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One might expect that a report with a title referring to “more findings about school vouchers and test scores” would include the latest studies. However, Mark Dynarski, a Senior Fellow at the Brookings Institution, and Austin Nichols, a Principal Associate of Social and Economic Policy at Abt Associates, recently argued that the new voucher evidence is negative, even though the two most recent studies in Louisiana and Indiana show null to positive effects on student achievement.

How did these researchers come to their counterintuitive conclusion?

It appears that the researchers did not include the two most recent evaluations of voucher programs in Figure 1 below, which is taken from their report. That would not be much of a problem if the title and body of the report did not indicate otherwise.

Figure 1: Findings from Four Current Studies of Vouchers and Eight Previous Studies

 

If the researchers simply used previous results, the article (and its title) should not indicate that the latest estimates from Indiana and Louisiana are used. Further, the forest plots should not indicate that multiple years of results are used.

So what does the experimental voucher research actually say?

The Actual Test Score Results – and Their Implications

Even the latest experimental results, which show that voucher students in Louisiana and Indiana caught up with or did better than their public school peers on test scores, are less optimistic than prior voucher studies. However, there is not a clear theory for why voucher programs ought to be less-effective now than they used to be, all else equal.

I suspect that the regulatory environment may have something to do with the recent lackluster experimental results. For example, private schools participating in the Louisiana Scholarship Program (LSP) must administer the state standardized test, prohibit parental copay for families using vouchers, report finances to the government, and surrender their admissions process over to the state. As the recent study by me and my colleagues at the University of Arkansas finds, only a third of the private schools chose to participate in the LSP, and those schools were less likely to be the higher quality institutions.

As shown in Figure 2 below, the recent meta-analysis of 19 experimental voucher studies, by researchers at the University of Arkansas, finds that student test score impacts improve over time (also shown by the most recent results in Louisiana and Indiana). Indeed, students using a voucher to attend a private school have around half a standard deviation higher academic achievement in reading than their traditional public school peers by the fourth year. That is quite significant; a study by Stanford economist Eric Hanushek indicates that the effect is equivalent to around a 6.5 percent increase in lifetime earnings—more than $75,000.

Figure 2: Experimental Impacts of Vouchers on Student Test Scores by Year

 

While the positive test score trend is encouraging, I am skeptical about the implications. The trend could indicate that children are settling into their new schools and that private schools are improving in academic quality over time. However, the trend could also simply be a reflection of the new incentive structure for private schools in voucher programs. Since test scores are the state’s preferred accountability measure, private schools in voucher programs must shift their focus towards standardized testing.

The latter explanation could be problematic. As Jay Greene from the University of Arkansas has pointed out, there are nine school choice studies showing a disconnect between test scores and long term outcomes that we actually care about—such as graduation rates, criminal activity, and income. The shift towards focusing more on standardized testing could very well harm the ability of private schools to shape the character skills necessary for success.

If we really want to help all children achieve the best education possible, we must be humble about our ability to measure progress and determine what is best for people who have unique needs. Rather than using a single crude measure to determine who ought to have access to more educational options and a better life, we should have faith in the abilities of parents to select schools based on the numerous institutional factors that play a part in children’s educational experiences.

Senators Tom Cotton (R-AK) and David Perdue (R-GA) are promoting their legislation titled “the RAISE Act” at the White House today. It would reduce immigration by 50 percent over 10 years by eliminating several categories of legal immigration. The legislation would reduce the per capita rate of immigration to the lowest amount since just after the Great Depression. Immigration would fall to a rate three times less than the historical average and 11 times less than the historical high.

Yet the senators claim that the RAISE Act would “restor[e] legal immigration levels to their historical norms.” This statement is so misleading that it borders on outright deception. The “level” is just the absolute number of immigrants each year. But this treats the number of immigrants in 1900 the same as the number of immigrants in 2017, despite the fact that the U.S. population quadrupled during that time. You have to control for the size of the country. It’s like saying a million immigrants to China is the same as a million immigrants to Estonia—despite the fact that China is 1,000 times more populous.

The figure below provides the true picture of the amount of immigration to the United States: the number of new legal permanent residents divided by the number of people in the United States (the per capita immigration rate). From 1820 to 2017, the immigration rate averaged 0.45 percent of the population annually. In 2017, that rate was 0.32 percent. In other words: 28 percent below the average historical rate. If the United States were to adopt the “historical norm,” it would need to raise immigration quotas by about the amount that RAISE lowers them: 411,000. By contrast, under the senators’ proposal, immigration would fall to 0.14 percent—more than three times less than the “historical norm.”

The figure below graphs the annual legal immigration rate from 1820—the first year that the U.S. recorded immigrant arrivals—to 2017. It assumes that the RAISE Act will actually be implemented in 2018 and uses the Census population projections to forecast the impact of the legislation through 2030. As it shows, the rate of immigration would dramatically drop in the first year and continue to fall until it reached a level not seen since just after World War II and far below the tradition of immigration prior to the progressive movement in the 1920s.

U.S. Per Capita Immigration Rates and Projected Rates Under the RAISE Act, 1820-2030

Sources: 1820–2017: Department of Homeland Security; 2018–2030: Tom Cotton and Census Bureau (Census population figures reduced by immigrants denied under RAISE Act minus the number who would’ve emigrated from the U.S. after initial entry in any case, using Borjas; the rate of decline in immigration for 2028–2030 based on Cotton’s projections for 2018–2027)

Below is a table of the immigration rates for every year from 1820 to 2030. If the RAISE Act becomes law, 2030 would have the lowest rate of immigration since 1954, and of the 30 years out of 211 with lower rates, 18 of them occurred during the Great Depression or World Wars, and seven were in the 1820s before steam power transformed the Atlantic crossing. Are these periods what the senators consider normal?

Immigration Rates Ranked Lowest to Highest

Rank Immigration Rate Year

1

0.02%

1943

2

0.02%

1933

3

0.02%

1944

4

0.02%

1942

5

0.02%

1934

6

0.03%

1945

7

0.03%

1935

8

0.03%

1936

9

0.03%

1932

10

0.04%

1941

11

0.04%

1937

12

0.05%

1938

13

0.05%

1940

14

0.06%

1823

15

0.06%

1939

16

0.07%

1822

17

0.07%

1824

18

0.08%

1946

19

0.08%

1931

20

0.09%

1820

21

0.09%

1825

22

0.09%

1821

23

0.09%

1826

24

0.10%

1947

25

0.11%

1953

26

0.11%

1918

27

0.12%

1948

28

0.13%

1949

29

0.13%

1954

30

0.13%

1951

31

0.14%

1919

32

0.14%

2030

33

0.14%

1955

34

0.14%

1958

35

0.15%

2029

36

0.15%

1959

37

0.15%

1960

38

0.15%

1961

39

0.15%

2028

40

0.15%

1962

41

0.15%

1964

42

0.15%

1965

43

0.15%

2027

44

0.16%

1827

45

0.16%

2026

46

0.16%

1963

47

0.16%

2025

48

0.16%

1950

49

0.16%

1966

50

0.17%

2024

51

0.17%

1952

52

0.17%

1831

53

0.17%

2023

54

0.18%

1979

55

0.18%

2022

56

0.18%

1969

57

0.18%

1971

58

0.18%

1975

59

0.18%

1829

60

0.18%

2021

61

0.18%

1830

62

0.18%

1970

63

0.18%

1967

64

0.18%

1972

65

0.18%

1974

66

0.18%

2020

67

0.19%

1973

68

0.19%

2019

69

0.19%

1957

70

0.19%

1956

71

0.19%

2018

72

0.20%

1930

73

0.21%

1977

74

0.22%

1828

75

0.23%

1968

76

0.23%

1976

77

0.23%

1929

78

0.23%

1984

79

0.23%

1982

80

0.23%

1980

81

0.24%

1983

82

0.24%

1999

83

0.24%

1985

84

0.24%

1838

85

0.24%

1998

86

0.24%

2003

87

0.25%

1987

88

0.25%

1986

89

0.25%

1925

90

0.25%

1928

91

0.26%

1981

92

0.26%

1926

93

0.26%

1988

94

0.26%

1978

95

0.27%

1995

96

0.28%

1843

97

0.28%

1862

98

0.28%

1922

99

0.28%

1927

100

0.28%

1861

101

0.29%

1917

102

0.29%

1878

103

0.29%

1916

104

0.30%

1997

105

0.30%

2000

106

0.30%

1877

107

0.30%

1835

108

0.31%

1994

109

0.31%

1898

110

0.32%

2013

111

0.32%

1897

112

0.32%

2017

113

0.32%

2014

114

0.32%

2016

115

0.32%

1915

116

0.33%

2015

117

0.33%

2004

118

0.33%

2012

119

0.34%

2010

120

0.34%

2011

121

0.35%

1996

122

0.35%

1993

123

0.35%

2007

124

0.36%

1879

125

0.36%

1868

126

0.37%

2008

127

0.37%

1876

128

0.37%

2002

129

0.37%

2009

130

0.37%

1895

131

0.38%

2001

132

0.38%

1992

133

0.38%

2005

134

0.40%

1859

135

0.40%

1844

136

0.40%

1920

137

0.41%

1839

138

0.41%

1858

139

0.41%

1833

140

0.42%

1899

141

0.42%

1894

142

0.43%

2006

143

0.44%

1832

144

0.44%

1989

145

0.45%

1834

146

0.45%

1841

147

0.47%

1923

148

0.48%

1896

149

0.49%

1860

150

0.49%

1840

151

0.49%

1836

152

0.50%

1837

153

0.51%

1875

154

0.52%

1863

155

0.55%

1864

156

0.57%

1845

157

0.57%

1842

158

0.58%

1886

159

0.59%

1900

160

0.62%

1990

161

0.62%

1924

162

0.63%

1901

163

0.66%

1893

164

0.69%

1865

165

0.70%

1885

166

0.71%

1874

167

0.72%

1889

168

0.72%

1890

169

0.72%

1991

170

0.73%

1856

171

0.74%

1921

172

0.74%

1846

173

0.76%

1855

174

0.79%

1871

175

0.82%

1902

176

0.83%

1887

177

0.83%

1909

178

0.84%

1867

179

0.87%

1866

180

0.87%

1891

181

0.88%

1912

182

0.88%

1908

183

0.88%

1892

184

0.89%

1857

185

0.90%

1869

186

0.91%

1888

187

0.91%

1880

188

0.94%

1911

189

0.94%

1884

190

0.97%

1872

191

0.97%

1870

192

0.99%

1904

193

1.03%

1848

194

1.06%

1903

195

1.07%

1873

196

1.10%

1847

197

1.12%

1883

198

1.13%

1910

199

1.22%

1905

200

1.23%

1914

201

1.23%

1913

202

1.29%

1906

203

1.30%

1881

204

1.31%

1849

205

1.43%

1853

206

1.48%

1907

207

1.49%

1852

208

1.50%

1882

209

1.58%

1851

210

1.59%

1850

211

1.61%

1854

Average

0.43%

 

 

 

“Designed by Apple in California; Assembled in China” are the words engraved on the back of Apple’s ubiquitous iPods, iPads, and iPhones.  Might that soon change? 

