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“Europe’s Taxes Aren’t as Progressive as Its Leaders Like to Think,” wrote the Wall Street Journal’s Joseph C. Sternberg yesterday. Citing tax expert Stefan Bach from the German Institute for Economic Research, Sternberg shows how Germany’s tax system is only mildly progressive overall. Sternberg therefore states that politicians need to “tackle” indirect taxation if they want to have a major impact on the economy.

Now, Sternberg is undoubtedly right that broad-based tax systems which incorporate social contributions and VATs tend to be less progressive than those which rely more heavily on progressive income taxes. That is, if we narrowly look at the effects of taxes alone, rather than government spending. But does it make any economic sense to look at a tax system in isolation?

Good economic theory would suggest that to the extent we care about progressivity and redistribution, revenues should be collected in the least distortionary way possible, with redistribution done via cash transfers. So judging the desirability of a tax system by its degree of progressivity is not a good starting point. From an economic perspective, the assessment should be how distortionary different taxation systems across the world are. European tax systems have huge problems in this regard, but their progressivity or otherwise should not be a major consideration.

The second and more important related point is that assessing progressivity should not seek to separate the issues of taxes from transfers. To judge progressivity, one must look at the position of households across the income spectrum after both, not least because one person’s taxes are (now or later) another person’s cash transfer.

I cannot find figures to do this for Germany, but am familiar with some headline UK and US stats.

Every year when the UK Office for National Statistics (ONS) releases its publication The effects of taxes and benefits on household income, historical datasets a similar lament to Sternberg’s arises. Calculating total taxes paid as a proportion of gross income (market income plus government cash transfers), critics of the tax system assert that the poorest quintile pay 35.0% of their gross income in taxes, on average, which is almost identical to the average 34.1% for the top quintile (2015/16 figures). Like Sternberg, many conclude that the tax system is not progressive enough.

Yet a few seconds’ thought to what these figures show highlights how misleading this is. Gross income (the denominator in the calculation) includes cash transfers, which are transfers from one group to another. That a household uses money redistributed to it to spend, in turn paying what the ONS describes as indirect taxes (things like VAT, beer duty, tobacco duty, the TV license and fuel duty), can hardly be described as “regressive”.  This is akin to taking from Peter to pay Paul and then saying that – because Paul spends a large proportion of this money – the  tax system is unfair.

Put simply, benefits don’t fall like manna from heaven. One person’s taxes are someone else’s cash transfers. That the tax system is not ultra-progressive then is not what matters – it’s what the overall tax AND transfers system does that counts.

Thought of in this way, we can calculate effective tax rates, which measure the net contribution for the average household in each income quintile as a proportion of their market income. This is key: how much of the income that you earn is being taxed away and given to others? I.e. how progressive is the taxpayer-funded welfare state.

Table 1 shows the poorest fifth of households in the UK on average actually face an effective tax rate (all taxes minus cash benefits, divided by earned income) of -34.1 per cent, while the richest fifth face an average tax rate of 31.8 per cent. This means that, for every £1 earned in market income, the average household in the poorest quintile is transferred another 34.1p in cash benefits, while the average household in the top decile pays 31.8p in tax. The tax and cash transfers system, in other words, is very progressive.

But even this excludes so-called “benefits in kind,” which the UK state provides lots of, and which disproportionately benefit the poor. Once benefits-in-kind (education, healthcare, and subsidies for housing, rail and buses) are considered, these effective tax rates for the average household in the richest and poorest fifths become -140.2 per cent and 25.3 per cent respectively (see Table 2).

Now, the UK figures are not completely comprehensive. Unlike the figures below for the US (below), they do not seek to assign the impact of corporate income taxes on workers across the income distribution. They also exclude the cash-value benefits of other public goods, such as defense, law and order etc., and the courts which uphold property rights, where there is an argument that the rich benefit disproportionately (though development work stresses the importance of property rights for the poor too). But overall, it’s clear that welfare states are hugely redistributive.

Can similar figures be found for the US? The best comparator figures I can find come from the CBO’s June 2016 report The Distribution of Household Income and Federal Taxes, 2013.” There are three important differences in the methodology from the UK figures which means they are likely to look more progressive on the surface: the quintiles are assigned by market income, rather than disposable income; the transfers include transfers from state and local programs but only federal taxes (and sales taxes tend to be more regressive); and the figures presented include in-kind assistance, meaning they are closer in methodology to Table 2 than Table 1. But the results show the same trend.

The average household in the bottom quintile receives around $2.90 in cash transfers or in-kind benefits for every $1 earned, against the top quintile which faced an effective tax rate of 24.8%. Interestingly, as Greg Mankiw noted before, middle income Americans have shifted since 1979 from being, on average, net contributors to net beneficiaries under this measure.

Of course, averages hide a lot of information. Government programs redistribute heavily to those with children and to old people. But if we are going to assess crude measures of progressivity by looking across the income spectrum, it makes sense to include transfers too.

In conclusion, there are many problems with tax systems here and in Europe. But aiming to make them more progressive should not be an underlying economic aim. To the extent that redistribution is considered a valid goal, it should be undertaken through spending, and these stats above show countries such as the US and UK are already hugely redistributive or “progressive” in this regard. 

AEI scholar Abby McCloskey’s recent column on paid family leave argues that just “12 percent of private-sector employees have access to paid family leave from their employer.” For McCloskey, this is one of many reasons that the federal government should create a paid family leave entitlement program.

The 12 percent figure surely sounds appallingly low. In fact, it is so low that it seems suspect: it doesn’t match well with real-life experience or casual observation. The figure also doesn’t match with data from nationally representative surveys. For example, 63 percent of employed mothers said their employer provided paid maternity leave benefits in one national study, a 50 percentage point difference from the most recent BLS figure.[1]

So what gives? It seems many U.S. women take paid parental leave, but the Bureau of Labor Statistics (BLS) doesn’t count it. The BLS requires paid family leave be provided “in addition to any sick leave, vacation, personal leave, or short-term disability leave that is available to the employee.” This means that when employees take paid leave for family purposes, it doesn’t count if it could have been used for another purpose. 

In the real world, parents with conventional benefit programs often save and pool paid personal leave, vacation, sick leave, and short-term disability in the event of a birth or adoption. On average, employees with five years of service are provided 22 days of sick and vacation leave. A majority of private-sector employees can carry over unused sick days from previous years, which adds to the tally. Meanwhile, the median short-term disability benefit is 26 weeks for private-sector workers; six to eight weeks can be used toward paid maternity leave.

These benefits do exactly the same thing as paid family leave. As Human Resources Inc. puts it, “family-leave is usually created from a variety of benefits that include sick leave, vacation, holiday time, personal days, short-term disability…” And although not all employers, especially small businesses, have official paid family leave policies, “Many employers are flexible and can work out an agreement with you.” Benefits that aren’t spelled out in the company manual are surely undercounted by BLS figures, too.

Paid leave doesn’t always fit neatly under the BLS’s survey categories for other reasons. Unconventional benefit packages, like consolidated paid leave (or PTO banks) allow employees to use paid leave for any reason, family or otherwise. Consolidated paid leave is on the rise; the BLS reports that 35 percent of private-sector employees receive it. In some industries, more than half of employees receive this flexible benefit.

Unlimited paid leave plans are also growing in certain industries. These plans allow employees to take as much leave as they want, whenever they want, assuming they meet performance expectations. But unlimited and consolidated paid leave don’t provide paid family leave separately, so neither count.

As a result, BLS figures seem to grossly underestimate paid family leave availability. BLS methods penalize employers that provide flexible benefits, by pretending their benefits don’t exist.

