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The Federation for American Immigration Reform (FAIR) released a report claiming that E-Verify lowered unemployment rates in states that implemented it.  FAIR’s report is deeply flawed.  The first section of this blog will catalog FAIR’s errors and show that states with mandatory universal E-Verify typically had higher unemployment.  The second portion of this blog will use the synthetic control method to look at E-Verify’s effect on unemployment in Arizona after the E-Verify mandate.  The flaws in FAIR’s report are important to highlight as more states are considering a universal E-Verify mandate.  There is little evidence that E-Verify mandates lower unemployment but much evidence that they raise it.   

Criticisms of FAIR’s Report

E-Verify is a taxpayer funded federal government run system that is supposed to exclude illegal immigrants from the workforce.  The system would be used at the point of hire to verify that any new worker is actually authorized to work in the United States.  FAIR attempted to show that states with E-Verify have higher employment growth relative to other states.  This is likely an attempt to overcome one of the stronger criticisms of E-Verify: It is an expensive labor market regulation that will increase unemployment by raising the cost of hiring new workers among other problems.  However, FAIR excluded the first state to mandate E-Verify and made numerous other silly methodological choices that make their results unreliable. 

First, the FAIR authors excluded Arizona from their report.  Arizona was the first state to mandate E-Verify for all new hires.  Unemployment rates as measured by U3 were lower in Arizona than in the rest of the United States prior to the implementation of E-Verify and they shot up afterward, remaining consistently above the rest of the United States (Figure 1).  The result is even more extreme for the U6 unemployment rate that the FAIR report insisted on using (Figure 2).  Narrowing the comparison to the southwestern states of California, Colorado, Nevada, New Mexico, Oklahoma, Texas, and Utah shows similar results whereby Arizona had relatively lower unemployment prior to mandating E-Verify and higher unemployment afterward (Figures 3-4).  Utah mandated E-Verify for some employers during this time but excluding that state does not affect the results.  Mandatory E-Verify did not appear to improve employment in Arizona. 

Figure 1

Arizona Unemployment Rate (U3) vs. United States Unemployment Rate (U3)

Source: Bureau of Labor Statistics.

Figure 2

Arizona Unemployment Rate (U6) vs. United States Unemployment Rate (U6)

 

Source: Bureau of Labor Statistics.

Figure 3

Arizona unemployment Rate (U3) vs. Southwest Unemployment Rate (U3)

 

Source: Bureau of Labor Statistics.

Figure 4

Arizona Unemployment Rate (U6) vs. Southwest Unemployment Rate (U6)

 

Source: Bureau of Labor Statistics.

Second, FAIR did not distinguish between different types of E-Verify mandates.  They treated West Virginia’s law that the “West Virginia Legislature requires any employer that has employees working on the grounds or in buildings of the Capitol Complex, or who have access to sensitive or critical information, to use E-Verify” with being as strict as Alabama’s statewide mandatory E-Verify requirement for all new private and public sector hires.  Those different laws are going to have different impacts so it makes no sense for FAIR to treat them as the same.  This blog only looks at states with universal E-Verify mandates because that is FAIR’s policy goal.  

Third, FAIR did not show an average effect across states with mandatory universal E-Verify.  I constructed a simple average of U6 unemployment in all states (Arizona, Alabama, Mississippi, and South Carolina) for each year they had a universal E-Verify mandate and compare them to states that did not (Figure 5).  States are added to the average when they passed new mandates.  The vertical lines show when each state passed its E-Verify mandate.  States with an E-Verify mandate had consistently higher unemployment than states that did not.  This does not mean that E-Verify caused the persistently higher unemployment rates in these states as these state governments might have passed E-Verify because of high unemployment rates.  However, this simple analysis does provide evidence that states with E-Verify mandates did not then have lower unemployment rates than other states.

Figure 5

E-Verify Mandate States Unemployment Rate (U6) vs. United States Unemployment Rate (U3)

 

Source: Bureau of Labor Statistics.

Fourth, there were an estimated 350,000 unauthorized immigrants living in Arizona in 2009.  In the same year, there were only 210,000 illegal immigrants living in all of Alabama, Mississippi, and South Carolina.  If E-Verify were to have an effect on unemployment then it would be most obvious is Arizona.  However, it is impossible to tell when each state enacted mandatory E-Verify by eyeballing the U6 rate (Figure 6).  The state of the economy drives the unemployment trends more than this labor market regulation.  If E-Verify has an effect, it is small.

Figure 6

Unemployment Rates (U6) by State and Nationwide

 

Source: Bureau of Labor Statistics.

There are at least two reasons why the E-Verify mandate did not much affect the unemployment rates in these states.  First, illegal immigrant workers were small fractions of the workforce in three-quarters of them.  Second, E-Verify’s effect is attenuated because many employers in these states do not follow the E-Verify mandates and it is ineffective at actually excluding illegal immigrant workers even when it is used properly.

Fifth, the FAIR report analyzed a period of time that coincided with recovery from the Great Recession.  In other words, FAIR chose a start date for its report after which nationwide unemployment rates were guaranteed to fall.  The authors of the FAIR report made no effort to correct for that huge confounding factor. 

Synthetic Controls Method

This section uses the synthetic controls method (SCM) to see how E-Verify affected relative unemployment in states that mandated the program.  SCM “allows for effect estimation in settings where a single unit (a state, country, firm, etc.) is exposed to an event or intervention.  It provides a data-driven procedure to construct synthetic control units based on a convex combination of comparison units that approximate the characteristics of the unit that is exposed to the intervention.  A combination of comparison units often provides a better comparison for the unit exposed to the intervention than any comparison unit alone.”  SCM creates an alternative version of the unit that was not affected by the intervention based on numerous indicator variables for other units prior to the intervention.  Researchers use the SCM widely

The comparison units are states that must be similar to Arizona prior to the passage of mandatory E-Verify which I track back to 2004 (other papers have gone back to 1998).  Furthermore, the indicator variables must also be related to unemployment.  I chose states in the American southwest and indicator variables of the state level minimum wage laws, population, the percent of the population that are illegal immigrants, the state unionization rate, and per capita GDP.  SCM shows that Arizona’s unemployment rate rises above what it would have been in Arizona without E-Verify (Figure 7).  This means that E-Verify is likely the cause of the increase in relative unemployment in Arizona since its mandate.

The Root Mean Square Percentage Error (RMSPE) measures how close the pre-E-Verify Real Arizona is to the pre-E-Verify Synthetic Arizona Without E-Verify and the closer it is to zero (but not too close), the better it is.  The RMSPE is an excellent 0.0504892.  The Synthetic Arizona without E-Verify is constructed from 33.9 percent of Nevada, 29.1 percent New Mexico, 20.9 percent Texas, and 16.1 percent Utah.  The indicator variables are 16.7 percent the Arizona  U3 unemployment rate in 2007, 28.7 percent the population of the states, 14.4 percent the state’s minimum wage, 9.2 percent the state’s population who are illegal immigrants, a fraction of a percent from the unionization rate, and 31 percent from the state’s GDP per capita.  These are good weights distributed over many indicator variables.  When I excluded states with a partial E-Verify mandate on firms by certain sizes (Georgia, North Carolina, Tennessee, and Utah), the results were very similar. 

Figure 7

Synthetic Control Method Arizona, U3 Unemployment Rate

 

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, Eren and Ozbeklik, American Community Survey, and Pew.  

I then ran two robustness checks to see how much confidence we should have in these findings.  The first is called an in-time placebo and it changes the date of E-Verify’s enactment to see if there was a similar effect.  If there was a similar effect in other years then E-Verify is less likely to be the culprit. However, there was not a similar effect for other years which should increase confidence in the original SCM finding that E-Verify increases unemployment. 

The second robustness check is called an in-place placebo and it runs the SCM for every single state to see if Arizona stands out (Figure 8).  Arizona is in the bolded green line and it does not stand out relative to other states in the southwest.  This robustness check should decrease our confidence that E-Verify had much of an impact on the unemployment rate in either direction because Arizona straddles the horizontal 0 line.  A quick use of the SCM over these years with these indicator variables cannot show that E-Verify increased unemployment in Arizona but it does show that E-Verify did not lower unemployment. 