Foxconn, the Taiwan-headquartered company that does Apple’s assembling in China, announced last week that it will invest up to $10 billion in production facilities in Wisconsin. That sounds like something to cheer. After all, investment is essential to economic growth and foreign direct investment tends to nourish the domestic commercial eco-system by bringing in companies with new ideas and better ways of doing things.

But Foxconn is in the business of contract manufacturing—producing, but mostly assembling, electronics products branded and owned by other companies. It’s not a high value-added operation requiring high-skilled workers. It’s the kind of supply chain operation better suited to economies with an abundance of low-skilled workers willing to work for much lower wages than Wisconsin’s work force expects to earn. Then again, economic considerations aren’t the only determinants of investment decisions.

Back in 2011 at a dinner in Silicon Valley, President Barack Obama asked Apple’s founder and CEO Steve Jobs why all of the production and assembly of the company’s products couldn’t be done in the United States. Jobs was a bit dismissive, responding that those kinds of jobs weren’t coming back. 

But the message wasn’t lost on other business executives, including GE’s Jeff Immelt, who was quick to announce repatriation of some operations that had recently been outsourced to China. The president was in a political jam and his reelection efforts might benefit if he were to show that U.S. companies were reshoring and bringing those manufacturing jobs back stateside.

Foxconn’s investment in Wisconsin is the commitment Obama was seeking from Steve Jobs, who knew that assembling iPhones in the United States would be, if not cost prohibitive, irrational from a commercial perspective. But sometimes investment location decisions are driven more by political considerations than economics. Fear of political retribution and ingratiation to key policymakers are just as relevant as the regulatory environment, taxes, infrastructure, and skills of the workforce when deciding upon where to locate production. The rapid and virtually uninterrupted growth of Washington, DC over the past decade, while the rest of the country stagnated and limped along, attests to those unfortunate facts. The dividends from political investment are often greater, and more reliable, than growing a business the old-fashioned way.

With plans to build a facility in the United States that it estimates will employ thousands of workers, Foxconn has succeeded in winning Trump’s affections. That the plant will be built smack dab in the middle of the House Speaker’s district makes the deal all the more laudable from a politically strategic perspective. But, most importantly, Foxconn’s investment in the United States is savvy because it will provide some insulation for Apple products – and many other U.S. and western branded electronics – from the worst effects of an increasingly likely U.S.-China trade war.

The heat is being turned up on a low-grade, high-tech trade war that has been simmering and sometimes churning over the past decade, with the U.S. Trade Representative’s Office announcing it will initiate an investigation into China’s forced technology transfer policies, which could lead to the imposition of trade restrictions. 

Compelling China to change course with respect to these kinds of market access barriers is long overdue, but U.S. missteps (such as imposing restrictions unilaterally through channels not sanctioned by the World Trade Organization) could initiate a much larger and more deleterious sequence of protectionist measures. The prospect of that happening is what Foxconn is hedging against with its investment inside the U.S. tariff wall.

Depending on how things turn out, you may soon find engraved on the back of your smart phones the words: “Designed by Xiaomi in Shenzhen; Assembled in Wisconsin.”

Republican Senators Tom Cotton (AR) and David Perdue (GA) are unveiling a bill today at the White House that would slash the number of legal immigrants by about 50 percent over the next decade.  This bill will be very similar to the RAISE Act that both Senators introduced in February, which I criticized here.  Their new bill, if it is similar to RAISE, would cut legal immigration by about 50 percent by reducing family reunification, eliminating the diversity visa, and statutorily limiting refugees without increasing skilled-worker immigration.  So much for the talking point that immigration hawks are “only against illegal immigration.”

Cotton-Perdue Does NOT Create a Skills-Based Immigration System

Supporters are saying that this bill would create a “skills-based immigration” policy but nothing could be further from the truth.  Cotton-Perdue does not increase skilled immigration at all – it only cuts non-employment categories like families and the diversity visa while creating a points-based system for employment-based green cards that does not increase the numerical cap.  The new Cotton-Perdue bill would do nothing to boost skilled immigration and it will only increase the proportion of employment-based green cards by cutting other green cards.  Saying otherwise is grossly deceptive marketing.

President Trump stated that he wanted to create a merit or skills-based immigration system like in Canada or Australia, but the Cotton-Perdue bill would not come close to achieving that goal.  The immigration systems in Canada and Australia do emphasize skilled immigrants over family members but their immigration systems allow in far more immigrants, as a percentage of the population in both countries, than the United States.  It is important to control for the population of the destination country when comparing the relative openness of different immigration systems. 

New immigrants to Canada who arrived in 2013 were equal to 0.74 percent of that country’s population.  New immigrants to Australia in 2013 were equal to a whopping 1.1 percent of their population.  By contrast, immigrants to the United States in the same year equaled just 0.31 percent of our population.  The only OECD countries that allow in fewer immigrants relative to their populations than the United States are Portugal, Korea, Mexico, and Japan.  Seventeen other OECD countries allow in more immigrants than the United States as a percentage of their populations.

In 2013, the number of skilled-worker immigrants to Canada was equal to 0.18 percent of that country’s population.  If the Cotton-Perdue bill intended to copy Canada’s skills-based immigration system, then it would increase the number of annual employment-based green cards from the current level of about 75,000 to about 592,000 annually – a 7.9-fold increase in the number (Figure 1).  If the Cotton-Perdue bill wanted to copy Australia’s skills-based immigration system then it would have to increase employment-based immigration to about 852,000 annually – an 11.4-fold increase.

Figure 1

Annual U.S. Employment-Based Immigrants under Different Immigration Regimes, 2013

 

Sources: OECD, EuroStat, E-Stat, Citizenship and Immigration Canada, Department of Homeland Security, Author’s Calculations.

Because Canada and Australia allow in more skilled immigrants, the number of family-based immigrants admitted as a proportion of their respective populations is also higher relative to the United States.  In 2013, family-based immigrants to Australia and Canada were equal to 0.26 percent and 0.23 percent of their respective populations.  Family-based immigrants to the United States in 2013 were equal to just 0.21 percent of our population in that year.  An important caveat is that Canada and Australia do not allow in as many distant relatives as the United States.  If Canada and Australia are the models for a skills-based immigration system, as President Trump stated, then the result would be more family-based immigrants in addition to more skilled-immigrants.

Canada and Australia also have large-scale regional immigration systems that allow Provinces and States, respectively, to allow in foreign workers in addition to their federal systems.  Senator Johnson (R-WI) introduced a bill this year to create just such a state-sponsored migration system in the United States that is modeled on the Canadian program and would accrue tremendous benefits to Americans.  Senator McCain (R-AZ) recently became a co-sponsor.  Any bill that would seek to create a skills-based immigration system based on the Australian or Canadian models would include a state-sponsored migration system like the type proposed by Senator Johnson.

Cotton-Perdue Will Not Raise Wages

The RAISE Act was named after its intent to raise the wages of native-born American workers by reducing the supply of lower-skilled immigrants.  However, that has not been the effect of immigration restriction in American history.  Congress restricted immigration to raise American wages at least three times in American history –  1882, 1924, and 1964.  It failed each time. 

Congress’ 1964 cancellation of the Bracero program is most instructive.  Bracero was a guest worker visa that allowed Mexican workers to migrate to American farms. Congress canceled it after intensive lobbying by labor unions and bad publicity due to flaws in the program.  Economists Michael Clemens, Ethan Lewis, and Hannah Postel took advantage of this natural experiment that was “designed to raise domestic wages and employment by reducing the total size of the workforce” to see how American farm wages adjusted.  Their superb paper found that canceling Bracero had little measurable effect on wages.    

Figure 2

Farm Worker Wages before and after Bracero, by State

Source: “Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion” by Michael A. Clemens, Ethan G. Lewis, Hannah M. Postel.

Figure 2 from their paper compares the quarterly average real farm wages by states where Braceros made up more than 20 percent of seasonal agricultural labor (black line), states where Braceros were fewer than 20 percent of the workforce (gray line), and states where there were no Braceros at all or only negligible numbers (dashed line).  Clemens et al. write that “[t]he figure shows that pre- and post-exclusion trends in real farm wages are similar in high exposure states and low-exposure states.  It also shows that wages in both of those groups rose more slowly after bracero exclusion than wages in states with no exposure to exclusion.”  The farmers did not adapt to the decline in legal migrants by raising wages.  Instead, they mechanized and planted less labor-intensive crops. 

The similarities between Bracero’s cancellation and the Cotton-Perdue bill are enough to make this new research a compelling reason to reject the bill out of hand.  The first similarity is that the Bracero program allowed in half a million workers a year before it was eliminated – which is about the same number of green cards that the Cotton-Perdue bill would cut.  Second, Bracero workers are somewhat similar to the workers who would enter on the family-based green cards that Cotton-Perdue intends to cut.  Third, Braceros were also concentrated in some states just like new immigrants are.  The historical and economic experience with cutting legal immigration in the past should deter would-be supporters of this bill.            

Furthermore, immigration bears little blame for low wages.  The National Academy of Sciences’ (NAS) literature survey on the economic effects of immigration concluded that:

When measured over a period of 10 years or more, the impact of immigration on the wages of native-born workers overall is very small.  To the extent that negative impacts occur, they are most likely to be found for prior immigrants or native-born workers who have not completed high school—who are often the closest substitutes for immigrant workers with low skills.