This helps to explain why BLS figures differ dramatically from other surveys. In spite of that, don’t expect government-sponsored paid leave advocates to update their figures any time soon.

[1] Note that the Listening to Mothers III study focused on employed mothers; BLS focuses on private-sector employees.

“Is Amazon getting too big?” asks Washington Post columnist Steven Pearlstein, in a 4000-word column seeking justification for the Democrat Party’s quixotic pledge to “break up big companies” in its recent “Better Deal.” “Just this week,” notes Pearlstein, “Democrats cited stepped-up antitrust enforcement as a centerpiece of their plan to deliver ‘a better deal’ for Americans should they regain control of Congress and the White House.” He concludes by saying “it sometimes takes a little public power to keep private power in check.” But maybe it takes a lot of public power to write antitrust lawyers some big checks.

Politics aside, the question “Is Amazon getting too Big?” should have nothing to do with antitrust, which is supposedly about preventing monopolies from charging high prices. Surely no sane person would dare accuse Amazon of monopoly or high prices. 

Even Mr. Pearlstein has doubts: “Is Amazon so successful, is it getting so big, that it poses a threat to consumers or competition? By current antitrust standards, certainly not… Here is a company, after all, known for disrupting and turbocharging competition in every market it enters, lowering prices and forcing rivals to match the relentless efficiency of its operations and the quality of its service. That is, after all, usually how firms come to dominate an industry…”

That should have ended this story “by current antitrust standards.” But if we simply lower those standards, then “Better Way” antitrust shakedown threats could become far more numerous, unpredictable, and lucrative for politically-generous antitrust law firms

Among the 19 largest law firm contributions to political parties in 2015/2016, according to Open Secrets, all but one, Jones Day, contributed overwhelmingly to Democrats. More to the point, all of these law firms contributing most generously to the Democratic Party are specialists in antitrust and mergers: They appear on U.S. News list of top Antitrust attorneys. And the Trial Lawyers Association (now disguised as “American Association for Justice”) contributed over $2.1 million to Democrats, over $1 million to liberal organizations and $67,500 to Republicans.

Antitrust law is a very big, profitable and concentrated industry. Antitrust lawyers’ have a special interest in greatly expanding the reach and grip of antitrust law. They were surely delighted by Pearlstein’s prominent endorsement of law journal paper by Lina Khan, a 28-year old student and fellow at the “liberal-leaning” think tank New America.

Ms. Kahn believes it self-evident that low operating profits must prove Amazon is “choosing to price below-cost.” That’s uninformed accounting. What low profits actually show is that Amazon has been plowing-back rapidly expanding cash flow into capital expenditures, such cloud computing, a movie studio, and unique consumer electronics (Kindle and Echo).

 “If Amazon is not a monopolist, Khan asks, why are financial markets pricing its stock as if it is going to be?” That’s uninformed finance theory. Investors rightly see Amazon’s current and future growth of cash flow (the result of expensive investments) as the source of future dividends and/or capital gains (more net assets per share).

Kahn believes antitrust has been unduly constrained by “The Chicago School approach to antitrust, which gained mainstream prominence and credibility in the 1970s and 1980s.” She thinks Chicago’s “undue focus on consumer welfare is misguided. It betrays legislative history, which reveals that Congress passed antitrust laws to promote a host of political economic ends.”

The trouble with grounding policy on legal precedent is that Congress passed many laws to promote the special interest of producers at the expense of consumers—including the Interstate Commerce Commission (1887), the National Economic Recovery Act (1933), the Civil Aeronautics Board (1938), and numerous tariffs and regulations designed to benefit interest groups and the politicians who represent them.

The well-named chapter “Antitrust Pork Barrel” in The Causes and Consequences of Antitrust quotes Judge Richard Posner noting that antitrust investigations are usually initiated “at the behest of corporations, trade associations, and trade unions whose motivation is at best to shift the cost of their private litigation to the taxpayer and at worse to harass competitors.”

To grasp how and why anti-trust is easily abused as a rent-seeking device, it helps to relearn the wisdom of Frederic Bastiat: “The seller wants the goods on the market to be scarce, in short supply, and expensive. The [buyer] wants them abundant, in plentiful supply, and cheap. Our laws should at least be neutral, not take the side of the seller against the buyer, of the producer against the consumer, of high prices against low prices, of scarcity against abundance [emphasis added].” 

Contrary to Bastiat, however, Ms. Kahn claims to have found “growing evidence shows that the consumer welfare frame has led to higher prices and few efficiencies.” 

Growing evidence turns out to mean three papers, one of which seems to say what she says it does (but only about mergers, not concentration): “Research by John Kwoka of Northeastern University,” Pearlstein writes, “has found that three-quarters of mergers have resulted in [were followed by?] price increases without any offsetting benefits. Kwoka cited industries such as airlines, hotels, car rentals, cable television and eyeglasses.” 

If you believe that, mergers left consumers overcharged by the Marriott hotel and Enterprise Rent-A-Car ‘monopolies.’ Even if that sounds plausible, Kwoka’s evidence does not. Two-thirds of his sample covers just three industries (petroleum, airlines, and professional journal publishing), the price estimates are unweighted without standard error data, and several mergers date back to 1976-82. As Federal Trade Commission economists Vita and Osinksi charitably noted, “Kwoka has drawn inferences and reached conclusions … that are unjustified by his data and his methods.”

Pearlstein turns to another paper in Kahn’s trio: “There is little debate that this cramped [Chicago] view of antitrust law has resulted in an economy where two-thirds of all industries are more concentrated than they were 20 years ago, according to a study by President Barack Obama’s Council of Economic Advisers, and many are dominated by three or four firms.” 

Nothing in Pearlstein’s statement is even approximately correct. The Obama CEA looked at shares revenue earned by two different lists of Top 50 firms (not “three or four”) in just 13 industries (not “all industries”) in 1997 and 2012. Pearlstein’s “two-thirds of all” really means 10 out of 13, though the U.S. has considerably more than 13 industries. In transportation, retailing, finance, real estate, utilities, and education, for example, the Top 50 had a slightly larger share of sales in 2012 than in 1997. So what?

Should we fear monopoly price gouging simply because 50 firms account for a larger share of the nation’s very large number of retail stores, real estate brokers, or finance companies? Of course not. “An increase in revenue concentration at the national level,” the Obama CEA concedes, “is neither a necessary nor sufficient condition in market power.”

The Obama CEA did add that “in a few industries… there is some evidence of increasing market concentration.” How few? Just three: Hospitals, railroads, and wireless providers. Those industries are heavily regulated, as is banking. 

The CEA notes the 10 largest banks had a larger share of bank loans in 2010 than in 1980, which is hardly a surprise. Hundreds of banks that existed before the 1981-82 stagflation and 2008-09 Great Recession had closed by 2010. More lending now flows through nonbanks and securities. And the Internet (e.g., lending tree) makes shopping for loans or credit cards more competitive than ever.

Did the Obama CEA present any evidence that its extraneous data about industry-level or market concentration “has led to higher prices and few efficiencies”? Certainly not. They made no such claim because so many previous efforts have failed. “The Market Concentration Doctrine” could not explain higher prices when Harold Demsetz examined it in 1973, and it still can’t.

 

Generally speaking, the Washington Post editorial board does a great job on trade issues. They are pro-trade and they see trade agreements as a way to liberalize trade. However, I want to offer a response to something in a recent Post editorial about one particular technical aspect of the NAFTA renegotiation. Here’s the passage:

Alas, the administration also specified that the trade deficit with Mexico and the (smaller) one with Canada be reduced as a result of the talks, which isn’t possible and wouldn’t necessarily be desirable even if it were. Possibly even more counterproductive, Mr. Trump’s goals include the elimination of the so-called Chapter 19 dispute-resolution mechanism, which creates a special NAFTA-based forum to challenge a member country’s claims that another is selling exports below cost (“dumping”). This check against potentially protectionist litigation brought by U.S. industries in U.S. forums was Canada’s precondition for joining the U.S.-Canada free-trade agreement, upon which NAFTA was built; and it’s one reason that exports from Canada and Mexico are far less likely than those of other nations to face penalties in the United States.