Figure 8

In-Place Placebo, U3 Unemployment Rate

 

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, Eren and Ozbeklik, American Community Survey, and Pew.  

This wonderful paper by Magnus Lofstrom, Sarah Bohn, and Steven Raphael at the PPIC uses different indicator variables over a different period and finds a negative employment effect from E-Verify.  I trust their more thorough review of the evidence than my own but I needed to run my own simpler SCM here in order to look at the same years analyzed by FAIR.        

Conclusion

FAIR’s report made several questionable methodological choices in analyzing how E-Verify affects unemployment rates on the state level.  Most egregiously, FAIR excluded Arizona even though it was the first state to mandate universal E-Verify.  Any thorough and reputable study on the employment effects of E-Verify must include all of the states that actually mandated it.  Furthermore, unemployment rates in states with universal mandatory E-Verify were mostly higher than in other states.  Lastly, I used the synthetic control method to show that Arizona’s unemployment rate did not drop as a result of E-Verify and there is some evidence that E-Verify even increased unemployment in Arizona.  Whatever one can say about E-Verify, it does not lower unemployment rates.

Many states are considering an E-Verify mandate for all employers and employees in their states. E-Verify is a taxpayer funded federal government run system that is supposed to exclude illegal immigrants from the workforce. In practice, E-Verify imposes high economic costs and does little to dampen the wage magnet that attracts illegal immigrants to the United States.

State attempts to mandate E-Verify have run into serious roadblocks in at least three states this year and are likely dead there. For instance, Illinois’ HB 3415 is still stuck in committee and is very unlikely to become law. In fact, Illinois is so averse to E-Verify that it even tried to prohibit its use of that system by any employer in the state. New Jersey’s A 3249 is extremely unlikely to pass in a state government dominated by Democrats. Maine HP 904 is effectively dead as that legislator has more pressing matters to attend to.

However, a watered-down form of mandatory E-Verify has an excellent chance of becoming law in North Carolina. The Protect North Carolina Workers Act (HB 35) passed the House and will likely be taken up by the state Senate when it returns in late August. The Protect North Carolina Workers Act would require mandatory E-Verify for every new employee hired by a firm with 15 or more employees. Legislators have exempted domestic and farm workers from E-Verify, likely because they believe those sectors of the economy would be devastated if they also had to comply with the mandate. 

E-Verify’s cheerleaders sell the system as a silver bullet that will resolve illegal immigration with little help from other government programs. E-Verify takes personal identity information that workers must provide on I-9 tax forms and then checks the validity of their Social Security Number against information held in Social Security Administration (SSA) and immigration status against Department of Homeland Security (DHS) databases. If both databases decide that the identity information is valid then E-Verify approves the employee for work. If E-Verify encounters an error then it returns a tentative non-confirmation that requires the employee and employer to sort out the error. In 2012, 46.5 percent of contested E-Verify cases took longer than eight working days to resolve. If the error is resolved then the employer can permanently hire the worker. If the error is not resolved then E-Verify issues a final non-confirmation whereby the employer must fire the worker.

That whole system can only work well if E-Verify and the information in government databases is reliable and accurate. Unfortunately for workers and employers, that information is wrought with errors. The last major survey of E-Verify’s accuracy rates in 2012 found that it incorrectly approved 54 percent of illegal immigrants to work legally in the United States. E-Verify approved them because it relies on documents presented by the workers themselves. The biggest hole in E-Verify is that it checks the validity of documents but does little to check whether they belong to the actual person who presents them. For example, E-Verify flags a blatantly false Social Security number but it will not flag a valid one when it is paired up with the right name even if neither belong to the correct worker.  Any problems created by a nationwide E-Verify mandate will lead to calls for a national biometric identity card to fill the gaps.

E-Verify also forces some employers to fire some legal workers. Around 0.15 percent of E-Verify queries result in a false final non-confirmation, locking out otherwise legal citizens and permanent residents from employment. Even more absurd, about half of all new hires in states that require mandatory E-Verify for all new hires are not run through the system. The goal of E-Verify is to disincentivize illegal immigration by denying workers employment but mandatory E-Verify in Arizona only lowered wages of Mexican illegal immigrants by about five percent. That hardly counts as demagnetizing the wage magnet. Enforcing E-Verify is about as difficult as enforcing the current I-9 system except that it adds another layer of bureaucracy for employers and employees to overcome. 

A North Carolina E-Verify mandate for firms with 15 or more employees will have little effect on unlawful immigration but will increase the cost of hiring new workers. North Carolina has grown rapidly over the last few decades. Its relatively low taxes, tolerable administration of justice, and manageable regulation environment have made it a magnet for workers and firms from around the world. Imposing a new, costly, and ineffective labor market regulation like E-Verify is a bold strike against the other wise policies that have made North Caroline an economic success.  

Congress should privatize federally-owned businesses such as Amtrak, the postal service, and the air traffic control system. Privatization would cut costs and improve customer service, as I discuss here. It would also boost U.S. innovation and exports.

Typically, federal government businesses do not export their goods, services, or technologies. They have no incentive to do so. They are content to live the quiet life, and they have little reason to innovate or seek foreign markets. As such, keeping business activities trapped inside of bureaucracies restricts growth opportunities for the economy.

In a new article on air traffic control (ATC), Rui Neiva of the Eno Center illustrates the theme. He discusses how the privatized Canadian ATC company developed and implemented “electronic flight strips” years ago, while our government ATC bureau is still struggling to adopt this advance.

By 2009, all NAV CANADA facilities, including those serving general aviation, were equipped with electronic flight strips. Given that NAV CANADA is both an operator and a manufacturer of equipment for ATC, the technology that they developed has been sold to multiple countries worldwide, including Australia, Denmark, Dubai, Italy, and United Kingdom.

Canada privatized its ATC system in 1996 as Nav Canada. The company is a leader in ATC innovation and has developed numerous technologies, such as the flight strips, that it exports abroad. Bob Poole noted, “The technical expertise at Nav Canada has led to a thriving business marketing innovative ATC hardware and software and advising other air navigation service providers on modernization.”

Nav Canada earns income from foreign contracts and royalties, which in turn helps fund its ongoing research. Another interesting byproduct of Canadian privatization is Searidge Technologies, which is a Canadian company that is a leader in selling “remote tower” services to ATC systems worldwide. Nav Canada was an early investor in Searidge and today is co-owner.

Now consider another industry run by our government: currency printing. Our money is printed by the U.S. Bureau of Engraving and Printing. But Canada has long contracted out the printing of its money to the Canadian Bank Note Company and other firms.

Canadian Bank Note Company has used its domestic expertise as a base to go global, and today it prints money, stamps, and high-end security products for clients in 60 counties. Meanwhile, the Bureau of Engraving and Printing supplies only the U.S. market and does not export.

Government agencies fall behind because they are cut off from global markets and the need to compete. Look at the U.S. government-made bills in your wallet. Boring! Now look at this cool Canadian fiver or this New Zealand fiver, both manufactured from high-tech plastics by the Canadian Bank Note Company. The NZ bill won “international bank note of the year” in 2015.

The lesson is that we deny opportunities to American entrepreneurs when we keep businesses entombed in the government. Moving ATC, currency printing, and other activities to the private sector would allow American workers to capitalize on their skills and sell their innovations worldwide.

More on air traffic control here.

More on privatization here.

Join me, Michael Sargent, and Rep. Tom Massie at the Heritage Foundation tomorrow to discuss air traffic control reform.

 

Liu Xiaobo passed away on July 13th, 2017, at age 61. This piece was originally posted at AtlasNework.org on September 8, 2016.

When I think of examples of successful self-control and dignity under the most difficult circumstances, one person comes to mind before all others: 刘晓波, Liu Xiaobo, the Chinese writer and human rights activist, who was sentenced on Dec. 25, 2009, to 11 years of imprisonment in China on the charge of “inciting subversion of state power.” Liu’s body is in prison and he is being made to suffer deprivation of liberty, health, companionship, and more by state authorities, but he will not allow himself to be consumed by the hatred that would destroy a person with less self-control. Before being subjected to years of imprisonment and abuse, he had tried to lead a life of freedom and responsibility.

“What I demanded of myself was this: whether as a person or as a writer, I would lead a life of honesty, responsibility, and dignity,” Liu said.