Furthermore, the small long-run relative wage impacts on native-born American workers by education are close to zero according to the most authoritative studies by economists George Borjas and Gianmarco Ottaviano and Giovanni Peri, both of which take up much of the NAS report.  They disagree when it comes to immigration’s impact on the wages of dropouts, even though the effect is small and positive for all native-born workers lumped together in both studies (Figure 3).  The 2015 American Community Survey reports that only 9.4 percent of native-born Americans over the age of 25 are dropouts – the category of native-born workers who are most likely to be negatively affected.  Thus, over 90 percent of American workers are in education-skill categories where immigrants increase relative wages according to George Borjas’ relatively negative findings.

Figure 3

Relative Impact of Immigration on Native Wages by Education

 

Sources: Borjas, p. 120; Ottaviano & Peri, Table 6.

Note: Borjas looks at 1990–2010. Ottaviano and Peri look at 1990–2006.

Assuming that the Bracero research by Michael Clemens, Ethan Lewis, and Hannah Postel does not apply to Cotton-Perdue, which is extremely unlikely, the main potential beneficiaries are other immigrants.  Both Borjas and Ottaviano & Peri find that the wages of immigrant workers do drop because of competition with new immigrants even though native wages do not (Figure 4). That is because new immigrants have skills and educations most similar to previous immigrants, so they compete against each other more than with natives who have different skill and education levels.  Reducing immigrant wage competition with immigrants is not a popular goal for the population most affected.  Figure 25 of this Bulletin shows that immigrants are much more likely to support liberalized immigration in spite of wage competition.

Figure 4

Relative Impact of Immigration on Immigrant Wages by Education

 

Sources: Borjas, p. 120; Ottaviano & Peri, Table 6.

Note: Borjas looks at 1990–2010. Ottaviano and Peri look at 1990–2006.

Cotton-Perdue Is a Bad Political Bargaining Chip

More seasoned political observers around Washington DC suspect that the Cotton-Perdue bill is intended to be a bargaining chip that they can drop in exchange for other reforms like mandated E-Verify or another large-scale increase in immigration enforcement.  This is similar to when proponents of the 1996 Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) originally included cuts to legal immigration but had to settle for only boosting enforcement when many Republicans supported preserving the legal immigration system

Cotton-Perdue is not a good political bargaining chip for at least two reasons.  First, virtually zero Democrats would support a cut to green cards and at least half of Republicans would join them.  Cotton-Perdue will die on its own due to lack of support – like the RAISE Act did a few months ago – or be stripped out of any immigration bill in which it was included.  The bill has no chance so it cannot be credibly used as a bargaining chip to gain concessions elsewhere despite what President Trump says today.  Second, the public is more supportive of immigration than it was in the mid-1990s when Congress last seriously considered cuts in the legal system.  In 1995, 65 percent of Americans wanted less immigration while only 38 percent do today.  Cotton-Perdue would not be popular on Capitol Hill or with the American electorate so it is not a credible bargaining chip.

Conclusion

The Cotton-Perdue bill would not create a skills-based immigration system as President Trump has said he wants, it will not increase American wages, and it is not a credible bargaining chip in any future negotiations in Congress.  Interestingly, the current U.S. immigration system is gradually selecting a higher proportion of skilled immigrants over time without Congressional reform.  The Cotton-Perdue bill deserves to be criticized but it is not a serious threat that should gain concessions from Congressmen or Senators in both parties who either support immigration reform or the current level of admissions.

This week, the worst-kept secret in international sports became official: Paris will host the 2024 Olympic Summer Games and Los Angeles will host in 2028. There were plenty of happy faces in Paris and L.A. over the announcement—and there should be some in Boston too.

Just four years ago, Boston was a frontrunner in the sweepstakes for the 2024 Games. A group of city businessmen put together a multi-billion-dollar plan for the Games, including proposed construction of a large, temporary stadium for the main events and a beach volleyball venue that would be erected on Boston Common. The group then set to work getting political leaders and the public onboard.

In an article forthcoming in the fall issue of Regulation, Andrew Zimbalist, a Smith College economist and internationally renowned expert on the finances of mega-events like the Olympics, tells what happened next:

At first, Bostonians were excited by the Olympic prospect, inspired by claims that the event would yield long-lasting benefits in economic stimulus, international prestige, and tourism. But then they began to learn from people like Zimbalist that hosting the Olympics usually isn’t the net positive that proponents claim.

He writes of recent American Olympic history:

Lake Placid 1980 experienced cost overruns of 321% and ultimately required a bailout. The State of New York contributed $63 million (17% of total costs) and the federal government spent $179 million (50% of total costs). … Atlanta 1996 had cost overruns of 147%. … Approximately one-third of all spending—$823 million—came from taxpayers. … The federal government planned to spend $342 million on the 2002 Salt Lake City Winter Olympics. The Salt Lake City municipal government planned to spend $75 million and the Utah state government committed an additional $150 million. The final public bill was considerably higher.

Outside the United States, the Olympic experience has been even worse; barrels of red ink and/or horrifying events marked the Mexico City Games of 1968, the Munich Games of 1972, the Montreal Games of 1976, the Athens Games of 2004, the Sochi Games of 2014, and the Rio Games of 2016. And afterward, Zimbalist writes, the costs continue:

Beijing 2008’s “Bird’s Nest” stadium has been converted into a museum for tourists to visit at $12 a pop, but there is little interest. Meanwhile, the facility costs millions of dollars annually to operate and maintain. Rio’s Olympic Park has many venues that were slated for post-game use, but there was either no money to convert them or there were no private developers willing to take on the responsibility of remodeling and management. As in Athens (2004), most of Rio’s venues are now falling into disuse. London’s $700 million Olympic Stadium has been converted (at a $400 million additional public expense) into a new stadium for the West Ham soccer club, but West Ham had a perfectly good stadium beforehand.

As for claims that the Olympics bring tourism benefits, he argues this probably isn’t true on net. Major cities like Boston already attract plenty of tourists, but they’ll be inclined to stay away during the Olympics because of the chaos of the Games. And the Lyle Lanley notion that the Games would “put Boston on the map”? Well, Boston is already a pretty big dot on the map.

Put simply, host cities and nations rarely benefit from the Games. Instead, the beneficiaries are the International Olympic Committee (IOC) and the developers and other businessmen who profit from the construction and operation of the venues. For most everyone else, the Olympics are a sucker’s bet.

Once Bostonians learned this, public opinion turned sharply against the city’s hosting the Games. In late July of 2014, the city withdrew its application for the Games.

So why the smiles in Los Angeles? Because L.A. has figured out the politics and economics of the Olympics and refuses to make the costly mistakes that other host cities make. And this isn’t the first time the City of Angels has been so shrewd.

As Zimbalist chronicles, when L.A. hosted the 1984 Games, it roughly broke even—and perhaps even made a small profit. The city achieved this in part through aggressive use of corporate sponsorships. But the main reason for the success was L.A.’s heavy use of existing venues: the Coliseum, which hosted the 1936 Games, was also the main site of the 1984 Games; and the campuses of USC and UCLA were used to house athletes and staff instead of lodging them in a newly constructed “Olympic Village.”

L.A. was able to take this miserly approach because it was the only bidder for the 1984 Games. It thus drove a hard bargain with the IOC, instead of trying to “wow” the committee with exorbitant public works for the Games, as Athens (2004), Beijing (2008), Sochi (2014), and Rio (2016) did to their later regret.

Los Angeles’s 2028 proposal revisits this strategy, with plans to re-use the Coliseum, Staples Center, Pauley Pavilion, and other venues, use USC and UCLA again for the Olympic Village, and use a new football stadium in the LA suburb of Inglewood that is being built for the NFL’s Rams and Chargers franchises. Like in 1984, L.A. was able to strike this hard bargain with the IOC because—after the experiences of Rio et al.—only Paris and L.A. were serious candidates for 2024 and 2028 Games.

Still, L.A., California, and U.S. taxpayers should be on guard. The L.A. bid does envision the construction of some “temporary facilities,” and those can be expensive. Temporary stadiums (albeit far larger venues than what L.A. envisions) that were planned for Chicago’s unsuccessful 2016 Olympic bid and Boston’s withdrawn 2024 bid were estimated (optimistically) to cost $392 million and $175.5 million, respectively, for construction alone.

Generally speaking, hosting the Olympic Games has been a bad deal for taxpayers. Hopefully, Los Angeles is once again avoiding being the IOC’s sucker and will have both a terrific and financially responsible 2028 Games.

Writing in Monday’s New York Times, Katherine Stewart–author of 2012’s The Good News Club: The Christian Right’s Stealth Assault on America’s Children–has purportedly uncovered what “what the ‘government schools’ critics really mean.” According to Stewart, those who criticize government schools “have their roots in American slavery, Jim Crow-era segregation, anti-Catholic sentiment and a particular form of Christian fundamentalism.” She then catalogues a litany of unsavory characters who opposed “government schools” because they believed in the righteousness of slavery or because they saw the schools as insufficiently fundamentalist.

I’m not going to directly address Stewart’s claims about people like Robert Lewis Dabney or James W. Fifield Jr., both of whom, according to her, opposed government schools for unsavory purposes. I wouldn’t be surprised if they did. Many policy proposals can attract unsavory people, but the mere existence of such adherents is not a sufficient reason to abandon the policy. If it was, then the fact that many early-20th century Progressive economists and social reformers championed the minimum wage because it would unemploy “racially undesirable” immigrants would be a sufficient reason to oppose the minimum wage.   

Instead, I’ll focus on two fundamental errors in Stewart’s article. First, she ignores the extensive historical provenance of critics of state education, i.e. “government schools.” To demonstrate this, I can’t do better than refer you to intellectual historian and Libertarianism.org contributor George H. Smith, who has done yeoman’s work on the history of critics of state education. Smith has paid particular attention to 19th century British Voluntaryists, such as Herbert Spencer and Auberon Herbert. In a series of essays on Cato’s Libertarianism.org, Smith tells the history of those critics. “Rather than giving to government the power to decide among conflicting beliefs and values,” writes Smith, “they [British Voluntaryists] preferred to leave beliefs and values to the unfettered competition of the market.” Smith continues:

One must appreciate this broad conception of the free market, which includes far more than tangible goods, if one wishes to understand the Voluntaryist commitment to competition and disdain for government interference.

