHS’ talking points against Rounds-Collins are either hyperbolic, half-truths, or just inaccurate.  Below, I will respond to the three most egregious sections of the DHS press release.

 

By halting immigration enforcement for all aliens who will arrive before June 2018, it ignores the lessons of 9/11 and significantly increases the risk of crime and terrorism.

 

There have been nine terrorists who entered the United States illegally since 1975 who went on to plan or commit an attack on U.S. soil.  One of them, Glen Cusford Francis, managed to kill one person in an assassination on U.S. soil.  That’s one successful murder in a terrorist attack over 43 years, committed by one of the roughly 49 million illegal immigrants who entered during that period (most left the United States).  The annual chance of being murdered by an immigrant who entered illegally was about 1 in 11.6 billion per year during that time.

The Rounds-Collins amendment does not increase the threat from immigrant criminals.  Immigrants are already less likely to be criminals relative to native-born Americans.  Furthermore, Rounds-Collins does not limit the ability of law enforcement to track down immigrant criminals or to deport those convicted of a crime.  In fact, it focuses interior immigration enforcement resources on actual criminal and national security threats rather than dissipating them on raids.  Thus, the new enforcement priorities of Rounds-Collins are more likely to reduce the already low threat posed by illegal immigrant criminals and national security threats.         

 

It eviscerates the authority of DHS to arrest, detain, and remove the vast majority of aliens illegally in the country by attempting to limit DHS enforcement by codifying a “priorities” scheme that ensures that DHS can only remove criminal aliens, national security threats and those who arrive AFTER June 30, 2018 creating a massive surge at the border for the next four months.

 

This is simply untrue.  The enforcement priority section of Rounds-Collins just forces DHS to prioritize the removal of illegal immigrants who have committed crimes, as well as national security threats, over immigrants whose only offense was violating immigration law – unless they entered after June 30, 2018.  Furthermore, the relevant section of the bill does not prevent DHS from enforcing immigration laws against non-priorities, but it does remove the open-ended discretion.

New priorities for interior enforcement won’t much affect illegal entries across the border.  Southwest border apprehensions are at very low historical levels and a prioritization of interior immigration enforcement toward what the Obama Administration had in place in his second term certainly doesn’t open the border to illegal entries.  Amnesties have not historically increased the flow of illegal immigrants but appear to actually reduce them, for a time at least.  However, more border enforcement tends to lock illegal immigrants inside of the United States who would otherwise have left, boosting the stock but not the flow. 

 

Note: After publishing this, I learned that the Senate pulled this back to January 2018.  That change weakens DHS’ argument further.

 

By keeping chain migration intact, the amendment would expand the total legalized population to potentially ten million new legal aliens – simultaneously leading to undercutting the wages of American workers, threatening public safety and undermining national security.

 

DHS provides no estimate of how this legalization would expand “the total legalized population to potentially ten million.”  Legalized Dreamers wouldn’t be able to legalize their parents under this bill, which is essentially a restatement of current law.  Given the current long backlogs in the family-sponsored immigrant system and that most of the Dreamers legalized come from countries afflicted by those, there’s really no way that 10 million additional legal immigrants would be able to enter through this.  The best recent evidence is that each new immigrant eventually sponsored about 3.5 new immigrants through family reunification.  Because Dreamers’ ability to sponsor family members is limited and the wait times for many of the green card categories are so long, the number will certainly be lower for the legalized Dreamers.  It’s also unclear why that would be an argument against the Rounds-Collins amendment from the perspective of the agency tasked with enforcing it. 

The effect of immigrants on the wages of American workers is small and, if it is negative, is entirely concentrated on high school dropouts.  There are far better ways to help them than reducing economic and wage gains for the 90 percent of the workforce in educational categories positively impacted.  Furthermore, the effect of immigration on the wages of blue-collar workers is slightly positive.  There is not a good economic argument for reducing legal immigration.  It’s unclear why DHS would even be making this argument, since they aren’t supposed to be economic central planners but enforcers of immigration law. 