Liu read his final statement after his sentencing, but was cut off after 14 minutes by the “judge” on grounds that the prosecution had spent only 14 minutes making the case against him. In it, he said, “I have no enemies and no hatred.” Liu exemplifies great self-control and mindfulness. He is focused on his goal: to foster a society of free and responsible persons who live together in equal freedom and mutual respect. He refuses to be consumed by hatred, because hatred and bitterness foster violence, cruelty, revenge, and oppression.

“Hatred can rot away at a person’s intelligence and conscience,” Liu said. “Enemy mentality will poison the spirit of a nation, incite cruel mortal struggles, destroy a society’s tolerance and humanity, and hinder a nation’s progress toward freedom and democracy. That is why I hope to be able to transcend my personal experiences as I look upon our nation’s development and social change, to counter the regime’s hostility with utmost goodwill, and to dispel hatred with love.”

I blink away tears every time I read Liu Xiaobo’s final statement. He not only refuses to be consumed by hatred, he takes the unjust occasion of his imprisonment to express his love for his wife, Liu Xia, who was forbidden by the state authorities to see him.

“I am serving my sentence in a tangible prison, while you wait in the intangible prison of the heart,” he said. “Your love is the sunlight that leaps over high walls and penetrates the iron bars of my prison window, stroking every inch of my skin, warming every cell of my body, allowing me to always keep peace, openness, and brightness in my heart, and filling every minute of my time in prison with meaning. My love for you, on the other hand, is so full of remorse and regret that it at times makes me stagger under its weight. I am an insensate stone in the wilderness, whipped by fierce wind and torrential rain, so cold that no one dares touch me. But my love is solid and sharp, capable of piercing through any obstacle. Even if I were crushed into powder, I would still use my ashes to embrace you.”

Has there ever been a more poignant expression of love? “I would still use my ashes to embrace you.” As another translation phrased it, “I will embrace you with my ashes.”

Liu had spent time in America teaching, but in 1989, as the Tiananmen Square protests gathered adherents, he left the safety of Columbia University to return to China. For his efforts to avert violence and save lives, he was arrested and brutalized for two years without charge. Although he had come to believe that some elements of the political cultures of “the West” could be helpful to China, he was not blinded to the flaws of other countries, cultures, and political systems. In a 1989 essay written in New York (“Chinese Politics and China’s Modern Intellectuals”), he resolved to be true to himself.

If I, as a person who has lived under China’s autocratic system for more than thirty years, want to reflect on the fate of humanity or on how to be an authentic person, I have no choice but to carry out two critiques simultaneously. I must:

1. Use Western civilization as a tool to critique China.

2. Use my own creativity to critique the West.

Liu Xiaobo exemplifies, to perhaps the highest degree, the self-control of a human being. The Chinese state has imprisoned him, but he refuses to be their willing slave. He refuses to be controlled by the state. They cannot even make him hate them.

Many of Liu’s papers are collected in his book No Enemies, No Hatred: Selected Essays and Poems, by Liu Xiaobo, ed. by Perry Link, Tienchi Martin-Liao, and Liu Xia (Cambridge, MA: Harvard University Press, 2012).

   

The death of Liu Xiaobo from liver cancer on July 13, under guard at a hospital in Shenyang, marks the passing of a great defender of freedom—a man who was willing to speak truth to power. As the lead signatory to Charter 08, which called for the rule of law and constitutional government, Liu was sentenced to 11 years in prison for “inciting the subversion of state power.” Before his sentencing in 2009, Liu stood before the court and declared, “To block freedom of speech is to trample on human rights, to strangle humanity, and to suppress the truth.” With proper treatment and freedom, Liu would have lived on to voice his support for a free society. 

While Liu’s advocacy of limited government, democracy, and a free market for ideas won him the Nobel Peace Prize in 2010, China’s leadership viewed him as a criminal and refused to allow him to travel to Oslo to receive the award. Instead, the prize was placed on an empty chair at the ceremony, a lasting symbol of Liu’s courage in the face of state suppression. Beijing also prevented liberal Mao Yushi, cofounder of the Unirule Institute, from attending the ceremony to honor Liu. 

IdealMentre

The mistreatment of Liu, and other human rights’ proponents, is a stark reminder that while the Middle Kingdom has made significant progress in liberalizing its economy, it has yet to liberate the minds of the Chinese people or its own political institutions. 

The tension between freedom and state power threatens China’s future. As former premier Wen Jiabao warned in a speech in August 2010, “Without the safeguard of political reform, the fruits of economic reform would be lost.” Later, in an interview with CNN in October, he held that “freedom of speech is indispensable for any country.”

Article 33, Section 3, of the PRC’s Constitution holds that “the State respects and protects human rights.” Such language, added by the National People’s Congress in 2004, encouraged liberals to test the waters, only to find that the reality did not match the rhetoric.

The Chinese Communist Party pays lip service to a free market in ideas, noting: “There can never be an end to the need for the emancipation of individual thought” (China Daily, November 16, 2013). However, Party doctrine strictly regulates that market. Consequently, under “market socialism with Chinese characteristics,” there is bound to be an ever-present tension between the individual and the state.

In an interview with the Wall Street Journal (September 22, 2015), President Xi argued that “freedom is the purpose of order, and order the guarantee of freedom.” The real meaning of that statement is that China’s ruling elite will not tolerate dissent: individuals will be free to communicate ideas, but only those consistent with the state’s current interpretation of “socialist principles.” 

This socialist vision contrasts sharply with that of market liberalism, which holds that freedom is not the purpose of order; it is the essential means to an emergent or spontaneous order. In the terms of traditional Chinese Taoism, freedom is the source of order. Simply put, voluntary exchange based on the principle of freedom or nonintervention, which Lao Tzu called “wu wei,” expands the range of choices open to individuals. 

Denying China’s 1.4 billion people a free market in ideas has led to one of the lowest rankings in the World Press Freedom Index, compiled by Reporters without Borders. In the 2016 report, China ranked 176 out of 180 countries, only a few notches above North Korea—and the situation appears to be getting worse. Under President Xi Jinping’s consolidation of power in preparation for this year’s Party Congress, the websites of liberal think tanks, such as the Unirule Institute, have been shut down, and virtual private networks (VPNs) are being closed, preventing internet users from circumventing the Great Firewall.

Liu’s death is a tragic reminder that China is still an authoritarian regime whose leaders seek to hold onto power at the cost of the lives of those like Liu who seek only peace and harmony through limiting the power of government and safeguarding individual rights. 

This story from the WSJ claims that 

the extradition of Joaquín “El Chapo” Guzmán, Mexico’s long-dominant drug lord, has led to an explosion of violence in his home state of Sinaloa, the birthplace of the country’s narcotics industry.

Rival factions are fighting over Mr. Guzmán’s billion-dollar empire as he awaits trial in solitary confinement inside a high-security prison in New York. He was extradited to the U.S. in January on drug-trafficking and murder charges.

This explanation for increased violence in Mexico is exactly what one would predict from this Cato Research Brief, by economists Jason Lindo and Maria Padilla-Romo:

We find that the capture of a [Drug Trafficking Organization] (DTO) leader in a municipality increases its homicide rate by 80 percent, and this effect persists for at least 12 months. Consistent with the notion that the kingpin strategy destabilizes an organization, we also find that these captures significantly increase homicides in other municipalities with the same DTO presence. In particular, we find that homicide rates in neighboring municipalities with the same DTO presence rise 30 percent in the six months after a kingpin capture before returning to expected levels. Further, kingpin captures cause homicide rates to grow over time (to 18 percent above expected levels 12 or more months after a capture) for more-distant municipalities with the same DTO presence. We find little evidence of increased homicide in neighboring municipalities where the captured leader’s DTO did not have a presence.

Disputes between rival suppliers occur in all industries; but in legal ones, the disputes take the form of advertising wars and lawsuits, not violence. See also this old paper of mine on the same subject.

Three days after North Korea successfully tested an intercontinental ballistic missile two U.S. B-1B Lancer bombers flew from Guam to South Korea and dropped guided bombs on a target range. This isn’t the first time the B-1B has “sent a message” to Kim Jong-Un, and it likely won’t be the last, but what message do these bomber flights actually send? Do the flights indicate that efforts to drive a wedge in the U.S.-South Korea alliance won’t work? Are they a demonstration of American capacity to destroy North Korea’s nuclear forces early in a conflict without relying on U.S. nuclear weapons? Something else? All or none of the above?