British libertarians had a long heritage of opposition to state patronage and monopoly, reaching back to the Levellers of the early seventeenth century. The Voluntaryists, like their libertarian ancestors, believed that government interference in the market, whatever its supposed justification, actually serves special interests and enhances the power of government, thereby furthering the goals of those within the government. The various struggles against government intervention were seen by Voluntaryists as battles to establish free markets in religion, commerce, and education. It was not uncommon to find the expression “free trade in religion” among supporters of church-state separation; when the editor of the Manchester Guardian stated in 1820 that religion should be a “marketable commodity,” he was expressing the standard libertarian position.

When fellow free-traders, such as Richard Cobden, supported state education, the Voluntaryists took them to task for their inconsistency. Those who embrace free trade in religion and commerce but advocate state interference in education, argued Thomas Hodgskin (a senior editor of The Economist) in 1847, “do not fully appreciate the principles on which they have been induced to act.” “We only wonder that they should have so soon forgotten their free-trade catechism,” wrote another Voluntaryist, “and lent their sanction to any measure of monopoly.”

Before free-traders ask for state interference in education, Hodgskin argued, “they ought to prove that its interference with trade has been beneficial.” But this, by their own admission, they cannot do. They know that the effect of state interference with trade has always been “to derange, paralyze, and destroy it.” Hodgskin maintained that the principle of free trade “is as applicable to education as to the manufacture of cotton or the supply of corn.” The state is unable to advance material wealth for the people through intervention, and there is even less reason to suppose it capable of advancing “immaterial wealth” in the form of knowledge. Any “protectionist” scheme in regard to knowledge should be opposed by all who understand the principle of competition. Laissez-faire in education is “the only means of ensuring that improved and extended education which we all desire.”

Smith’s essays, as well as a forthcoming Smith-edited anthology of critics of state education to be published by Cato, give the lie to Stewart’s assertion that critics of “government schools” operate in the tradition of racists and fundamentalists. Instead, we operate in the tradition of people like Thomas Hodgskin–a man who straddled that strange area between libertarianism and socialism–and Joseph Priestley, the discoverer of oxygen.

Stewart’s second fundamental error is to conflate conservative and libertarian critics of state education. While I imagine Stewart thinks that there is hardly any meaningful difference between conservatives and libertarians–except perhaps to think that libertarians are more “radical”–the issue of the government provision of schools helps separate libertarians from conservatives and, in the process, demonstrates a fundamental difference between the two. Put simply: many conservatives do not actually oppose government schools, they only oppose government schools that they do not control. Libertarians, on the other hand, as we’ve seen with the British Voluntaryists, will oppose government schools even if they were libertarian.  

In that vein, Jesse Walker at Reason has discovered a significant error in Stewart’s piece that helps underscore this difference between conservative and libertarian views on education. Stewart cites Presbyterian minister A.A. Hodge as one of the first to use the phrase “government schools.” As Walker points out, Hodge was not against government schools, he was against centralized schools. Lest there be any doubt, here’s Hodge in his essay “Religion in the Public Schools”:

It is agreed that the perpetuity of a free state necessarily requires the general education of the people. It is also agreed that no agency can so effectually secure this necessary end as a school system supported by public taxation and controlled by the state herself.

Hodge feared the secularizing tendency of centralized schools, and he therefore wanted the government to control schools at a local level. Again, lest there be any doubt, here are Hodge’s words in his essay “The Engine of Atheism”:

I am as sure as I am of the fact of Christ’s reign that a comprehensive and centralized system of national education, separated from religion, as is now commonly proposed, would be the most appalling enginery for the propagation of anti-Christian and atheistic unbelief, and of antisocial nihilistic ethics, individual, social and political, which this sin-rent world has ever seen.

Strangely, and I would say dishonestly, Stewart quotes this passage as follows, completely distorting the meaning:

In 1887, he published an influential essay painting “government schools” as “the most appalling enginery for the propagation of anti-Christian and atheistic unbelief, and of antisocial nihilistic ethics, individual, social and political, which this sin-rent world has ever seen.”

Hodge clearly wasn’t talking about “government schools,” he was talking about a “comprehensive and centralized system of national education,” something akin to today’s common core.

Finally, racists and religious zealots have also conspired against private schools. In Oregon, in 1922, Walter Pierce won the governorship with the support of the Ku Klux Klan. The Klan had become quite powerful in the state, and they were pushing for a compulsory education act, which would force children to go to “government schools.” Because the KKK was viciously anti-Catholic, eliminating private Catholic schools was one of the Act’s goals. After the law passed, one Catholic school, the Society of the Sisters of the Holy Names of Jesus and Mary, challenged the law on constitutional grounds. In 1925, in the case Pierce v. Society of Sisters, the Court unanimously struck down Oregon’s law on the grounds that it violated the Due Process Clause of the Fourteenth Amendment.

Whether or not someone supports “government schools” often depends on whether they feel their views are being represented by the school. Conservatives have long believed that public schools are little better than watered-down communist indoctrination camps, and thus they’re often critical of public education. Similarly, if Ms. Stewart found her children’s school overtaken with fundamentalist propaganda, she might pull her kids out and send them to a private school. Libertarians often stand alone, criticizing the very idea of state education as a misguided and quixotic attempt to enforce “shared values”–i.e. those values that won 51 percent of the vote in the last election–on a population.

Rather than being the heirs of racists and fundamentalists, those who criticize government schools are part of proud tradition that includes classical liberals, voluntaryists, and proto-socialists. As Hodge shows, many conservatives are part of a different tradition: one that believes the state should engineer its citizens and only oppose government schools when they disagree with how the schools are being run.  

This week, Apple announced it had pulled several apps from its iOS App Store that offer virtual private network (VPN) services in China. As quoted by tech blog TechCrunch, Apple stated:

Earlier this year China’s [Ministry of Industry and Information Technology] MIIT announced that all developers offering VPNs must obtain a license from the government.  We have been required to remove some VPN apps in China that do not meet the new regulations. These apps remain available in all other markets where they do business.

One published report claims that as many as 60 VPNs were pulled from the China version of the App Store. A Google search on the topic generally shows Apple taking a public beating for the action, which, in fact, was unavoidable if Apple was to comply with the new Chinese government law. 

As David Pierson of the LA Times noted, it’s hardly Apple’s first anti-free speech accomodation to the Communist Chinese government:

This is not the first time Apple has acquiesced to authorities in China, the company’s second-biggest market after the U.S. It has pulled apps from its China app store that mention the Dalai Lama and ethnic Uighur activist Rebiya Kadeer. Apple also removed the New York Times app this year and disabled its news app in China in 2015.

Apple will face exactly the same situation in November, when a new Russian law banning VPNs comes into effect. 

Veteran Apple watcher John Gruber made the following observation on Apple’s decision:

The thing I keep thinking about is that iMessage and FaceTime are among the few protocols available inside China with end-to-end encryption. The Chinese just started blocking WhatsApp a few weeks ago. I don’t know why they allow iMessage and FaceTime to continue working, but they do, and both of those protocols are designed from the ground up to only work using end-to-end encryption. There is no “off switch” for iMessage encryption that Apple can flip inside China. If you’re using iMessage, it’s encrypted. It would surprise no one if China started blocking iMessage and FaceTime, but for now, their availability is a real benefit to the people of China that seems to go largely unrecognized.

You can pretty much take it to the bank that blocking iMessage and FaceTime will be next up for Chinese (and probably) Russian censors, with further demands that other apps offering end-to-end encryption be excised from the iOS App Store.

And it will be those kinds of precedents that incoming FBI Director Christopher Wray and his colleagues in the American Intelligence Community use to force Apple and other manufacturers of privacy technology and software to give them “back doors” into said apps and services or to seek an outright ban on them on “national security” grounds. If that happens, American citizens should remind their federal legislators that if House and Senate members are allowed to use encrypted messaging apps and services, so should the citizens who elect them and pay their salaries.

Cross-posted at the Urban Institute, following our online debate.

Across the country, many people are finding it harder and harder to pay their rent. Among the leading reasons for rising rents is that housing supply isn’t growing fast enough to keep up with demand. The shortage of affordable rental housing has generated surging interest in regulatory reform, especially in California.

Despite that trend, restrictive land-use regulations that reduce housing supply enjoy support from people with a wide range of political attitudes and affiliations, as these regulations promise to accomplish appealing objectives. They can ensure that new residents provide revenue through property taxes or development fees to support schools, roads, parks, open space, and affordable housing. They  sometimes reduce gentrification and often control neighborhood aesthetics. And regulations that reduce housing supply enough to raise housing prices benefit residents who own homes.

Given the breadth of support for restrictions from various corners, any efforts to reform regulation must be correspondingly broad. Results from an online debate last month cofacilitated by experts from the Cato Institute and the Urban Institute hint at the potential for new coalitions.

Where the experts agree

The debaters, whose ideological perspectives varied broadly, agreed that, sometimes, land-use regulations are too rigid, limit growth too much, and create too much uncertainty. Results include higher housing costs, racial and economic segregation, constrained economic opportunity and innovation, and slower economic growth.

Even supporters of regulation conceded that regulations fail to work as advertised. They often expose people to harms instead of protecting them; diminish, rather than enhance, aesthetic and environmental quality; and aggravate public service degradation instead of preventing it.

Reflecting agreement on the problems of regulation, some debaters found common ground on what to do about those problems. Most of the agreement centered on local reforms that loosen or reduce regulation for improvements in efficiency, affordability, and equity. Dana Berliner from the Institute for Justice suggested broadening permitted uses, eliminating parking requirements where parking is abundant, and removing restrictions on home garage uses. Tony Arnold of the University of Louisville favored reducing regulatory requirements for affordable housing and agreed with Berliner on the importance of reducing unnecessary permitting delays. And Robert Dietz of the National Association of Home Builders recommended lowering development impact fees used for general revenue collection.

Some debaters also agreed that state governments are important actors in driving local regulatory reform. Richard Rothstein of the Economic Policy Institute endorsed state “fair share” affordable housing plans. New Jersey’s decades-old approach to battling suburban exclusionary zoning hinges on these plans and is supported by affordable housing advocates, civil rights leaders, and for-profit builders. That support wouldn’t materialize without provisions that override local restrictions and guarantee that builders incorporate affordable housing in their developments. Rothstein, Arnold, and American University’s Derek Hyra supported inclusionary zoning, but without the quid pro quo of increased certainty and density, the policy can generate stiff opposition from for-profit builders.