Legal immigrants entering on green cards from 1975 through 2017 have murdered 16 people in terrorist attacks on U.S. soil.  Assuming all of those green cards were issued in the family reunification categories or through the diveristy visa lottery, the chance of being murdered in a terrorist attack committed by a chain immigrant or a diversity visa recipient was about 1 in 723 million per year.  Even if that annual rate of deaths in terror attacks were to increase 10-fold, it would still not be a serious threat to national security. 

DHS’ open lobbying against Rounds-Collins via press release is extraordinary.  Past secretaries of DHS have certainly testified in favor of other immigration bills, but press releases by administrative agencies taking a clear side in a current debate in the Senate is a new expression of the power of administrative agencies.  DHS is openly lobbying for more resources that would enhance its power and respect.  That’s not a surprise according to what we know about how bureaucracies behave, but it is rare to see it expressed to nakedly in press releases during a Senate debate.

DHS should either not comment on these issues through press releases while the debate is occurring or only do so to make points about the feasibility of enforcement.  At a very minimum, the bureaucracy should not use policy-based talking points that are hyperbolic, half-truths, or inaccurate.   

George Hodgin’s mission seemed simple: manufacture uncontaminated, chemically consistent cannabis for use in scientific research on marijuana’s medical effects, all while complying with federal regulations surrounding the production of a drug still classified by the Drug Enforcement Administration (DEA) as highly dangerous. Despite new rules the DEA promulgated eighteen months ago, with the stated goal of allowing expanded cultivation of marijuana for scientific research, George Hodgin is still in administrative limbo. 

Hodgin, a former Navy SEAL, approached us recently for advice after encountering numerous regulatory roadblocks.  We have no special knowledge or ability in that direction; but perhaps publicizing his endeavors will nudge public opinion (and regulators) in the right direction. 

Expanding research access to high-quality marijuana is important. The Marijuana Policy Project estimates that roughly 2.5 million patients use medical marijuana – just in states with legal medical marijuana programs. This number is likely an underestimate, as it does not account for individuals obtaining marijuana for medical use through non-medical channels. Marijuana’s illegality at the federal level prevents the collection of much needed data that could help drive future research.

Veterans represent a particularly important category of medical marijuana users. Although Veterans Health Administration physicians are prohibited by federal law from recommending medical marijuana, new guidelines issued in December 2017 revise existing standards to encourage doctors and patients to discuss the use of medical marijuana without fear of recrimination. 

A January 2017 report from the National Academies of Sciences, Engineering, and Medicine acknowledges the difficulty researchers face in acquiring appropriate cannabis products and recommends actions be taken to ameliorate the situation; yet, obstacles remain. 

The major difficulty facing those who want to produce or obtain cannabis products for research purposes is that the DEA currently classifies marijuana as a Schedule I drug, which means the DEA views it as having “no currently accepted medical use.” But thirty states and the District of Columbia have laws permitting the medical use of marijuana. Additionally, the research available suggests potentially widespread medical applications for marijuana. 

Legal restrictions on access have severely hampered medical research into marijuana’s possible effects. One solution would be to reschedule marijuana, yet the DEA has repeatedly denied petitions to do so. In a July 2016 denial, the DEA asserted that marijuana has no currently accepted medical use in the United States because, among other reasons, “the scientific evidence is not widely available.”

This will be true, by definition, so long as the DEA makes it virtually impossible to conduct scientific research. Catch 22.

In August 2016, the DEA changed its rules to allow registered entities to supply researchers with the quality and quantity of marijuana needed for scientific study. Despite the rule change, however, the DEA has yet to approve a single application. In testimony given to the Senate Judiciary Committee last October, Attorney General Jeff Sessions confirmed that 26 applications are outstanding from marijuana suppliers; but the DEA has not approved a single one. 

The DEA’s resistance is part of the long-running, tough on drugs approach it has taken since the 1970s. As recently as 2013, courts upheld the DEA’s monopoly on the production of (federally) legal marijuana. The current administration shows no intention of changing this stance. 

In a recent poll, 91 percent of Americans supported the use of medical marijuana. For years, the DEA’s opposition to legalization or rescheduling has hinged on the argument that no scientific evidence suggests medical benefits. Despite hopes that the August 2016 rule change would usher in a new era of research, the past year and a half has proven that inaction remains the status quo. Until something changes, countless sufferers of pain, PTSD, and other ailments will remain trapped in a legal gray zone. Allowing properly vetted companies to manufacture and distribute research grade marijuana legally is the least the DEA can do.