The number of messages that the bomber flights could be sending reflects the fact that signaling is hard. States use displays of military power as a tool to communicate their intentions or positions to friends and adversaries alike, but these messages can easily be misread or even completely missed by the target. A recent book on nuclear weapons and coercive diplomacy by Todd Sechser and Matthew Fuhrmann contains multiple case studies of crises involving nuclear threats where signals were frequently misread or missed entirely.*

The B-1B bomber flights offer a perfect example of how signals can be misread. The B-1B used to carry nuclear weapons, but under the terms of the New START treaty the bombers were converted to remove their nuclear capability. According to the U.S. Air Force the conversion process was completed in March 2011. From the U.S. perspective, the B-1B flights are likely seen a demonstration of U.S. commitment to the alliance and capability to counter North Korea’s nuclear arsenal with conventional weapons.

However, from the North Korean perspective the B-1Bs are not just a conventional threat. After the bombers conducted joint drills with South Korean forces in May 2017, the state-run Korean Central News Agency (KCNA) called the exercises “nuclear bomb dropping drills.” Making the false claim that the B-1B is a nuclear bomber could just be for propaganda purposes, but Kim Jong-Un and the North Korean military may believe that the bomber has a nuclear mission. In isolation, incorrect statements about the bomber’s capabilities may not seem like a big deal, but if North Korean nuclear posture is formed based on assessments of U.S. nuclear and conventional strike capabilities then this small false assumption could have an outsized effect.

The B-1B flights are a useful example of how the target of a signal can develop different conclusions than what the signaler intends. Signaling is always difficult; there is no quick fix to ensure that signals will not be misread or missed entirely. U.S. policymakers must keep this in mind as they craft their approach to the North Korean problem, especially as they think about the role that military exercises and maneuvers play in their strategy. High profile military exercises will send a message to North Korea, but the message they receive may not be the message the United States intends.

 

⃰ Full disclosure: the Cato Institute hosted Sechser and Fuhrmann for a discussion of their book in March 2017.

Sen. Ron Wyden (D-OR) is concerned about Customs and Border Protection’s (CBP) searches of travelers’ electronic devices at the border and ports of entry. CBP’s responses to Wyden’s queries about such searches are illuminating but far from reassuring.

In February, Sen. Wyden sent a letter to Department of Homeland Security (DHS) Secretary John Kelly, asking a range of questions about searches of electronic devices. DHS responded to this letter, but the agency’s response didn’t satisfy Sen. Wyden, who posed some followup questions to CBP acting commissioner, Kevin McAleenan.

McAleenan’s answers to Sen. Wyden’s questions are revealing, in part because of what they don’t discuss.

The answers begin by noting that the Supreme Court recognizes the CBP’s “broad scope” of authority to conduct border searches.

Thanks to Supreme Court doctrine, there is a “border exception” to the Fourth Amendment, which ostensibly protects us and our property against “unreasonable searches and seizures.” As Justice Rehnquist noted in his United States v. Montoya de Hernandez (1985) majority opinion:

Consistently, therefore, with Congress’ power to protect the Nation by stopping and examining persons entering this country, the Fourth Amendment’s balance of reasonableness is qualitatively different at the international border than in the interior. Routine searches of the persons and effects of entrants are not subject to any requirement of reasonable suspicion, probable cause, or warrant, […] and first-class mail may be opened without a warrant on less than probable cause.

As things stand, CBP can conduct “routine” searches at the border absent a warrant or individualized suspicion. In its guide to digital privacy at the border, the Electronic Frontier Foundation note that what constitutes a “routine” search is not comprehensively defined. The Supreme Court found, for instance, that taking a gas tank apart is “routine,” but that detaining someone until they defecate is not “routine.”

The Supreme Court has not ruled on whether CBP examination of travelers’ electronic devices constitute a “routine” search. CBP’s position is, unsurprisingly, that such snooping does not require a warrant. The CBP’s electronic search policy explicitly states:

In the course of a border search, with or without individualized suspicion, an Officer may examine electronic devices and may review and analyze the information encountered at the border,

Many electronic devices are locked with either a passcode or a fingerprint sensor. Sen. Wyden explicitly asked whether CBP officers are obliged to inform travelers that they are not required to disclose social media account passwords or passcodes to unlock electronic devices. As you can see below, McAleenan dodges the question entirely.

McAleenan asserts that the inspection of a traveler’s electronic device does not require that traveler’s consent. He goes on to say that CBP officers may ask travelers to unlock electronic devices and that the agency can hold on to the device. 

The question Sen. Wyden asked goes unanswered.

McAleenan’s does, however, answer Sen. Wyden’s question about whether CBP makes a distinction between accessing data on foreign servers in the course of conducting an electronic search and accessing data on domestic servers. McAleenan responded, saying that CBP officers only access data “physically resident on the device.”

This policy exempts a lot of sensitive data, but it doesn’t protect videos, photos, text messages and other information housed on phones and other electronic devices. 

CBP can cause headaches for American citizens and permanent residents who refuse to disclose passwords for electronic devices, either by seizing the device in question and delaying your exit from the airport or border crossing. The situation is worse if you’re not a citizen or permanent resident as you risk being denied entry.

A CBP officer asking for information that would allow access to your electronic devices is an intimidating prospect, and it’s not surprising that some innocent people feel compelled to cooperate. For example, a NASA engineer who is also a U.S. citizen did disclose the passcode for his phone after being pressured to do so by CBP. If CBP officers were required to inform travelers that they do not have to reveal passcodes or passwords there would be fewer of these incidents which, while still comparatively rare, are occuring more frequently than they were in recent years. 

I think this is the first official act of the Trump administration that I can honestly say I can get behind, and enthusiastically. According to the Washington Post, Trump’s budget plan would dramatically cut funding for TSA’s roving Fourth Amendment violation squads, better known as “Visible Intermodal Prevention and Response” (VIPR) teams. From the Post story:

Under the proposed budget, VIPR funding would drop to $15 million from $58 million and the number of VIPR teams would be cut to 8 from 31, with 277 full-time positions being eliminated, according to the report. The Democratic staff members of the Senate Homeland Security Committee say in the report they were told that even though federal officials say eight VIPR teams can “maintain an acceptable security posture,” the three-quarters funding cut will “limit” the presence of teams nationwide.

I would’ve preferred the complete abolition of these ineffectual, costly teams–which have never stopped a single terrorist attack but which have often caused havoc at the transportation hubs they’ve haunted. But these cuts are a welcome, significant step in the right direction, and the administration is to be commended for making this move.

As a general rule, the International Monetary Fund is a statist organization. Which shouldn’t be too surprising since its key “shareholders” are the world’s major governments.

And when you realize who controls the purse strings, it’s no surprise to learn that the bureaucracy is a persistent advocate of higher tax burdens and bigger government. Especially when the IMF’s politicized and leftist (and tax-free) leadership dictates the organization’s agenda.

Which explains why I’ve referred to that bureaucracy as a “dumpster fire of the global economy” and the “Dr. Kevorkian of global economic policy.”

I always make sure to point out, however, that there are some decent economists who work for the IMF and that they occasionally are allowed to produce good research. I’ve favorably cited the bureaucracy’s work on spending caps, for instance.

But what amuses me is when the IMF tries to promote bad policy and accidentally gives me powerful evidence for good policy. That happened in 2012, for example, when it produced some very persuasive data showing that value-added taxes are money machines to finance a bigger burden of government.

Well, it’s happened again, though this time the bureaucrats inadvertently just issued some research that makes the case for the Laffer Curve and lower corporate tax rates.

Though I can assure you that wasn’t the intention. Indeed, the article was written as part of the IMF’s battle against tax competition. As you can see from these excerpts, the authors clearly seem to favor higher tax burdens on business and want to cartelize the global economy for the benefit of the political class.