Eliminating Chapter 19 probably would be a dealbreaker for Canada. And why would Mr. Trump seeks its elimination? After all, as he said in that call with Mr. Peña Nieto, “Canada is no problem . . . we have had a very fair relationship with Canada. It has been much more balanced and much more fair.” Perhaps he means the proposal as a bargaining chip, to be traded for some other, more valuable concession. Or perhaps he will be willing to finesse it behind closed doors, just as he pleaded with Mr. Peña Nieto to help him wiggle out of his unwise promise to make Mexico pay for a border wall. We certainly hope the administration can be pragmatic on this point, lest it trigger the trade war with our neighbors that Mr. Trump once promised but so far has sidestepped.

Starting with some technical points, let me note that dumping is defined as more than just sales below cost, as it could also mean export sales that are below the price in the home market or a third country market. (It’s a fundamentally arbitrary calculation, which you can read more about here.) Also, Chapter 19 covers countervailing duties (extra tariffs imposed on imports of subsidized goods) as well.

But the main issue is with the Post’s substantive defense of Chapter 19. It’s important to understand how the process works. U.S. agencies—the Department of Commerce (DOC) and the International Trade Commission (ITC)—make decisions about whether anti-dumping and countervailing duties are necessary in particular cases. These decisions, like other administrative decisions, can then be appealed to U.S. federal courts, in this case the Court of International Trade (CIT) in New York. Under NAFTA Chapter 19, however, Canadians and Mexicans have the option to appeal the agency decision to a special NAFTA panel (they can also go to the Court of International Trade, and sometimes do that instead of Chapter 19).

So, when someone says that NAFTA Chapter 19 panels protect against the abuse of antidumping/countervailing duties, in essence this means they think the U.S. courts are not up to the job of reviewing these agency decisions.

Is it possible that U.S. courts are insufficient here? In my opinion, we don’t have enough data on this question yet. What we would need to see in this regard is evidence of the impartiality (or partiality) of U.S. courts. For example, a basic piece of evidence would be how U.S. courts have ruled on these agency decisions. My colleague Dan Ikenson looked at some data on this a while back:

Between January 2004 and June 2005, IA [the Import Administration of the DOC] published 26 redeterminations of antidumping proceedings pursuant to remand orders from the courts. As Table 4 indicates, seven of the remand orders required IA to explain how its decisions were consistent with the law and did not expressly mandate that IA make any changes. But of the 19 remands that did require methodological changes, 14 produced lower antidumping duty rates upon recalculation for at least one of the foreign companies involved.

At first glance, this looks like a functioning judicial review of agency decisions, but we need to expand on this data, and then compare it to the results from NAFTA Chapter 19 panels (that is, compare the results of NAFTA panel decisions to those of CIT decisions; and compare the DOC and ITC responses to each kind of ruling). We have a Cato Trade Policy Center project to gather this data going on right now.

As for the point that “exports from Canada and Mexico are far less likely than those of other nations to face penalties in the United States,” it’s true in a sense. If you compare Canada and Mexico to the rest of the world, fewer of their imports are covered by these special duties. On the other hand, when you compare countries that are similarly situated in terms of development levels, you get a different result. For example, imports from Canada are more likely to be subject to duties than are imports from the United Kingdom and Germany.

And there’s also the question of whether NAFTA Chapter 19 is constitutional—it’s not clear whether this kind of agency decision review can be carried out by anyone other than a U.S. court.

Chapter 19 looks like it might play an outsized role in the NAFTA renegotiation, as people on both sides have latched on to it as a symbol of their cause. The reality is more nuanced, and it’s important to gather some hard evidence in order to assess the real value of the provision.

Vox’s Dylan Scott offers “An oral history of Obamacare’s 7 near-death experiences.” It’s a well-balanced take on how close the Affordable Care Act and ObamaCare—they are different animals—have come to oblivion.

Scott includes an excerpt of an email I sent him on his original, planned theme of “ObamaCare’s nine lives.” But I thought it might be worthwhile to include my entire response to him. I have lightly edited my email for clarity, added two illegal acts I had forgotten (#5 and #7), and added hyperlinks to useful references.

Just nine? The premise is inapposite, though. 

Jonathan Gruber was right: had the public known what the Affordable Care Act does, it never would have passed, because even more Democrats would have voted to kill it. ObamaCare keeps surviving not because it has nine lives, but because the executive and judicial branches keep rewriting the Affordable Care Act, outside the legislative process, to save it from constitutional and political accountability.

These unconstitutional and illegal actions began before the ink was dry on Obama’s signature. They include:

  1. Allowing Congress to remain in the FEHBP from 2010 until 2014;
  2. The bevy of exemptions Sebelius issued unions and other firms from various regulations;
  3. The threats Sebelius made to insurers who spoke publicly and truthfully about the cost of those regulations; 
  4. Sebelius soliciting funds for Enroll America from companies she regulates;
  5. Sebelius raiding the Prevention and Public Health Fund to the tune of $454 million to fund federal Exchanges; 
  6. The Supreme Court rewriting the individual mandate in 2012; 
  7. Sebelius gutting the Supreme Court’s Medicaid ruling by coercing states to implement parts of the Medicaid expansion the Court made optional;
  8. Obama’s illegal “if you like your health plan” fix/grandmothered-plans exemptions;
  9. The IRS issuing subsidies through federal exchanges;
  10. The Supreme Court upholding ObamaCare’s subsidies and penalties in federal-Exchange states;
  11. The Obama administration making illegal CSR payments;
  12. The Obama administration illegally diverting reinsurance payments from the treasury to insurance companies;
  13. The Obama administration declaring Congress to be a small business; 
  14. The Obama administration giving members of Congress an illegal $12,000 premium contribution to their SHOP premiums;
  15. The Trump administration continuing to make illegal CSR payments;
  16. The Trump administration continuing to give Congress and illegal exemption from the ACA…

Etc., etc.

It’s not that Obamacare has nine lives. It’s that ObamaCare has 90 or 900 or 9,000 committed ideologues who are willing to violate the law to protect it from the voters. 

What we have left is no longer the law Congress enacted. The ACA was a legitimate law, duly passed by Congress. ObamaCare is an illegitimate law that no Congress ever passed or ever could have passed. 

The ACA is dead. Long live ObamaCare.

Absent these unlawful actions, Republicans’ recent attempt to repeal ObamaCare would have succeeded.

Years ago.

Trying to tamp down impeachment talk earlier this year, House minority leader Nancy Pelosi (D-CA) insisted that President Donald Trump’s erratic behavior didn’t justify that remedy: “When and if he breaks the law, that is when something like that would come up.” 

Normally, there isn’t much that Pelosi and Tea Party populist Rep. Dave Brat (R-VA) agree on, but they’re on the same page here. In a recent appearance on Trump’s favorite morning show, “Fox & Friends,” Brat hammered Democrats calling for the president’s impeachment: “there’s no statute that’s been violated,” Brat kept insisting: They cannot name the statute!” 

Actually, they did: it’s “Obstruction of Justice, as defined in 18 U.S.C. § 1512 (b)(3),” according to Rep. Brad Sherman (D-CA) who introduced an article of impeachment against Trump on July 12. Did Trump break that law when he fired FBI director James Comey over “this Russia thing”? Maybe; maybe not. But even if “no reasonable prosecutor” would bring a charge of obstruction on the available evidence, that wouldn’t mean impeachment is off-limits. Impeachable offenses aren’t limited to crimes.