Research assistant Erin Partin contributed to this blogpost.

 

Seven GOP Senators have proposed a plan that they claim would fulfill a pledge by President Trump to provide permanent residence (a pathway to citizenship) to 1.8 million young immigrant Dreamers. Sen. Tom Cotton (R-AR) appeared to go further than a mere “pathway” alone, claiming that it would actually provide citizenship itself to 1.8 million. Sen. James Lankford (R-OK) made the same claim, stating that he expects “1.8 million [to] go through naturalization.”

In reality, only an estimated 877,100 people would receive permanent residence under the White House-Senate GOP plan – and only approximately 587,650 should be expected to receive U.S. citizenship. A realistic number of those who may benefit from the White House plan, as embodied in a GOP Senate bill, is important because supporters have used the 1.8 million figure to justify large-scale reductions in the number of legal immigrants entering the country – potentially 22 million fewer legal immigrants over 50 years.

The 1.8 million figure is fiction. Based on the experience of prior documentation efforts and the specifics of this particular proposal, the GOP senators’ Secure and Succeed Act would provide an initial status to about 1.1 million. But of them, only about 877,100 would likely receive permanent residence, sometimes called a “pathway to citizenship,” and only about 587,650 would likely end up receiving citizenship. Table 1 provides the actual enrollment rates and extension rates for DACA compared to estimates for the Secure and Succeed (S&S) Act.

Table 1

Sources: Authors’ calculations based on Migration Policy Institute (DACA Eligibility); Migration Policy Institute (S&S Eligibility, LPR Rates); Pew Research Center (Naturalization rate); U.S. Citizenship and Immigration Services (DACA Enrollees; DACA Extensions); S&S Initial Enrollment Rates Based on Congressional Budget Office. *An individual cannot apply for citizenship from DACA.

The S&S Act creates a four-part framework for potentially receiving permanent residence and later citizenship (see Table 2 at the end). First, Dreamers would need to meet a set of basic criteria to receive a conditional residence status valid for up to 7 years. Second, after 7 years, they could apply for an extension under a second set of stricter criteria. Third, at any time after the extension, they could apply to have the “conditions” removed and receive full permanent residence status with a pathway to citizenship under a third set of criteria. Fourth, they could apply for citizenship after another 7 years and more conditions. Each stage is fraught with obstacles for the about 3.3 million unauthorized immigrant Dreamers who entered the United States as minors several years ago.

Why the Secure and Succeed Act Won’t Provide Even Temporary Relief for 1.8 Million People

Under the Secure and Succeed Act’s initial requirements, applicants must have lived in the United States continuously since June 15, 2012—more than five years and eight months ago—and have entered before the age of 16. They need to have been younger than 31 in June 2012—36 years old today—and have graduated high school or be enrolled in college. According to estimates from the nonpartisan Migration Policy Institute (MPI), under the legalization portions of the S&S Act,* fewer than 1.6 million people could potentially become conditional permanent residents.

Even fewer will actually apply. DACA applicants had similar requirements when President Obama created the program in June 2012 (see Table 2), but only 60 percent of the eligible population ever signed up. While certainly S&S’s promise of permanent residence could entice some more applicants to apply, the factors that led to the low levels of DACA participation are likely to continue under S&S’s legalization program.

Some people who are included in MPI’s eligible population are not actually eligible, because they have committed certain criminal offenses (because these offenses can’t be modeled in the American Community Survey data MPI employs). This population of “eligible ineligibles” will grow significantly under S&S, because the legislation includes a variety of new criminal and non-criminal bars to a successful application, including the inability to support oneself without government benefits, prior deportations, removal orders, falsely claiming to be a U.S. citizen, false statements to obtain immigration benefits, and state or local offenses arising due to a lack of immigration status. No estimates exist of how many Dreamers fall into one of these categories, but it is potentially quite large.

In addition to the “eligible ineligibles,” some Dreamers believe they are ineligible but are actually eligible. This population could explain a major portion of the DACA enrollment-eligibility gap. The Secure and Succeed Act would likely increase the confusion, with its variety of new requirements on top of those from the original DACA program. DACA required enrollment in school of any kind or a high school degree. S&S would increase those initial requirements to require college enrollment or a high school degree.