…what’s the problem when it comes to governments competing to attract investors through the tax treatment they provide? The trouble is…competing with one another and eroding each other’s revenues…countries end up having to…reduce much-needed public spending… All this has serious implications for developing countries because they are especially reliant on the corporate income tax for revenues. The risk that tax competition will pressure them into tax policies that endanger this key revenue source is therefore particularly worrisome. …international mobility means that activities are much more responsive to taxation from a national perspective… This is especially true of the activities and incomes of multinationals. Multinationals can manipulate transfer prices and use other avoidance devices to shift their profits from high tax countries to low, and they can choose in which country to invest. But they can’t shift their profits, or their real investments, to another planet. When countries compete for corporate tax base and/or real investments they do so at the expense of others—who are doing the same.

Here’s the data that most concerns the bureaucrats, though they presumably meant to point out that corporate tax rates have fallen by 20 percentage points, not by 20 percent.

Headline corporate income tax rates have plummeted since 1980, by an average of almost 20 percent. …it is a telling sign of international tax competition at work, which closer empirical work tends to confirm.

But here’s the accidental admission that immediately caught my eye. The authors admit that lower corporate tax rates have not resulted in lower revenue.

…revenues have remained steady so far in developing countries and increased in advanced economies.

And this wasn’t a typo or sloppy writing. Here are two charts that were included with the article. The first one shows that revenues (the red line) have climbed in the industrialized world as the average corporate tax rate (the blue line) has plummeted.

This may not be as dramatic as what happened when Reagan reduced tax rates on investors, entrepreneurs, and other upper-income taxpayers in the 1980, but it’s still a very dramatic and powerful example of the Laffer Curve in action.

And even in the developing world, we see that revenues (red line) have stayed stable in spite of - or perhaps because of - huge reductions in average corporate tax rates (blue line).

These findings are not very surprising for those of us who have been arguing in favor of lower corporate tax rates.

But it’s astounding that the IMF published this data, especially as part of an article that is trying to promote higher tax burdens.

It’s as if a prosecutor in a major trial says a defendant is guilty and then spends most of the trial producing exculpatory evidence.

I have no idea how this managed to make its way through the editing process at the IMF. Wasn’t there an intern involved in the proofreading process, someone who could have warned, “Umm, guys, you’re actually giving Dan Mitchell some powerful data in favor of lower tax burdens”?

In any event, I look forward to repeatedly writing “even the IMF agrees” when pontificating in the future about the Laffer Curve and the benefits of lower corporate tax rates.

Neither of the defense bills (National Defense Authorization Acts, NDAAs) wending their way through the House and Senate grant the Pentagon the authority to reduce excess infrastructure. Military leaders have asked for such permission for many years, but Congress has stubbornly refused. An amendment sponsored by Rep. Tom McClintock (R-CA) would have stripped the language from the House NDAA that blocks a new Base Realignment and Closure (BRAC) round. That amendment failed yesterday by a vote of 175-248.

Before the vote, the House Armed Services Committee issued a “BRAC Facts” one pager to preempt the McClintock amendment and other attempts to resolve the impasse between Congress and military leaders over BRAC.

The one pager includes a few facts, but is selective to the point of misleading. For example, it states that Secretary of Defense James Mattis “does not have confidence in DOD BRAC assessments.” And quotes Mattis as saying “I am not comfortable right now that we have a full 20 some percent excess.” 

But the SecDef also said that a new BRAC round could save the Pentagon $2 billion a year. In written testimony last month, Mattis called BRAC “a cornerstone of our efficiencies program” and necessary to “ensure we do not waste taxpayer dollars.” Granting the Pentagon authority to reduce overhead, Mattis continued, “is essential to improving our readiness by minimizing wasted resources and accommodating force adjustments.” He observed, “Of all the efficiency measures the Department has undertaken over the years, BRAC is one of the most successful and significant.”

Meanwhile, deputy defense secretary Robert Work has also called for BRAC. “Spending resources on excess infrastructure does not make sense,” he wrote last year. In short, it simply isn’t accurate to imply that current Pentagon leaders doubt whether the military has more bases than it needs. And that is true even if the military were to grow in the next few years, as the HASC claims it must.

There are other problems with the HASC BRAC fact sheet. It notes that the “FY18 NDAA, which does not authorize a BRAC round, passed through Committee with an overwhelming bipartisan vote of 60 to 1.” But that doesn’t mean that 60 members supported everything in the bill. Indeed, 19 HASC members voted in favor of the McClintock amendment.    

HASC ranking member Adam Smith (D-WA) also attempted to amend the NDAA to allow for a BRAC, but his effort was blocked by the rules committee. During floor debate in support of the McClintock amendment, Smith scolded his fellow members. “We cannot afford for parochial interests to get in the way of what is in the best interests of our troops. We need a BRAC.” And he dismissed claims that a BRAC won’t save taxpayers’ dollars as “just factually ridiculous.” 

But an interesting divide might be opening, as well, between HASC Chairman Mac Thornberry (R-TX) and the chair and ranking member on the Senate Armed Services Committee. Bryan Bender at PoliticoPro reported that Senators John McCain (R-AZ) and Jack Reed (D-RI) “are preparing to offer an amendment to this year’s defense policy bill authorizing a new round of military base closures.”

A summary of the McCain-Reed proposal explains that it “is a significant departure from the 2005 BRAC round and includes a number of improvements which are all specifically designed to address common critiques from 2005.” The amendment was a bipartisan effort by SASC staff, in consultation “with the GAO, DOD, [Association of Defense Communities], CRS, former BRAC commissioners, various think tanks, [and] former DOD staff, etc.” A recent coalition letter that I spearheaded, signed by over 45 individuals from more than 35 different organizations, reveals the breadth and depth of support for a new BRAC round. 

Looking at the politics of BRAC on Capitol Hill, one could chalk up past Republican resistance to the fact that the requests were coming from an Obama administration that the GOP routinely accused of gutting the U.S. military. But now the Trump administration is requesting authority to eliminate unnecessary and underutilized facilities, even as it calls for more Pentagon spending. And Mattis has a lot more clout on Capitol Hill than his predecessors. If he gets behind the McCain-Reed proposal, the military might finally have a chance to redirect taxpayer resources to where they are most needed.

The other day, I wrote a piece lauding an amendment Sen. Ted Cruz (R-TX) was proposing to add to the Senate GOP’s health care bill. Cruz called it the the Consumer Freedom Amendment. If insurers offered two ObamaCare-compliant plans to all comers, the Cruz amendment would have freed them to sell–and freed consumers to purchase–health-insurance plans that did not comply with those regulations. The legislative language I saw appeared to free consumers, not from all the regulations I would like, but from enough that it would have made the Senate bill a step in the right direction. It also included more restrictions on the use of this “freedom option” than I would like, but same thing. The changes would have dramatically reduced premiums for consumers. Perhaps more important, it would have offered more comprehensive and more secure coverage to people who develop expensive illnesses than ObamaCare does.

Today, Senate GOP leaders released an updated draft of their health care bill. 

This draft imposes ObamaCare’s “single risk pool” price controls on “freedom option” plans. Long story short, that means there is no “freedom option” in this bill. Insurers probably would not even offer non-compliant plans. If they did, ObamaCare’s “single risk pool” price controls would make secure, guaranteed-renewable health insurance impossible by taxing such plans to death. Here’s how.

  • The “single risk pool” price controls would require insurers to increase premiums for both both ObamaCare-compliant plans and non-compliant plans by the same percentage. If claims in the complaint market necessitate a 10 pecent increase, while claims in the non-compliant market necessitate only a 6 percent increase, the insurer would have to increase premiums in the former market by too little and/or increase premiums in the latter market by too much.
  • Let’s say insurers split the difference by increasing premiums in both markets by 8 percent. In the second year, insurers would be over-charging consumers in the non-compliant market. The problem would only get worse with time. By year five, the insurer would be overcharging consumers in the non-compliant plans by almost 10 percent. That creates an incentive for the insurer or a competitor to issue new, appropriately priced non-compliant plans that lure the healthy people out of the old non-compliant plans.
  • Consumers who had who developed expensive illnesses in the first year could not switch to the new non-compliant plans, because insurers would underwrite them and charge them an even higher premium. So those folks would stay in the old non-compliant plans until the hidden tax imposed by the “single risk pool” price controls made those plans a worse deal than the heavily subsidized ObamaCare-compliant plans. At that point, those consumers would switch to the ObamaCare-compliant plans. Actually, the effect would be a lot like that of the MacArthur waivers in the House’s health care bill. 
  • In other words, secure, long-term, guaranteed-renewable coverage would be impossible, because the “single risk pool” price controls would tax those plans to death.
  • This dynamic would happen even faster if insurers increase both the compliant and noncompliant plan premiums by 10 percent, which they probably would.