That’s a settled point among constitutional scholars: even those, like Cass Sunstein, who take a restrictive view of the scope of “high Crimes and Misdemeanors” recognize that “an impeachable offense, to qualify as such, need not be a crime.” University of North Carolina law professor Michael Gerhardt sums up the academic consensus: “The major disagreement is not over whether impeachable offenses should be strictly limited to indictable crimes, but rather over the range of nonindictable offenses on which an impeachment may be based.” 

In some ways, popular confusion on this point is understandable. Impeachment’s structure echoes criminal procedure: “indictment” in the House, trial in the Senate—and the constitutional text, to modern ears, sounds something like “grave felonies, and maybe lesser criminal offenses too.”

But “high crimes and misdemeanors,” a term of art in British impeachment proceedings for four centuries before the Framers adopted it, was understood to reach a wide range of offenses that, whether or not criminal in nature, indicated behavior incompatible with the nature of the office. For James Madison, impeachment was the “indispensable” remedy for “Incapacity, negligence, or perfidy” on the part of the president—categories of conduct dangerous to the republic, only some of which will also constitute crimes. 

The criminal law is designed to punish and deter, but those goals are secondary to impeachment, which aims at removing federal officers unfit for continued service. And where the criminal law deprives the convicted party of liberty, the constitutional penalties for impeachable offenses “shall not extend further than to removal from Office,” and possible disqualification from future officeholding. As Justice Joseph Story explained, the remedy “is not so much designed to punish an offender, as to secure the state against gross official misdemeanors. It touches neither his person, nor his property; but simply divests him of his political capacity.”

No doubt being ejected from a position of power on the grounds that you’re no longer worthy of the public’s trust can feel like a punishment. But the mere fact that removal is stigmatizing doesn’t suggest that criminal law standards apply. Raoul Berger once illustrated that point with an analogy Donald Trump would probably find insulting: “to the extent that impeachment retains a residual punitive aura, it may be compared to deportation, which is attended by very painful consequences, but which, the Supreme Court held, ‘is not a punishment for a crime.’”

Had the Framers restricted impeachment to statutory offenses, they’d have rendered the power a “nullity” from the start. In the early Republic, there were very few federal crimes, and certainly not enough to cover the range of misdeeds that would rightly disqualify public officials from continued service.

Criminality wasn’t an issue in the first impeachment to result in the removal of a federal officer: the 1804 case of district court judge John Pickering. Pickering’s offense was showing up to work drunk and ranting like a maniac in court. He’d committed no crime; instead, he’d revealed himself to be a man “of loose morals and intemperate habits,” guilty of “high misdemeanors, disgraceful to his own character as a judge.”

As Justice Story noted in 1833, in the impeachment cases since ratification, “no one of the charges has rested upon any statutable misdemeanours.” In fact, over our entire constitutional history, fewer than a third of the impeachments approved by the House “have specifically invoked a criminal statute.” What’s been far more common, according to a comprehensive report by the Nixon-era House Judiciary Committee, are “allegations that the officer has violated his duties or his oath or seriously undermined public confidence in his ability to perform his official functions.”

The president’s violation of a particular criminal statute can serve as evidence of unfitness, but not all such violations do. That’s obvious when one considers the enormous growth of the federal criminal code in recent decades. Overcriminalization may have reached the point where Donald Trump, like everyone else, is potentially guilty of “Three Felonies a Day,” but even in Lawrence Tribe’s wildest imaginings, that wouldn’t translate to three impeachable offenses daily. If Trump were to import crocodile feet in opaque containers, fill an (expansively defined) wetland on one of his golf courses, or misappropriate the likeness of “Smokey Bear,” he’d have broken the law, but would not have committed an impeachable offense.

It’s also easy enough to imagine a president behaving in a fashion that violates no law, but nonetheless justifies his removal. To borrow an example from the legal scholar Charles Black, if the president proposed to do his job remotely so he could “move to Saudi Arabia [and] have four wives” (as well as his very own glowing orb), he couldn’t be prosecuted for it. Still, Black asks: “is it possible that such gross and wanton neglect of duty could not be grounds for impeachment”?

A more plausible impeachment scenario presented itself recently, with reports that President Trump had “asked his advisers about his power to pardon aides, family members and even himself” in connection with the special counsel’s Russia investigation. The president’s power to self-pardon is an open question, but his power to pardon others has few limits. There’s little doubt Trump could issue broad prospective pardons for Don Jr., Jared Kushner, Paul Manafort, Mike Flynn, and anyone else who might end up in the Mueller’s crosshairs—and it would be perfectly legal. It would also be impeachable, as James Madison suggested at the Virginia Ratifying Convention: “if the President be connected, in any suspicious manner, with any person, and there be grounds to believe he will shelter him, the House of Representatives can impeach him; [and he can be removed] if found guilty.”

Some years ago, I put together a collection of essays on the expansion of the criminal sanction into areas of American life where it doesn’t belong—published under the title, Go Directly to Jail: The Criminalization of Almost Everything. The idea that criminal law concepts had infected and weakened the constitutional remedy of impeachment wasn’t quite what I had in mind with that subtitle, but it seems to fit.

Congress has made the problem worse by outsourcing its investigative responsibilities to the executive branch. As Princeton’s Keith Whittington observes in a recent essay for the Niskanen Center, “relying so heavily on prosecutors to develop the underlying charges supporting impeachment has come at a high cost…it has created the widespread impression that the impeachment power can only appropriately be used when criminal offenses have been proven.”

It’s important to get this straight, because confusing impeachment with a criminal process can be harmful to our political health. It may lead us to stretch the criminal law to “get” the president or his associates, warping its future application to ordinary citizens. And it can leave the country saddled with a dangerously unfit president whose contempt for the rule of law is apparent, even if he hasn’t yet committed a crime.

E-Verify is the federal government’s national identification system that some employers currently use to verify the employment authorization of their new hires either voluntarily or under a requirement by state law. The Legal Workforce Act (LWA) would make this program mandatory for all employers in all states. Its proponents contend that E-Verify is simpler than the current I-9 form process and that it will protect employers from government raids and I-9 audits. But these talking points are false, and seemingly for this reason, employers refuse to use it voluntarily.

In 2017, 729,595 employers participated in E-Verify. Using a calculation from a USCIS-commissioned study, this figure corresponds to 9.5 percent of the 7.7 million private sector employers, which is somewhat higher than the actual level because some E-Verify users are public employers. It also greatly inflates the level of voluntary compliance. Only 10 states and D.C. have greater than 10 percent participation in E-Verify—all of them have expansive E-Verify mandates of some kind. To achieve this level of compliance, states need to require E-Verify for some private sector employers—either by fining non-users or rescinding subsidies from them. President Bush’s 2008 executive order mandating E-Verify for federal contractors drives the relatively high level of compliance in D.C.

Nearly half of all employers who use E-Verify operate in the 10 top E-Verify-using states, while only 17 percent of the businesses operate there. Only 6 percent of the 40 states without the more expansive mandates use E-Verify. As the Figure below shows, the true level of “voluntary” compliance is undoubtedly much lower than 6 percent. Another dozen states have various E-Verify requirements for public employers or contractors, and federal contractors exist in every state, meaning that it’s impossible to determine the precise level of voluntary participation.

Figure: E-Verify Participation Rates, 2017

Sources: Author’s calculations based on USCIS; SBA; BLS (Top 10 states: Alabama, Arizona, Georgia, Mississippi, Missouri, Nebraska, North Carolina, Rhode Island, South Carolina, Tennessee, and Utah, plus D.C.)