S&S would create a new category of quasi-“eligible ineligibles”: those who are initially eligible, but could not meet the secondary requirement to extend status or receive permanent residence. The risk of a denial may keep some from taking the risk to apply. Nearly 8 percent of applicants for DACA were rejected. The S&S Act requires applicants to sign away their rights to an immigration hearing before a judge, meaning an agent could remove them quickly without due process for any infraction. If they dropped out of college or lost their job for more than a year, S&S could quickly end up as a pathway to deportation. This actually imposes a new risk that wasn’t present with the DACA program itself.

Applicants also consider the cost. DACA required an application fee of $495. This forces the recipients to have this amount on hand to pay to enter the program. Many DACA recipients cite the fee as a primary challenge. MPI’s analysis also cites family income as a factor “strongly affecting” Dreamers’ ability to apply. S&S would increase the fee by an unknown amount. But various requirements in the law would imply that the fee would increase as much as 100 percent or more. It requires a medical examination and could require an in-person interview—neither of which DACA required. This could make S&S legalization more like applying for adjustment of status to permanent residence, which costs about $1,225.

Fear of deportation counterintuitively affected DACA applications. The more immigrants in a certain community who feared deportation, the more likely they were to apply for DACA. This makes sense, because enforcement makes legal documents more valuable than they would otherwise be. Communities less affected by enforcement are more likely to fear putting themselves on the government’s radar for the first time than those where the government is already targeting them. For this reason, Asian immigrants signed up at the lowest rates, while Mexican immigrants—the most likely to be deported—signed up at the highest rates.

S&S’s impact on this phenomenon is likely mixed. On the one hand, Asian immigrants are more likely to say that green cards are more important than relief from deportation for unauthorized immigrants, making them more likely to apply. On the other hand, S&S doesn’t immediately provide a green card but rather a seven-year conditional residence status subject to a variety conditions. If this population was concerned about bringing attention to themselves under President Obama, there is little reason to believe that concern would decrease under President Trump, whose administration has demonstrated a willingness to deport even people who regularly checked in with immigration enforcement.

Moreover, many Dreamers expressed concern that their application could be used to target their families. Not only does S&S not address this fear, it amplifies it by providing enforcement resources and new legal authorities to the administration to speed up deportations.

The increased benefits of a potential green card may draw out some new applicants who previously didn’t want to take the risk to apply. But overall, the increased costs, greater risks, heighted eligibility requirements, and more frightening political environment would act to depress application rates. According to the Congressional Budget Office (CBO), the last major legalization—the 1986 amnesty—had only a two-thirds participation rate, despite much less stringent requirements than the ones contained in S&S. Ultimately, we chose to use the CBO’s higher rate of 67 percent, rounding it up to 70 percent—10 percentage points higher than DACA’s initial enrollment rate. Based on this analysis, we can conclude that at most 1.1 million Dreamers would receive initial legal status under the Senate GOP proposal.

Why Secure and Succeed Won’t Give a Pathway to Citizenship to 1.8 Million People

The 1.1 million people who are legalized by the Secure and Succeed Act receive (at first) only conditional permanent residence under the bill, not full permanent residence with a right to seek citizenship. For that, S&S recipients would have to reapply for an extension and separately for permanent residency. Under DACA, which had no additional requirements at all to extend status other than maintaining residence in the United States for another two years, just 86 percent of initial enrollees maintained status through the end of the program. Under S&S, applicants for extension and ultimately permanent residency would be required to pay a fee of at least (another) $1,225, have accumulated 7 years of residency, English language literacy, and 62 months of a mix of either employment, military service, or college enrollment.

Only 79 percent of initial enrollees would meet these requirements and move onto the permanent residence phase, according to MPI estimates. That means fewer than 900,000 Dreamers would receive permanent residence – the promised “pathway to citizenship” – under the White House-GOP Senate bill.