Why further debate is crucial

Some debaters offered pros and cons of regulations and advocated for policies that others opposed. Many of these items deserve more thought and discussion, even if we don’t reach an agreement now, because they illuminate trade-offs and potential approaches for future policy designs that could ease the housing supply crisis. We hope you’ll come up with some ideas of your own when you read the full Cato Institute and Urban Institute debate here.

U.S. Senator Corey Booker (D-NJ) 

is proposing a far-reaching bill that would both legalize marijuana at the federal level and encourage states to legalize it locally through incentives.

Federal legalization is unquestionably the right policy. The bill does go farther than necessary by 

[withholding] federal money for building jails and prisons, along with other funds, from states whose cannabis laws are shown to disproportionately incarcerate minorities.

If federal law legalizes, state prohibitions become irrelevant given that state borders are porous. Eight states have already legalized, and competition for marijuana tax revenues will drive most others to follow suit once federal prohibition is gone.

Alas,

The New Jersey Democrat’s bill, called the Marijuana Justice Act, has virtually no chance of passage in the Republican-controlled Congress and in a presidential administration that’s decidedly anti-marijuana.

Nevertheless, Booker gets three cheers for trying.

Yesterday Immigration and Customs Enforcement (ICE) announced that eighteen counties in Texas are taking part in the 287(g) program. The program allows police departments to enter into agreements with ICE, thereby permitting their officers to carry out certain federal immigration enforcement functions. The news from Texas is the latest evidence that President Trump’s campaign pledge to “expand and revitalize” 287(g) was a serious commitment, not political bluster. The expansion of 287(g) is a worrying development. The program has been widely criticized for harming police-community relationships and prompting racial profiling. It also grows the power of the federal government, which traditionally has not played a major role in state and local law enforcement.

287(g) was, until a few years ago, a program that had three models: Jail, Task Force, and a Jail/Task Force hybrid model. The Jail agreements allow participating officers to check an individual’s status in a detention facility and issue detainers. Using detainers, officers can hold individuals 48 hours longer than they usually would so that ICE can pick them up. The Task Force model allowed officers to carry out immigration enforcement in the field such as questioning and arresting people suspected of violating immigration law. At the end of 2012 the Obama administration announced that the Task Force 287(g) model would be scrapped, with ICE declaring that other programs “are a more efficient use of resources for focusing on priority cases.”

The Department of Homeland Security (DHS) Office of Inspector General (OIG) raised concerns related to 287(g) in a 2010 report, which stated:

NGOs critical of the 287(g) program have charged that ICE entered into agreements with LEAs that have checkered civil rights records, and that by doing so, ICE has increased the likelihood of racial profiling and other civil rights violations.

Claims of civil rights violations have surfaced in connection with several LEAs participating in the program. Two LEAs currently enrolled in the program were defendants in past racial profiling lawsuits that they settled by agreeing to collect extensive data on their officers’ contacts with the public during traffic stops, and adopt policies to protect the community against future racial profiling. Another jurisdiction is the subject of (1) an ongoing racial profiling lawsuit related to 287(g) program activities; (2) a lawsuit alleging physical abuse of a detained alien; and (3) a DOJ investigation into alleged discriminatory police practices, unconstitutional searches and seizures, and national origin discrimination.

The DHS OIG report was correct to point out the criticism leveled at 287(g). As I’ve noted before, the American Immigration Council found that “287(g) agreements have resulted in widespread racial profiling.” According to the ACLU of Georgia, “The 287(g) program in Cobb and Gwinnett has encouraged and served as a justification for racial profiling and civil and human rights violations by some police officers acting as immigration agents.”

In 2010 Wade Henderson, then-President and CEO of The Leadership Conference on Civil and Human Rights, testified before the House Subcommittee on the Constitution, Civil Rights, and Civil Liberties, saying, “the facts show that many local law enforcement agencies repeatedly use 287(g) agreements to stop, frisk, detain, arrest, question, harass, terrorize, and otherwise target individual Latinos and entire Latino communities in a broad way to enforce federal immigration laws, for no reason other than that they appear to be Latino and thus are profiled as potential illegal immigrants.”

But nonprofits are not the only organizations that have criticized the 287(g) program. The Department of Justice’s Civil Rights Division issued two reports on 287(g). One, published in 2011, focused on the Maricopa County (Arizona) Sheriff’s Office (MCSO), the other, published a year later, examined the Alamance County (North Carolina) Sheriff’s Office (ACSO).

For the MCSO report the DOJ had a racial profiling statistics expert examine traffic stops. This expert “found that Latino drivers were between four to nine times more likely to be stopped than similarly situated non-Latino drivers.” The same report noted that one Maricopa deputy “was told by his supervisors to expect that he would encounter hostility from people who believed they were being stopped because of their ethnicity.”

In ACSO, the DOJ found a “pattern or practice of unconstitutional policing.” The report also noted the impact ACSO’s policing practices had on Latinos (including citizens) with the sheriff unequivocally encouraging officers to target Latino neighborhoods.

The most recently announced 287(g) agreements are not Task Force agreements. All of the current 287(g) agreements are Jail agreements. However, in February, Trump’s then-DHS Secretary John Kelly announced in a memo (emphasis mine):

The Commissioner of CBP and the Director of ICE should consider the operational functions and capabilities of the jurisdictions willing to enter into 287(g) agreements and structure such agreements in a manner that employs the most effective enforcement model for that jurisdiction, including the jail enforcement model, task force officer model, or joint jail enforcement-task force officer model.

In March, Milwaukee County Sheriff David Clarke signed a 287(g) letter of intent, explicitly stating that he is seeking a hybrid Jail/Task Force 287(g) agreement with ICE. The president’s own rhetoric, one of his executive orders, and DHS’ statements suggest that Clarke isn’t being overly ambitious in seeking a hybrid agreement.

The news from Texas represents the largest expansion of 287(g) in years. As ICE notes, between 2012 and 2016 there were only six new 287(g) agreements. At the end of 2016 there were 32 law enforcement agencies with 287(g) agreements in 16 states. Today, there are 60 law enforcement agencies with 287(g) agreements in 18 states.

State and local law enforcement should not be involved in enforcing federal laws. Immigration enforcement is a federal responsibility and, as has been noted, 287(g) has a poor track record when it comes to effective and constitutional policing. The recent expansion of 287(g) is unfortunate, but it’s hardly surprising. This is exactly the kind of immigration policy the president promised us.

Yesterday’s fraudulent and illegitimate vote to install a constituent assembly in Venezuela is the definitive step towards consolidating a de jure dictatorship in that country.

The constituent assembly will enjoy supra-constitutional powers, which means that its prerogatives go beyond writing a new constitution and include, inter alia, dissolving and removing all existing institutions—including those controlled by the opposition or held by critics of the regime, such as the National Assembly and the Attorney General’s Office—and calling off scheduled elections, which the government would certainly lose. In the hours after the vote, Nicolás Maduro openly stated that the constituent assembly will strip opposition assembly members from immunity and will discharge Maria Luisa Ortega, the Attorney General.

Several myths regarding the crisis need to be addressed:

Venezuela is on the brink of a civil war: In order to have a war, both sides need to be armed. In the case of Venezuela, only one side—the government—has the guns: the Maduro regime enjoys the full support of the armed forces, the National Guard—which is responsible for brutally repressing the protests—and the colectivos, which are armed thugs that terrorize the population in motorcycles with the assistance of the police and the National Guard. Of the more than 120 people killed since the protests began four months ago, almost all have been protestors or other civilians murdered by the security forces.

The army could withdraw its support for Maduro at any moment: This is wishful thinking. For over a decade, the armed forces have been carefully purged of officials that do not support the authoritarian project of Hugo Chavez and his successor Nicolás Maduro. The Maduro government is a military regime, even though its head is technically a civilian: 13 members of the Cabinet (out of 32) are military officials, as well as 11 of the 20 Chavista governors. The armed forces are profiteering from the status quo; they are deeply involved in smuggling and drug trafficking.

The alternative to supporting the regime for the rank and file members of the military is not serving under a new democratic government or retiring with a government pension but rather being prosecuted for massive corruption or being extradited to the United States for drug trafficking. Moreover, even though there are reports of growing dissatisfaction at the troop level, the Cuban security services have infiltrated the armed forces and can easily detect and prevent any uprising from taking place. It is the perfect setup for the consolidation of a dictatorship.

A negotiated solution is the only alternative: This is without a doubt the ideal scenario. However, the Maduro regime is not interested in giving up power. Any acceptable agreement for the opposition necessarily involves calling for free elections, which Maduro would certainly lose. For Maduro and his henchmen, losing power means seeking political asylum (probably in Cuba) or ending up in prison in Venezuela. There have been several efforts to mediate a compromise between the government and the opposition. In every single case, the government has used the negotiations to buy time and divide the opposition, while increasing the number of political prisoners, stripping the powers of the legislature, and calling off scheduled elections. It is no wonder that most of the opposition has given up on the idea of a negotiated solution and seeks the immediate departure of the regime.

The country is deeply polarized: This was definitely the case when Hugo Chávez died in 2013. But since then, the rapidly deteriorating economic situation and the humanitarian crisis besieging the country have undermined support for the regime. Surveys indicate that up to 80% of Venezuelans want Maduro gone. Even though many former Chavistas still distrust the opposition, they recognize the need for regime change.

Cuba can play a positive role in the solution of the Venezuelan crisis: This is utter nonsense. Cuba is not a just an ally of Venezuela, Cuba is the puppet master of the Maduro regime. Since the days of Hugo Chávez, the Cubans have been closely advising the Venezuelan government on how to dismantle democratic institutions. Cuban agents control many agencies within the Venezuelan government and are deeply ingrained in the armed forces. In exchange, Cubans get cheap Venezuelan oil, a subsidy that at some point amounted to 20% of the island’s GDP. Cuba has made it clear in recent weeks that it won’t allow its colony to slip from its control.

What then? Nobody knows for sure what the end game is. International pressure is growing along with more active protests in the streets. Targeted economic sanctions to individuals within the regime certainly hurt. It is difficult to conceive the successful installation of a full-fledged dictatorship when you have millions of Venezuelans adamantly opposed to such a move, and thousands of them protesting daily in the streets. However, the regime—with the collaboration of Cuba—has firm control over the armed forces and the National Guard. As long as that is the case, it is difficult to foresee any positive changes in the near future. The consolidation of a Cuba-style dictatorship remains a possibility.