Unfortunately, USCIS has not released more recent data since 2013 on the size of the businesses using E-Verify, but assuming the 2013 proportions, 98 percent of businesses with less than 10 employees were not using E-Verify in 2017. The numbers also reveal that even when the law requires businesses to use E-Verify, they are reluctant to do so. Even in Alabama, which has achieved the highest E-Verify participation rate with a universal E-Verify requirement, less than half of the state’s businesses actually use the program. Arizona, which has the oldest universal E-Verify requirement and where two intentional violations can result in the “business death penalty,” actually fares worse. Only 39 percent of businesses use the program.

These facts demonstrate that most businesses—especially small businesses—do not consider E-Verify “business friendly.” 

E-Verify is a government-run national identification system that some U.S. employers currently use to verify the employment status of their new hires on a voluntary basis or a compulsory basis if they are federal contractors or operate in states with an E-Verify mandate. The Legal Workforce Act (LWA), which has passed the House Judiciary Committee on three occasions since 2012, would mandate that all employers use the program. In scope, LWA would surpass all other regulations in U.S. history, applying to every single employer and every single worker—illegal and legal—with deleterious consequences for both.

Proponents see E-Verify as an inexpensive silver bullet to end illegal immigration. But naturally, this technocratic dream fails to fit reality. As my colleagues’ recent study shows, E-Verify does slightly reduce unauthorized immigrant wages, but not nearly far enough to “turn off the jobs magnet.” Unsurprisingly, the market finds a way to connect willing workers with willing employers. However, while E-Verify fails to separate illegal workers from their jobs, it does manage to do exactly that for many legal workers—U.S. citizens and work authorized immigrants.

E-Verify salesmen neglect to mention that the program applies to all workers, not just those here illegally, and that U.S. citizens and legal workers can end up caught in the system. I have previously explained how, from 2006 to 2016, legal workers already had 580,000 jobs held up due to E-Verify errors, and that of these, 130,000 lost their jobs completely. These shocking numbers would grow worse under mandatory E-Verify. Under the most conservative estimate, if applied to all employers, E-Verify would delay at least 1.7 million jobs for legal workers and eliminate nearly half a million jobs over 10 years.

How E-Verify already harms U.S. workers

LWA requires employers to submit the information employees provide them on the I-9 forms to E-Verify. If the information fails to match the records of the Department of Homeland Security or Social Security Administration, E-Verify issues a “tentative nonconfirmation” (TNC). Under LWA, people who receive a TNC would need to challenge it within 2 weeks or it would become a “final nonconfirmation” (FNC), which requires an employer to immediately terminate their employment or face major fines or jail time.

Errors can occur because employers enter the name incorrectly. This mistake is particularly common for people with multiple or hyphenated last names or names with difficult spellings. They also happen when bureaucrats incorrectly enter information into their databases or when employees fail to fully update their information after a name change.

To sort out the problem, employees then have to visit in person the Social Security Administration or U.S. Citizenship and Immigration Services (USCIS)—the new DMVs for employment. Employees and employers have to stumble through this process in the dark because E-Verify is unable to tell them the origin of the problem. Workers may need to file Privacy Act requests to access their records and fix the issue. In these cases, it can take more than three months to even obtain a response. LWA allows employers to delay hiring a worker until they clear this bureaucracy.

Even worse, E-Verify can cause legal workers to lose their jobs entirely. Authorized job seekers can receive an FNC if they fail to challenge the TNC or if their employer fails to notify them. According to a USCIS-commissioned study, 17 percent of FNC errors were the fault of the employee not following the regulations. The other 83 percent were the result of employers not informing the worker about the TNC, so they could challenge it.

E-Verify’s boosters tout its 99.8 percent accuracy rate, implying that U.S. workers have little to fear. But even a low rate applied to a population as large as the U.S. workforce would result in hundreds of thousands of errors. Indeed, in 2016, under voluntary use of the system, E-Verify caught up 63,000 legal workers in its regulatory scheme. It will become much worse if Congress mandates it for all employers.

Legal Workforce Act will harm even more U.S. workers

In order to project the number of errors under LWA, we need to know the number of hires that employers will make through the system and the rate at which E-Verify will wrongly not confirm a job applicant.

The Census Bureau reports the number of new hires, almost 100 million in 2015, but LWA would also allow employers for the first time to voluntarily check their existing workers, a practice that the current regulations prohibit. This means that the number of E-Verify checks will exceed the number of annual hires that the Census records. Unfortunately, we cannot know by how much because it depends on the desire of employers to use this procedure, but it could raise the estimated number of new checks by tens of millions. For this estimate, I took the most conservative position and assume no company will check any of its existing employees.

The future error rate is more difficult to assess. The E-Verify system’s accuracy has improved over time, so this trend will likely continue as the bureaucracy, employers, and employees figure out the system. However, there is likely a natural floor beneath which the system cannot improve—perfect accuracy is almost certainly impossible (especially considering the causes of the errors). For this reason, it is unlikely that the error rates will continue to improve at the current rate indefinitely.

On the other hand, the rates could grow much worse, especially following the initial rollout, because LWA would flood it with new employers who have no desire or ability to use the program. For the last 10 years, the system has mostly incorporated larger employers. About 90 percent of employers have less than 15 employees, compared to only 8 percent of E-Verify businesses, as another USCIS-commissioned study found. Smaller employers have less human resource staff to implement these types of regulations, and there will certainly be a learning curve regardless.

LWA would also likely incorporate a large new population of employees who are more likely to be the victims of E-Verify errors. According to the USCIS-commissioned study, this group includes legal immigrants and Hispanics. Because many Hispanics and legal immigrants live in states where E-Verify is not currently mandatory at the state-level, it is likely that LWA’s national mandate would increase errors for them. Given the uncertainties, this estimate takes the conservative assumption that the E-Verify improvements would continue at the same pace that it did under the Obama administration (2009-2016), an 8.5 percent reduction in the error rate annually, even though this is unlikely to continue.

Finally, LWA will definitely increase the rate of job loss due to E-Verify. FNCs currently only happen to legal workers if they fail to challenge or an employer fails to notify them about a TNC. LWA would introduce a new way to receive a FNC: inability to resolve the issue in time. LWA requires that a person prove their right to work in less than 10 working days or be fired. The bill allows a single one-time extension at the discretion of the Secretary of Homeland Security (p. 36). Yet as explained above, we know that it often takes much longer than that to resolve a TNC error.

Unfortunately, USCIS only provides case resolution details in groups: such as, less than 3 business days, 3 to 8 days, or more than 8 days. In 2012, the last year for which we have data, 36 percent of all erroneous TNCs took more than 9 or more days to resolve. If we assume that the full 36 percent cannot obtain an extension of the 10-day limit, then roughly 57,000 legal workers would lose their jobs due to this one provision of LWA alone.

However, for this estimate, I will assume that all of these workers will receive the one-time extension. If we further assume that the daily number of TNC resolutions in the 3 to 8 day period continued at the same rate thereafter, then 13.3 percent of all TNCs currently take more than 20 business days to resolve. The true share is likely higher than this because if someone cannot sort the error out in 8 days, it likely has a more complicated origin than those resolved in the first week. Nonetheless, this projection assumes that this share will continue into the future.

Estimate of the number of job delays and losses due to E-Verify

The Legal Workforce Act imposes the mandate on all U.S. employers in stages based on the size of the firm over a 2-year period. The table below begins the year in which E-Verify becomes fully mandatory for all employers. Year 1 uses the 2016 error rate as the starting point. Under these assumptions, nearly 1.5 million legal workers over 10 years would receive erroneous TNCs, and of these, nearly 430,000 would lose their jobs completely.