Finally, this population will only have the right—after yet another 7 years—to seek citizenship. The actual population that will receive it is much lower. Nearly 90 percent of DACA recipients are from Mexico, Guatemala, Honduras, and El Salvador. According to the Pew Research Center, these nationalities have naturalization rates below 50 percent. Mexicans, which account for 80 percent of all DACA enrollees, have a 42 percent naturalization rate. Given that Dreamers grew up in the United States, however, they are more likely to want citizenship. For this reason, Table 1 above applies the average naturalization rate for all countries of 67 percent. This implies that fewer than 600,000 people would end up receiving citizenship under the White House-Senate GOP proposal.

Conclusion

In the best case scenario, the Senate GOP plan would likely provide a pathway to citizenship to fewer than 900,000 Dreamers—less than half of the president’s promise. Moreover, only an estimated 587,657 would likely naturalize—less than a third of the 1.8 million that some senators have claimed.

If Congress wants to fulfill the president’s promise, it would need to institute a broader legalization program for Dreamers with as few risks and costs, and as little confusion, as possible. Congress would also need to provide legal certainty in some form for their parents to mitigate fear of coming forward. Members of Congress should also stop exaggerating the extent of the legalization of Dreamers as part of a strategy to justify politically questionable policy choices, including imposing large-scale reductions in the annual level of legal immigration and eliminating many current immigration categories.

Various Legalization and Citizenship Tracks for Young Immigrants

Sources: Senate Amendment 1959 to H.R. 2579; S. 1615USCISH.R. 1468

*Migration Policy Institute evaluated the Succeed Act, which contains the same basic criteria for legalization as the Secure and Succeed Act.

The evidence is in. And it’s great news for kids in charter schools. A just-released study by my colleagues at the University of Arkansas and me finds that, overall, public charter schools across eight major U.S. cities are 35 percent more cost-effective and produce a 53 percent higher return-on-investment (ROI) than residentially assigned government schools.

And every single one of the cities examined exhibited a charter school productivity advantage over their district school counterparts. As shown in Figure 1 below, charter schools outperformed district schools in each city on student achievement despite receiving significantly less resources per student. Charter schools in all eight cities studied are getting more bang for the buck. And in places like D.C. and Indianapolis, charter schools are doing more with a lot less.

Figure 1: Charter School Funding and Performance

Our ROI models consider the effect that each schooling sector has on children’s lifetime earnings relative to the total taxpayer investment for children’s K-12 education in each sector. As shown in Figure 2 below, charter schools provide a huge ROI for taxpayers. And D.C. charter schools are knocking it out of the park by producing an 85 percent higher ROI for their taxpayers than district schools.

Let’s make this a bit more concrete. The data show that every thousand dollars spent on education in D.C. district schools translates to around a $4,510 increase in students’ lifetime earnings. That is commendable. But that same thousand-dollar-expenditure produces an estimated $8,340 in students’ lifetime earnings if allocated to a public charter school in the city. And that 85 percent advantage is huge considering that taxpayers spend over $458,000 for each child’s K-12 education in D.C. district schools.

Figure 2: ROI for Charter Schools Relative to TPS (13 Years)

Notably, charter schools in Boston and Indianapolis both produced ROIs that were over 60 percent higher than their neighboring district schools. New York City, San Antonio, and Denver all produced ROIs that were 29 to 32 percent higher than district schools.

But these results shouldn’t surprise anyone. When educational institutions have the incentive to spend money wisely, they do just that. Because residentially assigned government schools do not have to attract their customers, they can spend tons of money on administration and fancy buildings. On the other hand, charter schools must spend money on kids – rather than administrators – if they want to keep their doors open.

From 1983 to 1999, the CBO issued two-year forecasts that added up to a 2.7% growth rate, which would now be widely dismissed as a “rosy” forecast. Yet actual growth averaged 3.7% from 1983 to 1999 – a full percentage point higher – despite a recession in 1991. Today, the CBO forecasts that even 2.7% economic growth is impossible, and claims only 1.9% is within reach. 

The Administration thinks the economy can grow a percentage point faster. The 2019 Budget estimates the economy will grow by 2.9% a year for ten years. The Committee for a Responsible Budget (CFRB) argues that this “strains credulity, especially if interest rates and inflation also remain under control, as the budget predicts they will.” [This appears to suggest higher inflation would be good for growth.]