I’m not saying there’s no way Senate Republicans can redeem their bill. I have offered ideas that might. But at this point, the Cruz amendment does not redeem or even add to the bill.

I don’t get Republicans’ sudden infatuation with price controls

For most of American educational history, government massively discriminated against African Americans, first with some states prohibiting any education for them, and long after that districts maintaining de jure, and to this day de facto, segregated schools. But we are to believe that the big segregation danger is school choice? That’s like saying it’s not the nuke we’ve been using that’s the big threat, but that someone might use a slingshot. It is also what the Center for American Progress is asserting in a new brief: The Racist Origins of Private School Vouchers.

This may be a new report, but that modern proposals are a huge danger because some states and districts used choice to evade public school integration after Brown v. Board of Education isn’t a new argument. Some places absolutely did do this, but the argument remains as logically and factually untethered from full history as it has ever been.

For one thing, the large-scale drive to have education dollars follow students to chosen schools did not start with white people trying to escape racial integration, but Roman Catholics—and others—trying to direct funding for their children to schools that taught their religious values, not someone else’s. They wanted to be treated equally, which public schools did not do. Meanwhile, as even the CAP report hints, often private people tried to help African Americans in the face of government discrimination.

Of course, we continue to have segregation in education: if you want to access a “good” district, you have to be able to pay for a home there. That is why most people probably do not think of private schooling when they think of “white flight,” but of families moving out of districts with growing African-American populations into suburban districts that tended to be largely white. This happened most famously in Michigan, not deep in the kudzu of Alabama or Mississippi.

Here, perhaps, is the biggest thing the CAP report misses: private school choice is extremely popular with African Americans, who want to be empowered to seek out something better for themselves, not be dependent on politicians and bureaucrats. For instance, a 2016 poll by the journal Education Next found that a whopping 64 percent of African Americans supported “a tax credit for individual and corporate donations that pay for scholarships to help low-income parents send their children to private schools.” Such support is not new, with approval for vouchers in the 60 percent range at least as far back as 1999.

Asserting that the origins of school choice are racist reeks of politicized guilt by association. But far more important, it ignores historical, current, and logical reality. Government, including the public schools, often forced segregation, and the public schools continue to be massively segregated. Meanwhile, logic dictates that there is far more danger of inflicting continued harm with a government system in which choice is primarily only possible by purchasing a home, than by giving parents control of education funds. Indeed, most African Americans agree: they want school choice.

As I predicted 72 hours ago, the FY18 National Defense Authorization Act (NDAA) will not be a vehicle for reforming National Security Agency (NSA) surveillance authorities under Sec. 702 of the FISA Amendments Act (FAA). The twist is that while the House Rules Committee did disallow an amendment to prevent “back door” warrantless searches of the stored communications of Americans (the full NDAA amendment list is available here), the author of all three surveillance reform amendments to the bill, Rep. Ted Lieu (D-CA) withdrew the other two before a Rules Committee vote. Lieu’s office offered the author the following statement on the decision:

Mr. Lieu has always been a strong advocate for protecting our civil liberties and our privacy. He introduced these NDAA amendments (which have been offered previously by other Members) to prevent warrantless searches of Americans’ data under Section 702 of the Foreign Intelligence Surveillance Act. Warrantless searches are just one of many problems with the law, which is set to expire at the end of this year. The House Judiciary Committee is currently negotiating a package that reauthorizes the necessary foreign surveillance authorities while adding sweeping reforms to protect Americans’ civil liberties. We were asked to withdraw our amendments this week to allow those reform discussions to continue in good faith, and we obliged because we are optimistic about achieving our goals. The amendment decision in no way changes the fact that a broad, bipartisan coalition of Member’s will fight any attempt to reauthorize Section 702 without serious reform.

So where does that leave FAA reform prospects? That will depend in no small measure on how determined reformers are to push the House GOP leadership on the question. As I write these lines, House Judiciary Committee Chairman Bob Goodlatte (R-VA) and Ranking Member John Conyers (D-MI) are working on competing FAA bills; while I expect the Conyers bill to offer more sweeping reform proposals, Goodlatte will no doubt not allow the Conyers bill to get a vote in committee. All of this means that unless at least 5-6 GOP House Judiciary members make it clear to Goodlatte that any FAA Sec. 702 reform bill brought up in committee must be amendable, what passes out of that committee and goes to the House floor for a vote may be just as anemic a reform measure as the 2015 USA Freedom Act

What would real reform look like? In an ideal world, the FAA would simply sunset and become an historical footnote. If the American public was more politically engaged on this issue, that outcome would be within reach. Unfortunately, that’s not the case at the moment. It’s possible that further surveillance-related revelations in the “Russiagate” scandal might change that dynamic, but those pushing for real surveillance reform cannot rely on chance to achieve their aims. Pro-surveillance advocates are certainly leaving nothing to chance.

The Office of the Director of National Intelligence (ODNI) is pushing hard to maintain this surveillance authority, and if possible, see that it becomes permanent and remains unchanged otherwise. As I noted in The American Conservative earlier this year, there’s plenty of reason to question the veracity of the executive branch’s claims about the necessity and efficacy of Sec. 702 collection.

Accordingly, I’ll judge any Sec. 702 reform bill by the following criteria. First, does it ban the collection & retention of U.S. Person data unless said data is collected pursuant to an authorized investigation governed by a probable cause-based warrant? Does it require the verified destruction of non-investigation relevant U.S. Person data extant in Intelligence Community IT systems? Does it require mandatory compliance audits by (preferably) the Government Accountability Office or (2nd choice) the Intelligence Community Inspector General? Does it ban so-called “about” collection, as suggested by Rep. Tulsi Gabbard (D-HI)? Does it mandate efficacy and cost audits?

If the bill that comes out of the House Judiciary Committee does not do all of these things (and ideally several more), then it’s just another edition of the old Capitol Hill “Let’s-Not-But-Say-We-Did” legislative shell game.

Olivia Enos, David Inserra, and Joshua Meservey of the Heritage Foundation published an interesting Backgrounder last week about the U.S. refugee program. We agree with many, though not all, of its conclusions and think that it serves as a wonderful example of policy experts grappling with a difficult policy question in a nuanced and thoughtful way – two characteristics often lacking in Washington, D.C.

However, the Backgrounder’s claim that 61 refugees were convicted of Islamist “terrorism-related” offenses since 2002 has earned a lot of attention from the media. David Inserra was kind enough to send us a complete list of the refugee terrorists he and his colleagues counted. Here are the facts about these 61 people:

  • None of these refugees killed anyone in a terrorist attack on U.S.-soil.
  • Only five (8 percent) were refugees who attempted or planned an attack on U.S. soil. The other 56 (92 percent) of the list were either not refugees or not terrorists targeting U.S. soil.
  • At most 50 were actual refugees who may have committed terrorism offenses, out of the 2.1 million refugees admitted since 1989, which is the earliest year that anybody on the list entered as a refugee. At least eleven (18 percent) of the refugee terrorists reported by Heritage were either not actually refugees or not convicted of terrorism offenses.
  • Only five (8 percent) entered as refugees since 2008.
  • Only five (8 percent) were likely refugee security vetting failures who entered as adults or older teenagers and committed an offense soon after entering.
  • The 50 refugees represent just five of the 124 nationalities of refugees admitted since 2002 (4 percent). Three-quarters of the refugees who committed a terrorism offense came from a single nation.

The security threat from refugees is minuscule, concentrated among a few Somalis, and has little to do with vetting.