Here’s some genuine good news for both individual liberty and harm reduction: the Food and Drug Administration has granted a four-year reprieve to e-cigarettes (“vaping”). In particular, it is extending from November 2018 to August 2022 the requirement to obtain regulatory clearance for, or else withdraw, vaping products now on the market. As I noted last year, under the “deeming” regulations proposed under the Obama administration 

even products currently sold on the market will have to be withdrawn unless their makers, mostly small companies, care to venture on an FDA approval process that can cost $1 million and up per item. Any resulting applications will result in permission to sell only if the agency decides the product is a net safety improvement on current offerings. And that permission will be at best chancy because the FDA, following [then-CDC head Thomas] Frieden’s lead but in contrast with the views of many others in the public health field, refuses to acknowledge vaping as a safer alternative to tobacco smoking, even though large numbers of smokers turn to vaping with exactly that goal in mind. 

While it is likely that many smokers save their life or health by switching from a cigarette habit to the less injurious electronic alternative, every such switch cuts into revenues from conventional cigarette sales—and thus the coffers of state governments and other beneficiaries of the 1998 tobacco settlement. Some of these groups, as well as some components of the tobacco business, had quietly backed the FDA’s plan to close down vaping except perhaps for the very biggest players. 

Notably, and shrewdly, the Trump White House chose to associate itself with the Friday FDA announcement: 

A spokesman for the White House told The Daily Caller News Foundation President Donald Trump “supports the FDA’s new initiative,” and noted it as an example of his administration’s efforts to give relief to small businesses across the country.

“Public health is a priority and anything that will help protect kids and assist individuals to stop smoking is a worthy cause,” the White House spokesman told TheDCNF. “The President and his administration have taken historic action to eliminate unnecessary and burdensome regulations.”

Meanwhile, new Food and Drug Administration head Scott Gottlieb says his agency will look into the possibility of limiting nicotine levels in conventional cigarettes with the aim of making them less addictive. The obvious problem with that, the incursion on liberty aside, is that if cigarettes are made to contain less nicotine, many users will choose to maintain an existing level of intake by stepping up the number of cigarettes they smoke per day, thus boosting their intake of associated tar and noxious gases. But at least there’s time to argue over the flaws of a proposal that’s down the road. The vaping regs were bearing down quickly. 

 

I realize that I am a bit late to this party and that many of Nancy MacLean’s strange claims and factual errors have already been exposed and debunked by people much more familiar with her work, the intellectual history of libertarianism and the Nobel Prize-winning economist James Buchanan, than I am. However, there is one aspect of MacLean’s conspiracy theorizing in Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America (i.e., “the attempt by the billionaire-backed radical right to undo democratic governance” in America) that, I think, needs further comment.

Specifically, it would appear that in her “thoroughly researched” book, as Publishers Weekly calls it, MacLean has not bothered to talk to many actual libertarians, including, apparently, her colleague at Duke University, Michael C. Munger. Had she done so, MacLean would have realized that libertarians have come to their views for a plethora of reasons—only one of which may be the generosity of the libertarian businessman, billionaire and bête noire of the progressive left, Charles Koch. (I shall return to Charles Koch below.) But that would have, I am afraid, undermined her view of the libertarian movement as a racist (what else?) conspiracy.

At the risk of seeming self-indulgent, I would like to like to offer a personal perspective on becoming a libertarian. Growing up in 1980s Czechoslovakia, I witnessed communism’s final decade. The people around me were still afraid of eavesdropping by the secret police, jail time for anti-socialist activities, professional ruin, and social ostracism. But communism no longer inspired terror in the way it had in the early years after the Czechoslovak communist putsch in 1948.

As such, I cannot claim some sort of a victimhood status. My generation did not associate communism with firing squads and starvation. Rather, communism meant annoying, but manageable, food shortages and the grey monotony of everyday life under a dictatorship. Why do I revisit 30-year-old memories? I do so, because appreciation for political and economic freedoms, which is what I understand libertarianism to mean, often comes from personal experiences that are unconnected to (imagined) conspiracies.

Perhaps it is the realization that interactions with businesses, like the local Whole Foods, are more pleasant and satisfying than interactions with government agencies, like the local DMV. Perhaps it is the desire to consume food, drink, and drugs without an input from an all-knowing government official. Perhaps, as was the case with me, it is looking at the economic and social ruins of socialism. Hundreds of millions of human beings have learned to appreciate freedom during communism and many, far too many, still yearn for it in places like Cuba, North Korea, and Venezuela.

We have, in other words, acquired libertarian tendencies without James Buchanan, Charles Koch or, for that matter, the Cato Institute.

Buchanan helped us to understand why communism fell, not to realize that it had failed. Wealthy libertarian donors enable people like me to proselytize on behalf of freedom and we appreciate them, in part, because we worry that socialism, like the tardigrade, is never truly dead. Had MacLean picked up the telephone and talked to one of the many American libertarian activists with weirdly sounding names, she would have realized that to be libertarian, one does not have to be a part of a vast and nefarious conspiracy. She would have saved us a lot of time spent on debunking her thesis and she would have saved herself a bucket-load of embarrassment.

A common fear about lower-skilled immigrants is that they will push native-born Americans with similar skills out of the labor market. In recent years, this argument focuses on the harm to native-born teenagers who are most substitutable with lower-skilled immigrants—especially those on the H-2B visa for seasonal non-agricultural work. This effect is supposed to be greatest in the summer time when American teenagers are on school vacation. 

Teenagers are working less than they used to but the U.S. labor market has changed in myriad ways that are unrelated to immigration, especially when it comes to the opportunity cost of teenagers. In responding to an op-ed by Senator Ben Sasse (R-NE) that lamented the loss of teenage work ethic (an oxymoron if my personal observations and experience as a teenage worker is representative), economist Ernie Tedeschi showed that increased enrollment in summer school can explain virtually the entire decline in their summer employment, at least for the month of July (Figure 1). The data allowed Tedeschi to separate part-time and full-time school enrollment after 1989. Years ago, I noted that increased summer school enrollment explained much of this decrease by leaning heavily on this Chicago Fed Letter that stated:

[w]e find no compelling evidence that associates the recent decline in teen participation with greater labor market competition due, for example, to larger cohorts of teens or an increase in the numbers of unskilled workers entering the labor market because of the 1996 welfare reform or changes in immigration.

Figure 1

Labor Force Participation & School Enrollment in July: 16-19 Year Olds

 

Source: Ernie Tedeschi’s calculations from IPUMS monthly CPS Extract.

Although Tedeschi does not mention immigration in his blog, his findings are broadly consistent with estimates of how immigration affects teenage employment and wages. Figure 1 is consistent with economist Peter McHenry’s finding that “low-skilled immigration to an area induces local natives to improve their performance in school, attain more years of schooling, and take jobs that involve communication-intensive tasks for which they (native English speakers) have a comparative advantage.” Another finding by economist Christopher L. Smith found that native-born American teenagers do compete with low-skilled immigrant workers because both are relatively unproductive but also that such competition incentivizes teens to acquire more education so that they do not have to compete directly with immigrants in the future. Thus, low-skilled immigrants do push some teens out of the labor market temporarily while they upskill. 

Upskilling is also consistent with research by economists Giovanni Peri and Chad Sparber that finds increased lower-skilled immigration induces lower-skilled natives to specialize in jobs that require communication in English while the immigrants specialize in jobs that are more manual-labor intensive, an effect called task specialization. They estimate that task specialization reduces immigration’s downward wage pressure because natives react by adapting and specializing in more highly paid occupations, not by dropping out of the job market. This effect decreases wage competition between lower-skilled natives and immigrants by around 75 percent.

It could be that teenagers find school enrollment more fulfilling because competition with immigrant workers has lowered wages in that segment of the labor market. There is a lot of academic evidence that that effect is hard to find and, if it does exist, extremely small. However, if such a negative wage effect from immigration does impact a large cohort of American workers then we should expect to find it among teenagers. Furthermore, even if teenage wages do decline because of immigrant competition, curtailing low-skilled immigration may not have any effect on wages or employment as employers mechanize low-skilled jobs in response—a more expensive production method relative to hiring immigrants but less expensive than paying natives a higher wage. The more likely explanation is that the long-run monetary return for the teenager from education if greater than working a summer job, especially since states now subsidize summer school.

I’m delighted to learn from Eric Boehm at Reason that a $35 million stadium subsidy is “pretty close to dead” after Potomac Nationals owner Art Silber pulled the matter from the Prince William Board of County Supervisors consideration ahead of a planned vote July 18. However, taxpayers in other Northern Virginia counties may still be at risk, as the Nationals search for a less fiscally responsible county board nearby. 

I wrote about the Nationals’ attempt to milk the taxpayers last month:

The county found a consulting firm to produce, as it has done for many governments, an optimistic economic analysis: It suggests that a new stadium would generate 288 jobs, $175 million in economic impact, and $4.9 million in tax revenue over a 30-year lease. Similar studies have proven wildly optimistic in the past. In 2008 the Washington Post reported that Washington Nationals attendance had fallen far short of what a 2005 study predicted. As Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed Nationals stadium subsidy, “The wonder is that anyone finds such figures credible.”…

Silber and the board of supervisors want the taxpayers to know that this time is different; their $35 million bond issue isn’t a government giveaway:

In Prince William, the board of supervisors is considering a proposal in which it would use bond money to build the stadium. The team would then reimburse the county the entire cost over the course of a 30-year lease.

“We’ve all read about certain professional sports teams threatening to leave if a local government doesn’t buy them a new stadium. The exact opposite is happening here,” said Tom Sebastian, a senior vice president with JBG. “The Potomac Nationals have agreed to pay 100 percent of the cost to construct a new stadium so that they can stay in Prince William County.”

I will gladly pay you Tuesday, 30 years from now, for a hamburger today.

Congratulations to Americans for Prosperity, Supervisor Pete Candland and his colleagues, and especially to the taxpayers of Prince William County. 

On Tuesday, the Senate Finance Committee will hold a hearing to discuss affordable housing. The committee will debate whether to expand the Low-Income Housing Tax Credit (LIHTC), a program that ineffectively subsidizes affordable housing. A bill co-sponsored by Senator Cantwell and Senator Hatch would expand the program by 50%.