“Given population aging and other economic fundamentals,” says the CFRB, “the United States is likely to ultimately achieve growth of 2 percent per year or perhaps less – not 3 percent. The Federal Reserve projects long-term sustained growth of 1.8 percent per year [1.7–2.2%], and the Blue Chip average for sustained growth is only slightly higher at 2.1 percent. Prior to the tax deal, CBO projected a long-run growth rate of 1.9 percent.”

Is the OMB unrealistic to estimate the economy can grow by 2.9% a year or is the CBO unrealistic to assume it can’t grow faster than 1.9%?

The real contest here is between current OMB projections after the tax deal, and CBO projections “prior to the tax deal.” Fed and Blue Chip forecasts are unofficial and unpersuasive.

The Federal Reserve does not make official long-term projections. The quarterly FOMC Summary of Economic Projections (SEP) defines  “longer-run projections” as rates of growth to which “a  policymaker expects the economy to converge over time – maybe in five or six years.” Last December 13, the 19 survey participants thought that after five or six years real GDP would settle down to 1.7% to 2.2%, but that is not a ten-year average since growth in the previous five or six years might be rapid.

Blue Chip Indicators collect monthly forecasts from over 50 business economists (I used to be one of them). It constructs a “consensus” by averaging a possibly wide array of different estimates. All such frequently-revised forecasts are most reliable as lagging indicators – becoming pessimistic after economic news turns bad and optimistic after things pick up. The models and techniques used to make monthly or quarterly forecasts have no predictive power at all beyond two quarters, if that.

What about the CBO? Their projection of 1.9% growth is a full percentage point below that of the Trump administration. Could the CBO possibly be that far off? Sure. They’ve done it before.

From 1983 to 2000, the CBO’s two-year forecasts of real GDP growth were exactly one percentage point too low, on average.  A two-year forecast for 1983–84 was made in 1983 and combined estimated growth rates for both years, so the fact that 2-year growth rates kept being underestimated repeatedly in all but two years (1990 and 1991) from 1983 to 2000 was a triumph of theory over experience.

The graph, from “The CBO’s Economic Forecasting Record,” shows the CBO systematically underestimated growth of real GDP after the Reagan tax rate reductions were phased in during 1983–84 and 1988–90 (TRA86), and again after the capital gains tax was slashed from 28% to 20% in 1997. Conversely, the CBO overestimated GDP growth after Bush 41 raised tax rates in 1990, after Obama raised tax rates in 2013, and during the high-tax bracket creep years of 1976–82.   The CBO appears to suffer from a pro-tax estimating bias – assuming higher tax rates do no harm, and lower tax rates do no good.

The CBO argues that its “five-year forecasts of output and inflation are more accurate than its two-year forecasts of those variables, in part because long-term forecasts rest more on underlying trends in the economy than on short-term cyclical movements, which are very difficult to predict.”  Unfortunately, CBO five-year forecasts also underestimated real GDP growth in all but one 5-year period between 1981-1985 and 1999-2003.  The exception was 1987-91, when the CBO estimate proved slightly optimistic (0.28%) thanks to recession on the heels of the ill-fated Bush 41 “tax increase.”  A single mild recession (aggravated by higher taxes) can’t explain why the CBO consistently underestimated the 4.4% rate of real GDP growth for seven years from 1983 to 1989, or the same 4.4% pace for four years from 1996 to 2000.

A recent paper, “How CBO Produces Its 10-Year Economic Forecast” explains that “CBO projects potential TFP on the basis of historical trends in TFP growth. However, projecting trends in TFP is particularly challenging because it is, by definition, a measure of unexplained growth in output.” On the contrary, extrapolating “historical trends” is just lazy, not “challenging.”

The so-called “economic fundamentals” the CFRB mentioned essentially consist of projecting recent trends into the future.  That means assuming output per hour (productivity) keeps growing at the anemic 1.3% pace of 2006 to 2015, and that hours worked grow at half that rate because labor force participation is assumed (“projected”) to remain extremely depressed and most part-timers are assumed to reject longer hours.