The Non-Refugees and Non-Terrorists

The Backgrounder’s use of terrorism-related offenses is problematic as it is not synonymous with actual direct or indirect support of terrorism. There is no definition of a terrorism-related offense in U.S. statutes but there is a broad working GAO definition: that it relates to “terrorism, homeland security, and law enforcement, as well as other information.” As far as we can tell, the term terrorism-related is used to describe a conviction for any offense that results from a terrorism investigation – even if it is for crimes that bear no relation to terrorism such as buying stolen cereal. David Inserra told us that “Our [Heritage’s] inclusion criteria wasn’t based on convictions for terrorism offenses because people could be involved in that sort of activity and not ever be convicted. We were trying to find the happy medium between overly-restrictive and too loose definitions.” Thus, we are working with different definitions and the reader should keep that in mind. 

Six individuals on the Heritage list were not convicted of terrorism offenses. The government dismissed its complaint against Al-Hazmah Mohammed Jawad. Aws Mohammed Younis Al-Jayab and Ali Mohammed Al Mosaleh were charged with making false statements. Abdi Mahdi Hussein was convicted of failure to follow financial reporting requirements and was “not charged with any terrorism offense and was not alleged to have knowingly been involved in terrorism activities,” according to the FBI. Yusra Ismail was charged with stealing a U.S. passport—not terrorism—and Saynab Hussein was convicted of perjury.

At least five individuals on the Heritage list did not enter under the U.S. refugee program. One of Heritage’s errors is due to an error that Alex Nowrasteh made in his 2016 Policy Analysis (corrections will be made in future editions) that listed Nuradin Abdi as a refugee instead of an asylum recipient. Nima Ali Yusuf was also an asylum recipient. Harlem Suarez was a Cuban national would have received asylum by virtue of the Cuban Adjustment Act, not through the refugee program. Mahmoud Elhassan was a Sudanese immigrant whose mother sponsored him for a green card. Jasminka Ramic was a Bosnian immigrant who “immigrated to the United States as a legal permanent resident.” There may be others who should not be included in Heritage’s list as well as unknown individuals who should be counted.

This means that only 50 of the 61 people on the Heritage list were refugees who may have committed actual terrorism offenses. At the time of the publication of the Heritage Background, charges against 12 of the 50 remaining refugees were still pending. As Al-Hazmah Mohammed Jawad’s case shows, we cannot assume guilt based on the charges alone. But for the purpose of this post, we will assume these 12 cases will all end in convictions for terrorism offenses.

Few Refugees Plan Attacks on U.S. Soil—and Even Fewer Succeed

The text of President Trump’s original executive order cutting the refugee program justified itself as an attempt to “protect the American people from terrorist attacks by foreign nationals admitted to the United States.” It is remarkable, then, how few of these refugees actually planned or committed an attack on U.S. soil.  As Heritage writes, “Five refugees successfully committed a terrorist attack inside the U.S., two of which occurred after the U.S. reformed the program post-9/11.”  Three of the five refugees planned to commit an attack but were unable to follow through. Mohamed Osman Mohamud was caught in an FBI sting where he attempted to detonate a fake bomb. Similarly, Fazliddin Kurbanov’s bomb-making activities were “closely monitored by federal agents during the investigation and no terrorist attack occurred,” the Justice Department stated. Hysen Sherifi plotted to attack a military base but the FBI broke up his ring before they could do any damage. Abdul Artan and Dahir Adan were two refugee terrorists who actually committed their attacks but fortunately, they failed to get anybody killed other than themselves.

No refugee terrorist has killed a single person in a terrorist attack on U.S. soil since 1976—four years before the creation of the modern U.S. refugee program in 1980. From 1975 through the end of 2015, the annual chance of being murdered on U.S. soil in a terrorist attack committed by a refugee was an astronomical 1 in 3.64 billion per year.

Vetting Failures are Very Uncommon in the Refugee Program

The Heritage Backgrounder’s findings show just how uncommon vetting failures actually are. Heritage notes that the cases are mostly concentrated among “refugees who were resettled at a young age—often known as the ‘1.5 generation’—or the children of resettled refugees, who radicalize and then commit terrorist offenses.” That indicates that there is an assimilation problem for some refugees and not a vetting problem from the refugee program as a whole. We have entry dates for 47 of the 50 refugees, and 29 of them (62 percent) were juveniles at the time of their entry to the United States.

Additionally, many of the adult refugee terrorists were most likely not vetting failures who came intending to commit terrorism in the United States. We can’t read anyone’s mind, but the fact that the vast majority appeared to have shown no interest in an offense long after their arrival is probably about the best evidence we could get. Of the refugees for whom we have entry dates, 78 percent of them lived in the country for more than seven years before they committed an offense. Sixty-one percent lived here for more than a decade.

The seven-year point seemed particularly significant because the longest period between the entry of a refugee and his offense in a confirmed refugee vetting failure case—in which the government had evidence of radicalization prior to entry—was six years (Abdinassir Mohamud Ibrahim). If we assume that all offenders who entered as adults or older teenagers and committed their offense before their 7th year in the United States are vetting failures—regardless of whether there is evidence of that—we can get a rough estimate of the number of vetting failures.

By this measure, it appears likely that just five on the Heritage list were vetting failures: Abdinassir Mohamud Ibrahim lied about his clan membership on his refugee application; Waad Ramadan Alwan and Mohanad Shareef Hammadi fought with insurgents in Iraq; Fazliddin Kurbanov plotted an attack just four years after entering as an adult; and Abdul Razak Ali Artan committed an attack just two years after entry. Only Kurbanov and Artan intended to carry out an attack on U.S. soil, out of the approximately 2.1 million refugees who have entered the United States since 1989.

Nationalities of Refugee Terrorists

Since 2002, the United States has resettled refugees from 124 nations. Yet only five nationalities are represented on the Heritage list: Somalia (37), Bosnia (7), Iraq (2), Uzbekistan (2), and Kosovo (1). However, President Donald Trump’s executive order shuts down refugee resettlement for all countries. Notably, Syrian refugees are absent from this list entirely, despite Donald Trump’s overwrought rhetoric on the subject—as are five of the six nationalities targeted by the order: Libya, Yemen, Sudan, Syria, and Iran. Somalia is the only country that has sent refugee terrorism offenders to the United States and that is specifically listed on President Trump’s executive order.  

Somalis constitute only about 10 percent of the refugee program. Even Somali refugees have not proved dangerous to Americans. Almost all of the Somali terrorism offenders raised money for or went to join terrorist organizations abroad. Two did commit terrorist attacks in the United States but fortunately failed to kill anyone. Nobody from Somalia has killed anybody on U.S. soil in an act of terrorism for as far back as we have data.

Conclusion

The Heritage Backgrounder makes a valuable and interesting contribution to the debate over the future of the American refugee program. As a side effect, it shows just how small and manageable the refugee terrorist threat is.

Signaling its intent to proceed with business as usual, despite ongoing controversy over its leadership and structure, the Consumer Financial Protection Bureau (CFPB) recently finalized a rule restricting the ability of financial services companies to use arbitration clauses in their contracts. 

An arbitration clause requires the parties to the contract to take any dispute to arbitration, a privately operated hearing procedure that typically has a legally binding effect. Arbitration is often attractive because it can be quicker and less expensive than a case brought in court. It also typically means that the plaintiff cannot join together with other plaintiffs to bring a class action suit. This is the crux of the issue. 

Supporters of the new rule claim that these clauses, buried in fine print and ubiquitous in almost all parts of American legal life, allow banks and credit card companies to get away with abuses that would otherwise be checked by class action litigation. An unlawful practice that costs every customer $5 is almost assuredly not worth the cost or hassle of going to court over. However, bring together a class of one million customers (most of whom will never realize they’re part of the class at all), and there’s real money at stake. Enough money to entice a lawyer to litigate and, let’s be honest, control the entire process for a chance at the typical fee of 33 percent of whatever is recovered. 

Is this true? Were companies able to get away with practices that netted them cash while harming consumers because the harms were so diffuse? Maybe.  Probably. Without speculating about what kinds of practices companies may have engaged in or how wide-spread any were (I have no intention of impugning an entire industry, but every industry has its bad eggs), to the extent litigation was required to check any particular misconduct, if the harm per customer was marginal, it is unlikely anyone would bother with litigation. 

But that does not necessarily argue in favor of this rule. The rule will likely increase litigation costs for some companies. That’s kind of the point, right? To force the companies into court instead of using the often cheaper option of arbitration? Those costs will likely be passed along to customers in the form of higher fees. Before the CFPB’s rule, nothing prevented companies from drafting contracts without arbitration clauses. (Also, to be clear, before the rule nothing prevented a company and a customer from deciding together that they preferred to go to court. It’s just that if the contract had an arbitration clause, no one party could decide unilaterally to take the issue to court.) 