Table
Projection of E-Verify Errors Under Mandatory E-Verify

  Total Hires TNC Job Delays FNC Error Job Loss LWA Job Loss From TNC Delays Total Job Losses Total Errors Year 1

98,715,808

159,525

34,827

21,217

56,044

215,568

Year 2

98,715,808

158,169

34,531

21,036

55,567

213,736

Year 3

98,715,808

148,283

32,373

19,722

52,094

200,378

Year 4

98,715,808

138,398

30,215

18,407

48,621

187,019

Year 5

98,715,808

128,512

28,056

17,092

45,148

173,661

Year 6

98,715,808

118,627

25,898

15,777

41,676

160,302

Year 7

98,715,808

108,741

23,740

14,463

38,203

146,944

Year 8

98,715,808

98,855

21,582

13,148

34,730

133,585

Year 9

98,715,808

88,970

19,424

11,833

31,257

120,227

Year 10

98,715,808

79,084

17,265

10,518

27,784

106,868

Total

633,461,900

1,227,164

267,911

163,213

431,123

1,658,287

Sources: Author’s calculations based on: Total hires: Census Bureau; TNC share overcome (2011-2016): U.S. Citizenship and Immigration Services (USCIS) USCIS archived pages; E-Verify Erroneous TNC and FNC rates (2006-2010): Westat; LWA Job Loss From TNC Delays: Cato Institute. (Note FNC error rate in Westat expressed in terms of share of FNCs. See here for how the FNC rate was calculated for years without data.)

The number of TNCs reported above come from public numbers from USCIS, but the non-public numbers in USCIS in response to Cato’s 2013 Freedom of Information Act request for years 2008 to 2012 show 50,000 more TNCs during this period. Again, this means that this estimate is the lowest possible outcome for mandatory E-Verify.

LWA also increases the consequences of a TNC for a legal worker relative to current law. The legislation would allow the employer to delay hiring the job applicant until after they clear this process, which means that people would lose wages throughout the job delay period. Moreover, anyone who is attempting short-term employment could lose their job completely, even if they ultimately cleared E-Verify (p. 20). This provision highlights how E-Verify purports to be pro-U.S. worker legislation, but actually is anti-U.S. workers.

Congress should reject mandatory E-Verify. It’s a big government waste of resources. It won’t accomplish its intended goal, but it will punish Americans seeking jobs.

Leaders at all levels of government and civil society are alarmed at the continued rise, year after year, in the death rate from opioid overdose. The latest numbers for 2015 report a record 33,000 deaths, the majority of which are now from heroin. Health insurers are not a disinterested party in this matter.

Cigna, America’s fifth largest insurer, recently announced it has made good progress towards its goal of reducing opioid use by its patients by 25% by mid-2019. To that end, Cigna is limiting the quantities of opioids that can be dispensed to patients and requiring authorizations for most long acting opioid prescriptions. Cigna is encouraging its providers to curtail their use of opioid prescriptions for pain patients and is providing them with data on the opioid use patterns of their patients (prescription drug monitoring programs) with an aim towards reducing abuse.

In a Washington Post report on this announcement Cigna CEO David Cordani is quoted as saying, “We determined that despite no profit rationale—in fact it’s contrary to that—that societally we needed to step into the void and we stepped in pretty aggressively.”

No profit rationale?

Paying for fewer opioids saves the insurer money in the short run. And opioids have become costlier as “tamper-resistant” reformulations, encouraged by the FDA, have led to new patents allowing manufacturers to demand higher prices.

There is growing evidence that, as doctors curtail their opioid prescriptions for genuine pain patients, many in desperation seek relief in the illegal market, where they are exposed to adulterated opioids as well as heroin. For the same reason, recent studies on the effect of state-based Prescription Drug Monitoring Programs (PDMPs) suggest they have not led to reductions in opioid overdose rates and may actually be contributing to the increase. It is reasonable to be skeptical that Cigna’s internal prescription drug monitoring program will work any differently.

All of this intersects with a problem generated by the community rating regulations of the Affordable Care Act. The ACA requires insurance companies to sell their policies to people who have very expensive health conditions for the same premiums they charge healthy people. In addition, the ACA’s “risk-adjustment” programs, aimed at reimbursing insurers for losses due to a disproportionate share of the sickest patients, systematically underpay insurers for many of these enrollees. This penalizes insurers whose networks and drug formularies are desirable to those who are sick. Insurers respond to this disincentive by designing policies with provider networks, drug formularies, and prescription co-payment schedules that are unattractive to such patients, hoping they will seek their coverage elsewhere. This “race to the bottom” between the health plans results in decreased access and suboptimal health care for many of the sickest patients.

Researchers at the University of Texas and Harvard University, in a National Bureau of Economic Research working paper, show “some consumers are unprofitable in a way that is predictable by their prescription drug demand,” and “…Exchange insurers design formularies as screening devices that are differentially unattractive to unprofitable consumer types,” resulting in lower levels of coverage for patients in those categories. They rank drug classes by net-loss to the insurer (per capita enrollee spending minus per capital enrollee revenue). Opioid antagonists, used to treat opioid addiction, exact the third highest penalty on insurers, about $6,000 for every opioid antagonist user. (See Table 2.)

This suggests that patients suffering from opioid dependency and/or addiction (there is a difference) are victims of the race to the bottom spawned by the ACA’s community rating mandate.

Thus, the opioid overdose crisis and the ACA mandates—especially community rating—combine to make the “perfect storm.” Insurers team up with state and federal regulators to curtail the prescription of opioids for chronic pain patients, leading many to suffer needlessly and driving some, in desperation, to the illegal drug market and the risk of death from overdose. Meanwhile, those seeking rescue from the torment of dependency and addiction must access a health insurance system that is penalized for providing help.

Supporters of the RAISE Act are counting on the media, voters, and policy makers to focus on talking points supporting the bill rather than its actual substance.  Those supporters want the debate over this bill to be “skilled or merit based immigrants versus family-based immigrants” – a debate that they could win.  But they can only do that if everybody focuses on the talking points and they remain ignorant of the actual contents of the bill.  The RAISE Act talking points are grossly deceptive, at best, and do not accurately describe the bill’s contents or what its effects would be.  Each heading below is a major talking point that RAISE’s supporters are using followed by what the facts actually are.

“The RAISE Act creates a merit and skills-based immigration system.”

The RAISE Act does not increase merit and skills-based immigration over the existing cap.  The bill sets an annual cap of 140,000 green cards annually for merit and skills-based immigrants – the exact same number apportioned to the current employment-based green card for skilled workers.  The RAISE Act merely cuts other immigration categories, such as family-based green cards, while creating a points system for obtaining one of the 140,000 merit and skills-based green cards.  Cutting family reunification does not create a merit or skills-based immigration system.  

“The RAISE Act is very similar to the merit-based Canadian and Australian immigration systems”

The Canadian and Australian merit-based immigration systems are far more open than either current U.S. immigrant law or what the RAISE Act would create.  As a percent of the population, which is the only meaningful way to compare the size of immigrant flows in different countries or across time, the Australian and Canadian merit-based immigration policies allow about 3.5 and 2.4 times as many immigrants annually as the United States, respectively.  The RAISE Act would widen this gulf even further whereby the annual immigrant flows to Australia and Canada would be about 7.9 and 5.3 times as great as to the United States.  

The comparison is even more lopsided when it comes to skilled immigrants.  The annual skilled immigrant flow to the United States under current law (and if the RAISE Act is implemented) is equal to 0.04 percent of the population – and that includes their family members!  The workers themselves are only 0.02 percent of the American population.  The annual skilled immigrant inflow to Canada is equal to 0.18 percent of their population and in Australia, it is a whopping 0.26 percent – 9 and 13 times as great as in the United States, respectively.