If you add 1.3% projected growth of productivity to 0.6% projected growth of the labor force, you end up with a 1.9% limit on potential economic growth (slower than 2010–2017 when the economy grew at a 2.2%).  But productivity and labor force participation depend on incentives, not past trends. And incentives to invest and work just changed dramatically.

We know that the CBO is perfectly capable of underestimating economic growth by a full percentage point over a 10-year period since it already managed to do that over a 17-year period. If history is any guide, the CBO’s 1.9% long-term forecast is once again much too low, as it has been whenever the highest tax rates on income and/or capital gains were reduced.

As a native Texan, I make an effort to stay current on the latest happenings in my home state. And even though the announcement by the Consumer Financial Protection Bureau that it will reconsider new federal rules that would regulate payday lending is national in scope, the nature of the affected industry means that the particular impact will inevitably vary from state to state. Accordingly, the recently published editorial by the San Antonio Express-News addressing the topic calls for a state-specific response.

The Editorial Board must have viewed its argument as a common sense, self-evident proposal: in order to cure the payday malady, we need more laws! But the argument that “Texas lawmakers need to step up their game next session” in the event these federal regulations are rescinded gets it exactly backward; what Texas needs is not more fix-one-problem-while-causing-two-more statutes. Instead, an epinephrine injection of vigorously enforcing good laws should be combined with the surgical removal of bad ones.

Texas has gone down the “just pass another law and fix it” road before on this issue, and this approach has consistently made things worse, not better. After the passage of the federal Fair Credit Reporting Act in 1970, an industry offering “debt repair” services emerged. Unfortunately, many debt repair organizations engaged in disreputable practices and, in order to combat the excesses of this industry, the Texas Credit Services Organizations Act was enacted in 1987. But the organizations (“CSO’s”) created and defined under this Act not only included businesses paid to improve a consumer’s credit rating, but also those involved in “obtaining an extension of consumer credit for a consumer.” After the FDIC issued new guidelines on payday lending in 2005, Texas payday lenders sought to avoid these and other restrictions by registering and operating as CSO’s. And now, in an effort to fix the problem caused by the CSO statute, which itself was designed to fix a supposed problem in the Fair Credit Reporting Act, we are told that yet another statute must be passed. Who is actually gullible enough to think that this new “fix” will not again create at least as many new problems as it supposedly solves? It’s deja vu all over again.

No legislative body, no matter how powerful or well-intentioned, can repeal the laws of economics. In 2008, congressional mandates for Freddie and Fannie combined with the passage of the Community Reinvestment Act to mandate lending to those who could not afford to pay the loans back, thereby injecting systemic risk into the market. Similarly, the unintended consequences of severely restricting or eliminating the ability of desperate people facing financial emergencies to take out payday loans will only drive the market underground, resulting in less competition and more harm to consumers.

The real problem is not the existence of payday loans per se, but rather the unseemly entanglement of government enforcers with payday lenders. When borrowers default on credit cards or fail to pay back a signature loan from their bank, they face a denial of future credit from that institution, negative credit reporting making it more difficult to obtain credit with other institutions, and execution on civil judgments that can be satisfied against their nonexempt assets. These consequences work well to both constrain irresponsible behavior by consumers and allow institutions to properly assess the risk of lending. But the payday lending industry commonly eschews such reasonable remedial measures in favor of employing state actors to do their dirty work.

The process goes something like this. A payday lender requires the borrower to provide a post-dated check in order to receive the loan. Unsurprisingly, on the appointed date these checks often bounce due to insufficient funds. Lenders then take advantage of unsophisticated borrowers by threatening prosecution for check fraud unless they either pay up or roll over the loan. If these threats don’t do the trick, the lenders then refer the matter to the local district attorney’s office for potential prosecution.

These threats from collectors are not legally supportable under any fair interpretation of the penal code, and thus should constitute a violation of the Texas Debt Collection Act’s provisions against falsely accusing consumers of crimes or threatening them with arrest. Unfortunately, not only are such collection actions rarely punished, but many district attorney’s offices are often all too willing to countenance such charges. In fact, some district attorneys not only send out legally required notices on behalf of merchants using official government letterhead, but they have also established fast-filing programs that allow these lenders to expedite the process.