Unfortunately, the program usually sidesteps scrutiny because it is not part of the discretionary budgeting process. But the Senate Finance Committee has a unique window of opportunity to ask hard questions of LIHTC during the hearing. As a result, Tuesday’s hearing is arguably more important than usual.

What questions should the senators ask? Below are a list of ten questions to get the conversation started:

  1. Does LIHTC subsidize units that would be provided by the private market in its absence? How will the program improve the real number of affordable housing units produced?

  1. Why should Congress expand a program that GAO reports is not well managed? How does this bill increase oversight?

  1. Is LIHTC a band-aid solution for destructive local zoning and land use regulation policies? Should states be required to reduce local land use and zoning regulation in order to qualify for LIHTC?

  1. How will the bill reduce the amount that developers benefit from LIHTC?

  1. How does the bill improve the cost-effectiveness of LIHTC? Is LIHTC the most cost-effective way to subsidize housing? (Research suggests it is not.)

  1. Why must LIHTC be used in conjunction with other subsidies?

  1. Will non-profit developers continue to be provided preferential treatment in the credit allocation process? Even if they are less efficient at building affordable units?

  1. Given finite federal resources, why does LIHTC subsidize moderately low-income individuals rather than extremely low-income individuals?

  1. Why aren’t Housing Finance Authorities (HFAs) required to monitor project compliance during the latter half of the 30 year “extended use” period?

  2. How will the bill reduce corruption and fraud?

It’s essential that LIHTC is given the scrutiny it deserves. The Senate Finance Committee should make sure it happens.

In a speech about criminal gangs before police officers on Long Island, New York today, the President of the United States openly encouraged police officers to abuse people they arrest and take into custody. Daniel Dale of the Toronto Star tweeted that President Trump explained that he didn’t want officers to protect suspects’ heads when putting them in police cars, saying “You can take the hand away,” which drew the officers’ loud approval. Concurrent reporting from Asawin Suebsaeng of the Daily Beast confirmed that the call for police brutality drew “wild applause.”

The president’s comments are disgraceful and anathema to responsible policing and the Rule of Law. Causing intentional injury to a handcuffed suspect is not only against police procedure, but is a federal crime for which police officers have been sent to prison. What’s worse, the reaction of the crowd of officers should strike fear into the heart of every parent on Long Island, particularly those of black and Hispanic young men, who fit the stereotypical description of the gang members President Trump described.

In the name of law and order, the president made a mockery of the Rule of Law in his call for illegal violence against presumptively innocent suspects. It is a shameful day for the presidency and police agencies across the country should condemn the president’s irresponsible and indefensible comments in the strongest possible terms.

 

This is cross-posted from PoliceMisconduct.net

Pew Research Center surveys of American Muslims have consistently shown a trend toward growing acceptance of mainstream American views, as I have written before. Pew’s latest poll reveals the same pattern as those in the past. Despite the most hostile political environment for Muslims in many decades, U.S. Muslims continue to adopt the social views of other Americans.

Over the latest decade, the share of Muslim immigrants and their children has grown by 60 percent, from 1.7 million in 2007 to 2.6 million in 2017. The share of third generation or more Muslims has actually fallen from 28 percent in 2007 to 24 percent in 2017, which indicates that Muslim immigrants are taking part in this shift toward more liberal views. Muslim immigration, which is large in relative terms, is not retarding Muslim assimilation.

Figure 1
U.S. Muslims By Generation in the United States

Source: Pew Research Center (2017). Pew has no surveys before 2007, but the best survey estimate for year 2000 placed the total Muslim population at 1.9 million (Smith (2002)).

Perhaps the most notable shift revealed in the Pew data is the change in Muslim American opinion toward homosexuality. The share that reports society should accept homosexuality has nearly doubled in 10 years from 27 percent in 2007 to 52 percent in 2017. As Figure 2 shows, 61 percent of U.S. Muslims in 2007 supported “discouraging” homosexuality. Since then, this share has fallen almost in half, dropping from 61 percent to 33 percent. As I have discussed before, 87 percent of Muslims in Pew polls in non-U.S. countries oppose the toleration of homosexuality, which indicates a rapid change in views.

Figure 2
Pew Poll: Society Should Discourage Homosexuality (Percent Agree)

Source: Pew Research Center (2017).

Muslim Americans are simply not the fundamentalists that certain critics portray them to be. Pew found that almost two-thirds of Muslims stated a belief that there is “more than one true way to interpret the teachings of my religion.” This share has risen somewhat over the last decade, while the general public share has fallen slightly to the point where there is no statistical difference between the two groups on this issue. Unfortunately, the most recent Pew survey did not repeat a question it asked in 2007 and 2011 about whether more than one religion can lead to eternal life, but as I reported before, the trends were moving in the liberal direction.

Figure 3
Pew Poll: There is more than one true way to interpret the teachings of my religion

Source: Pew Research Center (2017), Pew Research Center (2008)

This assimilation process is likely associated with the growing integration of Muslims into society. According to Pew, 95 percent of Muslims have at least some Muslim friends, compared to 88 percent in 2007 (Figure 4). Moreover, there is now a large majority that say that most of their friends are non-Muslim—up 12 percentage points since 2007.

Figure 4
Pew Poll: How many of your close friends are Muslim?

Source: Pew Research Center (2017).

The most important question for many people, however, is their support for intentional violence against civilians—or terrorism. In past polls, Pew asked a different question about support for violence against civilians in defense of Islam. In this poll, they asked a more general question to allow for comparison between Muslim and non-Muslim responses. It reveals that three quarters of Muslim Americans think it is never permissible to target and kill civilians for a political, social, or religious cause—17 percentage points higher than the general public (Figure 5). Muslims and the general public were roughly equal in their support for such violence “sometimes” or “often.”

Figure 5
Pew Poll (2017): Can targeting and killing civilians for a political, social, or religious cause be justified?

Source: Pew Research Center (2017)

This poll confirms the findings of a 2011 poll by Gallup, which asked two very similar questions—one was whether it can be justified for “an individual person or a small group of persons to target and kill civilians” and the other “for the military.” U.S. Muslims were again by far the most opposed to such violence in either scenario. The results in the Pew poll are most similar to the Gallup results for the military scenario. This could indicate that Muslims and the general public were thinking of that scenario, or it could be that Muslims are assimilating Americans’ more permissive attitudes to civilian killings.

Figure 6
Gallup 2011 Poll: Targeting and killing civilians is never justified 

Source: Gallup (2011)

One reason why Muslim Americans are less likely to support violence against civilians is because Muslims worldwide are the most likely victims of terrorism and misguided military interventions. For this reason, they are much more resistant to the idea of exceptions to the normal moral impulse against this type of killing. A substantial portion of the U.S. Muslim population were refugees and personally targeted for persecution and violence. More than 300,000 Muslims have entered as refugees since 2002, when U.S. interventions in the Middle East, Africa, and Asia led to, as my colleagues’ recent paper explains, a rise in civilian deaths and more terrorist activity.

This could imply to some that Muslims are less patriotic, since people sometimes wrongly conflate patriotism with support for government policies. My colleague Alex Nowrasteh calls this phenomenon “patriotic correctness.” But Muslim Americans apparently can separate government policies and their devotion to their country. They are even more proud to be Americans than the general public—66 percent “completely agree” with the statement “I am proud to be an American” compared to 60 percent of the general public. Only 6 percent disagree compared to 7 percent of the general public. Muslim Americans are patriotic, just not patriotically correct.

Figure 7
Pew Poll: Do you agree with the statement: “I am proud to be an American”? 

Source: Pew Research Center (2017)

Whenever I have written about Muslim polling, some people tell me that we cannot believe Muslims because they have a religious concept called “Taqiyya” that compels them to lie. First of all, Taqiyya is mainly a Shia Muslim concept—which account for just 15 percent of U.S. Muslims—and it justifies lying only “where there is overwhelming danger of loss of life or property and where no danger to religion would occur thereby.” Moreover, the tradition of justified lying in both Sunni and Shia Islam state that there is no obligation to lie even in the face of persecution. Like Christians, Muslims also celebrate martyrs who refused to recant under threat.

Moreover, some Jewish and Christian traditions both occasionally celebrate noble acts of deception—for example, the Egyptian midwives protecting Jewish children, Rahab protecting the Israeli spies at Jericho, and Elisha protecting Israel from invasion. Last month, Muslims and Christians collaboratively used this defensive use of deception to allow Filipino Christians to escape Islamic militants.

Regardless, the thoroughly unfalsifiable theory that Muslims are lying to pollsters cannot explain the facts. For example, if the “right answer” on homosexuality is obvious, why are their deceptive answers not “better” than Americans? This theory also fails to explain why they have suddenly become more willing to lie today than 10 years ago and why they are less likely to “lie” to Pew and Gallup researchers in the United States than anywhere else in the world.

The Taqiyya excuse to dismiss valid polling on Muslims appears more like intellectual laziness or simply bigotry than a serious social science theory. Throughout history, people pushed similar theories about lying and untrustworthy Jews, perhaps most famously Protestant leader Martin Luther. It is hardly surprising that the same thing happens today with a similarly small minority in the United States, but it’s just as wrong.

The recent deaths of ten illegal immigrants in San Antonio, Texas are a gruesome example of the human costs of severe immigration restrictions. The immigrants wanted to be smuggled into the United States and, presumably, paid somebody for that service. They had no way to enter lawfully because the United States government allows in few temporary migrants to work in a handful of occupations and there is essentially no green card category for low skilled workers. Many of these people face the choice of continued poverty in their home countries or taking a risk at a better life working in the American black market. Attempting to work in the United States is risky and sometimes leads to deaths because of immigration enforcement and more enforcement will result in more deaths. 

These immigrants did make the choice to break American immigration laws but it does not follow that they are the ones to blame for their own deaths, despite what some restrictionists think. Immigration laws are primarily designed to stop Americans from voluntarily hiring, contracting, or selling to willing foreigners. If the immigration laws were concerned primarily with protecting the rights of Americans and those illegal immigrants who died in the Texas heat intended to do harm, had serious criminal records, or there was another excellent reason to think they would have hurt people here, then their deaths could be a defensible cost of a rational system that does more good than harm. At the very minimum, one could claim that the law that incentivized them to enter the black market at great risk was intended to protect people. But nobody familiar with our immigration laws or the net-positive effect of immigrants on Americans can make that argument with a straight face. These illegal immigrants died because of an international labor market regulation.    