The Canadian and Australian systems even allow more family-based immigrants as an annual percentage of their population at 0.23 and 0.26 percent, respectively, than the United States.  In Canada, immigrants are awarded more points if they have distant relatives living there already.  The RAISE Act does no such thing. 

The Australian and Canadian immigration systems are far more open than the current U.S. immigration and what has been proposed by the RAISE Act. The Australian and Canadian immigration systems have very little in common with what’s proposed by the RAISE Act.

“The RAISE Act will increase wages for working Americans.”

The last time Congress cut legal migration in order to raise the wages of lower-skilled Americans, wage growth actually slowed down.  Michael Clemens, Ethan Lewis, and Hannah Postel looked at Congress’ 1964 cancellation of the Bracero program for low-skilled Mexican farm workers discovered that farm worker wages rose more slowly after the migration was cut because farmers turned toward mechanization and planted crops that required less labor.  Not only did the supposed wage gains from cutting legal migration not occur after 1964, the rate of wage increase actually slowed.

The details and justifications for the RAISE Act and Congress’ 1964 cancellation of Bracero are eerily similar.  The Bracero program allowed in half a million workers a year before it was eliminated – which is roughly the number of green cards that RAISE would cut.  Bracero workers have a relatively similar skills level, compared to Americans, of the workers who currently enter of the family-based green cards that the RAISE Act intends to cut.  Braceros were also concentrated in some states just like new immigrants are.

More fundamentally, immigration bears little blame for low wages.  This point is not controversial among economists who study this issue.  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.

Immigration’s long-run relative wage impact on native-born American workers is close to zero.  The only potential exception by education group is high school dropouts who might face more labor market competition from immigration that would produce a maximum relative decline of about 1.7 percent from 1990 to 2010.  All groups of native-born Americans by education, which accounts for 91 percent of adults, see relative wage increases from immigration during the same time studied.

Restricting immigration doesn’t raise wages and, even if it did for those Americans who directly compete with immigrants, it would lower wages for the roughly 91 percent of Americans who do not.

“The RAISE Act would restore immigration to historical numerical norms.”

This statement only makes sense if American history began in 1925 – a year after the National Origin Quota Act became law.  Because the United States is more populated than it was in the past, the only way to reasonably compare immigrant flows over time is to view the as a percentage of the population.  After all, a million immigrants in 1790 would have a far greater impact on the American population than a million immigrants in 2017. 

As my colleague David Bier pointed out, the average historical immigration rate from 1820 to 2017 (the government did not count annual immigrant entries before 1820), was 0.45 percent of the U.S. population – higher than the approximately 0.32 percent of today.  In other words, current U.S. immigrant flows are actually 29 percent below the historical norms and would have to rise by over 400,000 a year to be them.  That’s very different from RAISE’s proposed cut of approximately 500,000 green cards annually.

“Current immigrants are very low skilled.”

New immigrants to the United States are more highly educated than native-born Americans.  About 39 percent of immigrants admitted to the United States in 2015 had a college degree or above compared to about 31 percent of adult natives.  The share of new immigrants to the United States with at least a college degree is almost double the 21 percent that it was in 1995.  About 29.4 percent of all immigrant adults living in the United States in 2015 had a college degree or above, slightly below the 30.8 of all native adults who have the same education.  These facts show that new immigrants are more educated than people realize, are increasingly better educated over time, the annual immigrant flow is making the stock of immigrants more educated, and this is happening under the current immigration policy.   

“Our current immigration system has increased economic inequality.”

This is an odd argument for Republicans to make but Senior Trump administration aide Stephen Miller did so at a press briefing earlier this week.  The evidence on how immigration affects economic inequality in the United States is actually mixed – which is more than you can say about Miller’s other economic invocations where he’s dead wrong.  Some research finds relatively small effects of immigration on economic inequality and others find substantial ones.  The variance in findings can be explained by different research methods.  For instance, outcomes vary considerably between studies that measure how immigration affects economic inequality among only natives and another study that includes immigrants and their earnings.  Both methods seem reasonable but the effects on inequality are small compared to other factors.  I don’t see the problem if an immigrant quadruples his income by coming to the United States, barely affects the wages of native-born Americans here, and increases economic inequality as a result.  The standard of living is much more important than earnings or wealth distribution – especially when the gains are so vast. 

“Amnesty for illegal immigrants punishes legal immigrants who got in line and tried to do things the right way.  That’s unfair.”

RAISE Act supporters don’t make this argument in support of this specific bill but many of them have in opposition to legalizing illegal immigrants.  However, the RAISE Act punishes virtually every wannabe immigrant who is currently in line to get a green card by kicking them out of the running.  If RAISE becomes law, it would continue the clear the green card backlog for one year and then cut those who have been in line but didn’t make the cut in the first year.  As a meaningless concession, the RAISE Act awards those who are eliminated from the backlog with 2 points under the new points system that requires a total of 20 to get in the new line for another green card.  How can RAISE Act supporters complain about the unfairness of an amnesty while supporting this bill? 

The RAISE Act says, “you’ve been in line for a green card for 20 years and followed all of the rules?  Too bad!  You’re out.  Here are a few points that will not add up to a green card in compensation.”  What kind of message does that send to immigrants who tried to follow the rules the right way?

Why are Americans less likely to move to better opportunities than they used to be? The Wall Street Journal reports:

When opportunity dwindles, a natural response—the traditional American instinct—is to strike out for greener pastures. Migrations of the young, ambitious and able-bodied prompted the Dust Bowl exodus to California in the 1930s and the reverse migration of blacks from Northern cities to the South starting in the 1980s.

Yet the overall mobility of the U.S. population is at its lowest level since measurements were first taken at the end of World War II, falling by almost half since its most recent peak in 1985.

In rural America, which is coping with the onset of socioeconomic problems that were once reserved for inner cities, the rate of people who moved across a county line in 2015 was just 4.1%, according to a Wall Street Journal analysis. That’s down from 7.7% in the late 1970s.

One particular problem with today’s immobility is that people find themselves in areas where jobs are dwindling and pay tends to be lower. Why don’t they move to where the jobs are? This comprehensive article for the Journal by Janet Adamy and Paul Overberg points to a few factors:

For many rural residents across the country with low incomes, government aid programs such as Medicaid, which has benefits that vary by state, can provide a disincentive to leave. One in 10 West Branch [Mich.] residents lives in low-income housing, which was virtually nonexistent a generation ago.

And then there are regulations that discourage mobility:

While small-town home prices have only modestly recovered from the housing market meltdown, years of restrictive land-use regulations have driven up prices in metropolitan areas to the point where it is difficult for all but the most highly educated professionals to move….

Another obstacle to mobility is the growth of state-level job-licensing requirements, which now cover a range of professions from bartenders and florists to turtle farmers and scrap-metal recyclers. A 2015 White House report found that more than one-quarter of U.S. workers now require a license to do their jobs, with the share licensed at the state level rising fivefold since the 1950s.

Brink Lindsey wrote about both land-use regulations and occupational licensing as examples of “regressive regulation”—regulatory barriers to entry and competition that work to redistribute income and wealth up the socioeconomic scale—in his Cato White Paper, “Low-Hanging Fruit Guarded by Dragons: Reforming Regressive Regulation to Boost U.S. Economic Growth.”

The Journal notes that 

the lack of mobility has become a drag on the entire U.S. economy.

“We’re locking people out from the most productive cities,” says Peter Ganong, an assistant professor of public policy at the University of Chicago who studies migration. “This is a force that widens the urban-rural divide.”