Taking a ding on your credit report is one thing; facing jail time is quite another. It is true that these pseudo-crimes are rarely prosecuted (presumably, because many recipients are suitably terrified into immediate payment), and that claims of modern-day debtors’ prisons lurking just around the corner are a bit hyperbolic. Even so, hijacking the government—the entity that by definition has a monopoly on the legitimate use of force—by transforming prosecutors into private debt collecting muscle is simply unconscionable.

Rather than pass another statute, the Texas Legislature should start by repealing the wrongheaded provisions of the CSO that allow payday lenders to avoid the laws intended to regulate their industry. The Consumer Protection Division of the Texas Attorney General’s Office should more vigorously enforce provisions of the Texas Debt Collection Act prohibiting fraudulent collection practices. And prosecutors should cease threatening to break borrower’s financial legs unless they pay up. These are the sort of solutions needed to combat the most pernicious aspects of the industry.

Payday lending, as currently constituted, is indeed a boil on the skin of the financial system. But the “medicine” of passing a new state statute that significantly limits these loans will not only fail to cure the patient, it will both exacerbate the current illness and produce a whole litany of unwanted side effects. The Texas Legislature should observe the Hippocratic Oath instead; first, do no harm.

Today millions of Americans will celebrate Valentine’s Day by purchasing roses for their loved ones and, in so doing, will participate in one of the everyday miracles of capitalism which too often escape our notice. As a recent Washington Post article points out, these roses will most likely have been grown thousands of miles away in Colombia, flown to the United States aboard cargo jets, and then delivered to florists and other retailers at the cost of a mere $1.50 per stem. That this is possible is not only a tribute to the magical powers of capitalism, but—as the newspaper notes—free trade and a 2012 agreement between the United States and Colombia which permanently lifted U.S. import tariffs on Colombian flowers. Indeed, a close reading of the piece reveals some of the many advantages of free trade and the benefits it confers.

Among them: 

Imports save consumers money: One of the most straightforward benefits of free trade is the reduced cost to consumers for the goods they purchase as a result of reduced tariffs and the ability of businesses to develop more cost-effective supply chains. By importing flowers from Colombia, according to the article, the price of roses has been kept almost unchanged for decades with a dozen red roses often available this week for less than $20.

Imports create jobs: Unsurprisingly, the growth of Colombia’s flower industry has helped provide jobs in that country—to the tune of 130,000 according to The Washington Post (including, it seems, for thousands of Venezuelans fleeing from that country’s experiment in socialism). Often overlooked, however, is that imports also create new employment opportunities for Americans, both through the actual process of importation and as an intermediate good. The numerous planes full of flowers, for example, require logistics personnel to offload, store, and transport them to their final destination. Cheaper flowers, meanwhile, mean increased sales and more workers at the distributors and retailers which carry them. Indeed, the article cites the example of the USA Bouquet Company in Doral, Florida which employs 75 workers to put “imported red roses into vases and then carefully [pack] them in boxes for a Valentine’s shipment to Walgreens.”

Gains from specialization and comparative advantage: Free trade between countries allows for specialization and an increased focus on those areas in which each country enjoys a comparative advantage. In this example, Colombia enjoys a comparative advantage in the growing of roses and other flowers which, as the article points out, is a major factor behind the decline of U.S. rose production. Unmentioned, however, is that increased trade between the United States and Colombia—up 95 percent since 2006—has led to billions of dollars in exports in sectors where Americans enjoy a comparative advantage, such as agriculture, machinery, and computer software. In addition, competition from Colombian growers has forced American businesses to adapt and move higher up the value chain to areas where they might have a comparative advantage within the flower sector. As a result, the article notes that the price of U.S.-grown roses has “ticked up in recent years because U.S. growers have focused primarily on higher-end roses that are designed for weddings and special events.”

If heartache is to be found in this free trade valentine it is that the trade agreement signed with Colombia is the last to have been approved by Congress (along with free trade agreements with Panama and South Korea, all of which were passed on October 12, 2011). While President Trump has promised the conclusion of additional bilateral agreements, new negotiations have yet to be initiated. That’s unfortunate, and we should hope that 2018 will see a new push on this front. Colombian roses are but one beautiful example of the gains to be had from tariff-free access to the world’s offerings, and Americans deserve access to all of them.

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