Those who die from the heat in shipping containers are only a fraction of all deaths crossing the border. From 1998 through the end of 2016, 6,915 people died crossing the Southwest border. The number of deaths is somewhat up over that time even though the number of apprehensions is way down meaning that the inflow of illegal immigrants does not primarily drive the number of deaths (Figure 1). 

If the number of border crossers doesn’t determine the number of deaths, what does? We have a clue in the fact that the number of apprehensions per border death is way down from about one death for every 6,000 apprehensions in 1998 to about one death for every 1,000 apprehensions in 2016 (Figure 2). That means it is much more dangerous. A greater proportion of border crossers die as the number of Border Patrol agents increases which is evidence that more immigration enforcement leads to more deaths.

Figure 1

Border Deaths and Apprehensions on the Southwest Border

  

Source: Customs and Border Protection.

Figure 2

Apprehensions per Death and Border Patrol Agents

Source: Customs and Border Protection.

This is not surprising as research shows more border enforcement leads to more smuggling and higher smuggling prices – both of which increase the riskiness of crossing and, for instance, dying in a shipping container in the Texas summer. 

The government’s primary means of halting illegal immigration is through deterrence – creating so much fear in the minds of would-be illegal immigrants that they do not even try to enter. However, deterrence does not work on everybody. One effect of so much deterrence is that some people try different and riskier ways of entering the United States, such as in a shipping container in the Southwest in the heat of summer. The result is more danger and more death. 

Those extra deaths, tragic as they are, might be worth it if the immigration laws save more lives in the United States by preventing criminals or terrorists from entering – but they clearly do not, and few serious people are trying to make that case. The deaths of people who mean no harm to others is a predictable result of immigration laws intended to protect the American labor markets, culture, or the other justification de jour. It’s time that people start weighing human cost when considering legal reforms.

“Fed Up” is the name of a progressive initiative that describes itself as a coalition of “community-based organizations, labor unions, policy experts, and faith leaders…united in our call for a strong economy that works for everybody and a more transparent and democratic Federal Reserve.” Its main organizer is the Center for Popular Democracy, with support from the AFL-CIO, and the Economic Policy Institute, among others.

Fed Up has two main causes. First, it raises an important issue when it questions the current governance structure of the regional Federal Reserve Banks. Ironically, while it calls for greater diversity of backgrounds among FRB directors, Fed Up never seems to notice that FRB presidents are today the main source of diversity of thinking on the Federal Open Market Committee. Between 1995 and 2013, Dan Thornton and David Wheelock have found, “there were just two dissents by governors compared with 67 by presidents.” Since 2006 there have been zero dissents by members of the Board of Governors.

Fed Up secondly offers advice to the Federal Open Market Committee, the monetary policy body whose voting members consist of the Board of Governors plus a rotating subset of Reserve Bank presidents. It urges the FOMC to pursue a secularly more expansionary monetary policy, in the erroneous hope that this would bring greater prosperity to workers. In its wishful view “The Fed should target real wage growth that is higher than economy-wide productivity growth, in order to combat inequality and boost workers’ share of income.”

To say that “the Fed should” do x is to imply that the Fed can do x. Regrettably, however, the Fed has no policy tool with which to target real wage growth. Nor does any agency have a tool to raise real wage growth above productivity growth. The Fed can print money faster, which generates higher inflation, but this does not sustainably increase real wages or employment. The Fed cannot improve the productivity or demand for labor by generating 4% or 5% rather than 2% inflation in the long run. (Raising inflation even further to double digits would clearly harm workers by deranging economic coordination).

Nor does faster money growth sustainably lower the real interest rate. It is an elementary proposition of monetary theory that the real interest rate is independent of monetary policy in the long run. Faster money growth only raises inflation and thereby the nominal interest rate, which is determined by the real interest rate plus the expected inflation rate. For the Fed to secure lower nominal interest rates in the long run it must lower the inflation rate, and so must pursue a less expansionary monetary policy.

In June, Fed Up organized and published a letter calling on the Fed to commit explicitly to higher inflation by raising its official inflation target above the current 2% rate. Twenty-two professional economists signed the letter, including Nobel laureate Joseph Stiglitz; former Minneapolis Fed President Narayana Kocherlakota; and several former Obama administration economists. Prominent academic signers included Justin Wolfers, Laurence Ball, and Brad DeLong. The letter can be read in its entirety here.

The letter’s argument does not turn on the above-mentioned confusions between nominal and real variables, or confusions between short-run and long-run effects of monetary policy. On the contrary, it implicitly rejects them. Its argument is more sophisticated: two percentage points in higher secular inflation, by raising the secular nominal interest rate two percentage points farther above its zero lower bound, would allow the Federal Reserve temporarily to reduce the real interest rate (the nominal rate minus the given inflation rate) by two more percentage points when it lowers the nominal rate to zero in a recession. The Fed would thereby be able to deliver more stimulus.

Kocherlakota spelled out the logic in a blog post:

The inflation target helps define how much stimulus the Fed can deliver when it lowers interest rates to zero (a boundary below which the central bank has been unwilling to go). In a higher-inflation environment, a nominal fed funds rate of zero results in a lower real, net-of-anticipated-inflation rate — the rate that economists typically see as most relevant for consumer and business decisions. If, for example, people expect inflation to be 3 percent, then a zero nominal rate translates into a negative 3 percent real rate — a full percentage point lower than the Fed could achieve if expected inflation were 2 percent. Experience suggests that the Fed could use the added ammunition.

Or as David Beckworth and Ramesh Ponuru boiled down the argument: “During a recession, central banks usually cut interest rates in order to stimulate the economy. The higher the interest rate is at the start of the recession, the more they can cut it.”

Kocherlakota conceded that “there’s also a case against raising the inflation target,” although he didn’t spell it out. He concluded: “That’s why the more important part of the letter is its call for ‘a diverse and representative commission’ to re-examine the monetary policy framework.”

The argument has been around for years that a 4% or 5% inflation target would be better than a 2% or 0% target. Its lineage goes back at least to a 1996 paper by Akerlof, Dickens, and Perry, which emphasized wage stickiness rather than the zero lower bound. (George Akerlof, by the way, is the husband of Fed Chair Janet Yellen.) More recently Olivier Blanchard in 2010, while IMF Chief Economist, suggested with co-authors that central banks should consider raising their inflation targets and thus nominal interest rates to create more space above the zero lower bound (hereafter ZLB). Laurence M. Ball, a co-signer of the Fed Up letter, argued explicitly for raising the inflation target to 4% in a 2014 IMF working paper emphasizing the ZLB.

The Fed Up letter argues that the ZLB has become a more frequent constraint on policy in light of a secular fall in the equilibrium real interest rate toward zero, citing an argument to this effect by San Francisco FRB president John Williams. In the words of the letter, although a 2% inflation target “seemed to give ample leverage with which the Fed could lower real interest rates” once upon a time, zero rates for seven years after the financial crisis failed at “sparking any large acceleration of aggregate demand growth.”

The most straightforward objection to raising the inflation target is that a higher secular inflation rate raises the well-known costs of inflation. It means a higher and more distortive tax on money-holding, reducing consumer welfare. It means greater “menu costs” of more frequently changing nominal prices. Higher inflation rates are associated with higher variability in relative prices, increasing noise in the price system. But these costs alone are not enough to counter the claim that the welfare costs of a more frequently binding ZLB are even greater. (The letter simply dismisses the costs of increasing the inflation rate by few percentage points, asserting a “lack of evidence that moderately higher inflation would harm Americans’ standard of living.”)

An effective challenge to the proposal for a higher inflation target requires a challenge to the underlying claim that the ZLB prevents an effective anti-recession monetary policy. The underlying claim rests on the New Keynesian or Taylor Rule conception that monetary policy is recession-fighting if and only if it lowers the nominal interest rate. But this is a mistake. The problem of recession, to the extent that monetary policy can relieve it, is an unsatisfied excess demand to hold money (the quantity demanded exceeds the quantity supplied at the current price level and nominal interest rate). Sales and employment are depressed because an excess demand for money corresponds to an excess supply of goods and services in general: consumers don’t buy when they are trying to build up their money balances. Monetary policy can in principle remedy the problem by expanding the quantity of money in the right amount at the right time.

But wait, you might say, didn’t quantitative easing fail to improve anything in the last recession? No. In the relevant sense – increasing the quantity of money in the hands of the public – quantitative easing wasn’t even tried. As I have emphasized in a previous article, in the face of a large 2009 increase in the holding of M2 balances relative to income (a large drop in the velocity of M2), the Fed did not raise the path of M2 growth. Its QE programs did raise the path of M0, the monetary base, but the Fed prevented that M0 growth from fueling faster M2 growth by paying banks to sequester the additional M0 (it paid them interest on excess reserves for the first time).

Absent offsetting higher interest on excess reserves, quantitative easing is capable in principle of providing all the monetary “looseness” needed. The ZLB is no obstacle to expanding M2. Consequently a higher secular inflation rate brings with it higher costs, but no offsetting benefit of enlarging the power of monetary policy to do the needful in a recession.

Finally, it should be noted that Chair Yellen, after having rejected the idea of raising the Fed’s inflation target on many previous occasions as a threat to the credibility of the FOMC, responded more positively to the idea after the Fed Up letter. At her June 14 press conference, she echoed the letter’s argument:

[A]ssessments of the level of the neutral likely level currently and going forward of the neutral Federal funds rate have changed, and are quite a bit lower than they stood in 2012 or earlier years. That means that the economy is, has the potential where policy could be constrained by the zero lower bound more frequently than at the time that we adopted our 2% objective. So it’s that recognition that causes people to think we might be better off with a higher inflation objective. That is an important set, this is one of our most critical decisions and one we are attentive to evidence and outside thinking. It’s one that we will be reconsidering at some future time. And it’s important for our decisions to be informed by a wide range of views and research, which is ongoing inside and outside the Fed.

The day after Yellen’s press conference, as the below chart shows, a leading market measure of the expected inflation rate stopped falling. It has since risen, and is now 12 basis points higher.

[Cross-posted from Alt-M.org]

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