If customers were really upset about arbitration, it seems they would have presented a terrific market for a company that would offer them contracts free of arbitration clauses. The trade-off would likely have been slightly higher fees for their products to off-set the costs. That is, effectively the trade-off the new rule presents: no arbitration clause, but higher costs. To my knowledge, no one offered this trade-off. Given the competitiveness of the market, it seems that if there were customers willing to pay for a product, banks and credit card companies would have offered it. The fact that no one did suggests to me that arbitration clauses are not that important to consumers. Not important enough, at least, to justify higher costs. This makes the rule a bit strange. It forces on consumers an option they never chose, all in the name of protecting their best interests.   

Last week, when discussing the Trump administration’s secret memo requiring “enforcement action” against “all removable aliens” who immigration agents encounter, I pointed out that every year since 2008, the House Appropriations Committee has included a provision in its version of the Department of Homeland Security (DHS) funding bill that requires the department to “prioritize the identification and removal of aliens convicted of a crime by the severity of that crime.”

I also noted that this provision was strangely left out of the “omnibus” funding bill enacted into law this May, which packaged funding for all departments in a single bill. But I chalked that up to an oversight due to the irregular process of putting together the large bill and predicted that the provision would reappear in the individual appropriations bill for 2018. I was wrong. The new House appropriations bill for DHS contains no requirement for prioritization. Now the Trump administration’s illogical non-prioritization policies will receive the tacit consent of the committee.

Remember that this provision has been included no matter which party controlled the House for almost a decade—really for as long as DHS has carried out major deportation operations. The first bill to contain this language was 2008 to fund the department for 2009 written by House Democrats and signed by President Bush. Here’s 2010 written by House Democrats and signed by President Obama. In 2011, House Republicans funded the government with a serious continuing resolutions—which essentially maintain the earlier funding bills’ status quo.

In 2012, 2013, 2014, however, Republicans wrote the bills and President Obama signed them with the requirement to prioritize criminal aliens based on the severity of their crime. Then in March 2015, the House of Representatives entered a bitter fight to stop President Obama’s proposed program to give work permits to certain non-criminal unauthorized immigrants who were parents of U.S. children (DAPA). In so doing, it nearly shut down the department. Yet the Republican funding bill for 2015 still included explicit language requiring prioritization. It did again in 2016.

Republicans wrote and passed all of these bills. Then in May 2017, after relying on continuing resolutions through part of the year, they enacted the 2017 omnibus appropriations bill—the big package I referenced at the beginning—which dropped this language. They did this despite the fact that the 2017 House standalone committee bill for DHS still had the restriction, which is why I figured it must have been an oversight. Sadly, it was not. The new House committee DHS funding bill drops the language, freeing the Trump administration from even the appearance of a conflict with Congress over its new policies.

President Trump’s executive order laying out his priorities for immigration enforcement explicitly prioritizes those who were never convicted of a crime. This would have directly contradicted the congressional mandate, so the committee staff appears to have just quietly removed it.

To be clear, this is not just a bad move because it will result in peaceful people being deported from the country that is their home, but because it will result in serious criminals not being deported. Every moment that DHS wastes on workers and families is a moment that it is not focused on criminals. That will not make us safer. The only reason that anyone would think that it would is if they think that unauthorized immigrants are more prone to commit serious crimes against Americans than the U.S.-born—a belief that is demonstrably false.

Hopefully, members of the House who still believe in prioritization offer amendments to correct this mistake.

Federal government spending is rising, deficits are chronic, and debt is reaching dangerous levels. Growing spending and debt are undermining the economy and may push the nation into a crisis. The solution is cutting and eliminating programs in every federal department.

I have posted a new plan at DownsizingGovernment.org that would reduce spending by almost one-quarter and balance the budget within a decade. The cuts compliment the ones proposed by President Trump in his 2018 budget.

Federal spending cuts would spur economic growth by shifting resources from lower-valued government activities to higher-valued private ones. Indeed, much federal spending is not just low value, it actively distorts markets and thus reduces overall income levels.

Cuts would expand personal freedom by giving people more control over their lives and by reducing the top-down controls that come with federal spending activities.

Liberals see government spending cuts as evil, while conservatives may see them as a necessary evil. Actually, spending cuts would positively benefit society.

From the full list of proposed cuts, these are my favorites: 

  • End farm subsidies and rural subsidies.
  • End K-12 school subsidies.
  • End HUD, including rental and public housing subsidies.
  • End urban transit subsidies.
  • End the ACA.
  • Reduce Social Security growth by indexing initial benefits to prices.
  • Raise Medicare cost sharing to increase skin in the game.
  • Block grant Medicaid to encourage states to find savings.
  • Privatize TVA, the PMAs, USPS, Amtrak, and air traffic control.

 See the full plan here.

  

Last month, the Department of Homeland Security (DHS) released a privacy impact assessment for its Traveler Verification Service (TVS), a program designed to develop and expand DHS’s biometric entry-exit system for international flights. The document sends a clear message to passengers: if you don’t want your biometric information to be collected, don’t travel.

The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 required an automated screening system for foreign nationals leaving and entering the United States. Since 1996 a range of legislation has called for the implementation of a biometric entry-exit system, although such a system has yet to be fully implemented. In March, President Trump signed Executive Order 13780, which called upon DHS to “expedite the completion and implementation of a biometric entry-exit tracking system for in-scope travelers to the United States.”

According to the DHS privacy assessment, TVS is growing:

[Customs and Border Protection] is publishing this updated [privacy impact assessment] because the recently initiated TVS is expanding to allow commercial air carriers and select airport authorities (“partners”) to provide their own facial recognition cameras and capture the images of travelers consistent with their own business processes and requirements (for example, to use facial images instead of paper boarding passes).

More from the assessment:

These partners will capture the traveler images consistent with their business purposes, and then transmit the photos they capture to CBP through a connection with CBP’s cloud-based TVS. CBP does not capture the photos directly from the traveler under this TVS expansion.

There are already pilot face scanning schemes in place at airports in six American cities; Boston, Chicago, Houston, Atlanta, New York City, and Washington, D.C. These pilot programs allow passengers and pilots to opt out. The DHS assessment explains that while you may be able to opt out of TVS scanning, government collection of your biometrics is unavoidable if you want to travel (highlighting is mine):

The assessment goes on to explain that passengers will be able to opt out of biometric identification under TVS. However, unless this opt-out option is clearly advertised to travelers it’s likely that most travelers will use a ubiquitous facial scanning system at airports.

Anyone who travels from American airports is familiar with the body scanners the Transportation Security Administration (TSA) uses for security. You can opt out of these scanners, but it’s very rare to see travelers telling TSA officials that they’re not going through the machines. When I opt out of these scanners I’m almost always the only one doing so. That is, unless I’m traveling with some Cato colleagues.

Sadly, millions of Americans consider passing through a body scanner to be an ordinary part of air travel. It would be a shame if facial scans became as widely accepted.

ObamaCare’s community-rating regulations generally bar insurance companies from using any factor other than age to determine premiums, and prevent insurers from charging 64-year-olds more than three times what they charge 18-year-olds. I have long maintained community rating is nothing more than a system of government price controls, and should meet with the usual scorn economists universally heap on such boneheaded policies.

An esteemed colleague challenges my claim that ObamaCare’s community-rating is a system of price controls, because “the government doesn’t set a price.” Here is how I responded:

Price controls don’t always take the form of a fixed integer. Sometimes government sets prices using ratios.

Premium caps control prices by limiting this year’s premium to a ratio of last year’s premium. Medicaid’s prescription-drug price controls set prices as a ratio of the average wholesale price. Medicare’s price controls involve all sorts of complex ratios.

ObamaCare’s community-rating regulations control prices by (a) setting the ratio of premiums for healthy vs. sick people within each age category to 1:1, and (b) setting the ratio of premiums for young vs. old to 1:3. Insurers would not voluntarily follow those ratios, with good reason. But community rating forces insurers to set prices according to those ratios. Thus it is a price-control scheme.

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