Ganong made similar points in a Cato Research Brief, “Why Has Regional Income Convergence in the U.S. Declined?

Declining mobility hurts U.S. innovation and economic growth and widens the rural-income culture gap. Government regulation plays a major role in declining mobility. But as Lindsey noted, those regulations are “guarded by dragons”—”the powerful interest groups that benefit from the status quo, all of which can be counted upon to defend their privileges tenaciously.” Despite the potential for agreement by right, left, and libertarian policy analysts on the problems with regressive regulation, all those wonks together may be no match for organized dentists, barbers, massage therapists, and homeowners who perceive that they benefit from keeping others out.

 

The Department of Housing and Urban Development (HUD) spends $10 billion a year on “community planning and development” subsidies to state and local governments. Community development sounds uplifting, but it involves mundane activities such as filling potholes.

Budget expert Tad DeHaven alerted me to this article in the Altoona Mirror yesterday:

City Council recently approved a fairly standard plan for spending its annual entitlement money from the federal Department of Housing and Urban Develop­ment.

… This year’s funding for [Community Development Block Grant] CDBG was $1.42 million — not much different from last year’s amount.

Loan paybacks of $162,000 brought this year’s CDBG total to $1.58 million, according to a summary provided by CDBG program Manager Mary Johnson.

Of that, $346,000 will go for rehabilitation of single-family homes; $306,000 for demolition of blighted properties; $301,000 for program administration; $332,000 for street paving; $235,000 for the city’s bike patrol and $67,000 for code enforcement all in low- to moderate-income areas.

Of $193,000 in HOME funding, $129,000 will go for rehabilitation of rental properties, $44,000 for an upgrade of Improved Dwellings for Altoona’s Woodrow Wilson Gardens parking lot in Garden Heights and $19,000 for program administration.

These activities are entirely local in nature, so why involve the federal government? The Woodrow Wilson apartment company pays $674,000 a year in local property taxes. Why not let the company keep some of that cash and pave its own parking lot? That would be easier than imposing federal income taxes on Altoona residents, sending the money to Washington to pay for the HUD bureaucracy, and having some of it trickle back down to Altoona.

Check this out: in the news story, “program administration” costs are $301,000 + $19,000 = $320,000 a year. Those costs consume a rather stunning 20 percent of the $1.58 million in federal aid. It goes toward the salaries of Mary Johnson and other officials, plus the costs of putting together 77-page “action plans,” 292-page “consolidated plans,” 48-page “downtown plans,” and other items listed here.

If Altoona is representative, then $2 billion of the $10 billion in federal aid is consumed by such local bureaucracy.

In addition, there are federal bureaucratic costs. The HUD “budget justification” says that 729 workers are in “community planning and development” costing $103 million in wages and benefits, or $141,000 each. These expensive paper-pushers simply hand out recycled money to the states, thus adding nothing to nation’s overall output. Indeed, because they are not producing useful goods and services in the private sector, their compensation represents a loss to the economy.

For a discussion of why HUD’s community development activities ought to be abolished, see DeHaven’s analysis here.

Talk of oil sanctions is in the air. Some would like the Trump administration to ban the importation of crude oil from Venezuela in response to that country’s recent fraudulent election. And some are predicting that if such a boycott were implemented, gasoline prices would increase by 10–15 percent, or 25–30 cents a gallon.

Venezuelan production is about 800,000 barrels a day, approximately 1 percent of the 80.4 million barrels a day world output. If 1 percent of world output were suddenly and permanently removed from the world market, then a 10 to 20 percent increase in price would certainly be a reasonable prediction, given what economists know about the relationship between reduced quantity and increased price in oil markets in the short run.

But boycotts are not true supply reductions; they are supply rearrangements. The United States and Venezuela both purchase and sell oil on a world market. In such a large market, country-of-origin and country-destination information quickly become blurred as crude oil and its refined products slosh from buyers to sellers, oftentimes via third parties. And even if the United States could somehow be a stickler at tracking and avoiding Venezuela-originated products, they would simply get re-routed to some other buyer—perhaps China or India—while other oil products would reroute to the United States.

Another factor is the nature of Venezuelan oil. Oil is not a homogenous, uniform worldwide product, but an idiosyncratic mixture of different hydrocarbons (and impurities) that varies from one country to the next and one oil field to the next. Venezuelan crude is “heavy,” meaning it contains more of the larger hydrocarbon molecules that are difficult to break down into usable products like gasoline. And some of the products it does yield aren’t especially valuable, like bunker oil. Refineries have to be specially configured to process the oil they receive, and heavy crude configurations are especially demanding. The United States does have such refineries, but the availability of light crude from the shale oil boom, which is much easier to break down into valuable products, has made the use of the extra configurations unnecessary.

Still, a U.S. boycott of Venezuelan oil could cause a short-lived price increase as markets adjust to the news. That increase could be extended depending on the actions of petroleum investors, who are a notoriously skittish lot. They could respond to a boycott by stockpiling oil in fear of lasting supply constraints. But U.S. inventories are currently relatively high, and stockpiling oil—pumping it into large storage tanks or leaving it on tankers at sea—is costly, which means the investors would shoulder a cost for their skittishness. Meanwhile, world oil production—including Venezuela’s—would likely not change from its current high level, except perhaps to produce a little extra to sell to the skittish investors. So we doubt any gas price increase would last for long.

Does this mean the United States should go ahead with a boycott? We are wholly agnostic on the wisdom and justice of boycotts, embargoes, and other such sanctions. (For a discussion of this topic, click here.) Rather, we argue that, economically, these policies seem to be pointless. Venezuela would simply sell its oil to other nations; a U.S. boycott would be as ineffective as similar policies against Cuba, Russia, and other countries.

World oil prices shift because of changes in world supply and demand, e.g., wars that block trade routes, recessions that reduce demand, expansions that increase demand, or producer collusion that constrains supply. A rift between the United States and Venezuela would be small potatoes in comparison, and any boycott would be made meaningless by the world market. Hence our skepticism that there would be much of a boycott price spike.

On August 3, The American Conservative ran a lengthy piece of mine dealing with the whistleblower protection nightmare that is the Department of Defense. One of the subjects of that piece is now former NSA IG George Ellard, and because I had even more on his case than I could fit into the TAC piece, I wanted to share the rest of what I know–and don’t know–about the allegations against Ellard, the final disposition of the case, why the Obama administration’s whistleblower retaliation “fix” is itself broken, and what might be done to actually provide meaningful protections for would-be national security whistleblowers in the Pentagon and elsewhere in the national security establishment.

Regarding what little we know about the specifics of Ellard’s case, I had this to say in the TAC piece:

As the Project on Government Oversight first reported in December 2016, a three-member interagency Inspector General External Review Panel concluded in May 2016 that the then-Inspector General of the National Security Agency (NSA), George Ellard, had, according to POGO, “himself had previously retaliated against an NSA whistleblower[.]” This apparently occurred during the very same period that Ellard had claimed that “Snowden could have come to me.” The panel that reviewed Ellard’s case recommended he be fired, a decision affirmed by NSA Director Mike Rogers. 

But there was a catch: the Secretary of Defense had the final word on Ellard’s fate. Outgoing Obama administration Defense Secretary Ash Carter, apparently indifferent to the magnitude of the Ellard case, left office without making a decision.

In the months after Donald Trump became president, rumors swirled inside Washington that Ellard had, in fact, escaped termination. One source, who requested anonymity, reported that Ellard had been seen recently on the NSA campus at Ft. Meade, Maryland. That report, it turns out, was accurate.

On July 21, in response to the author’s inquiry, the Pentagon public affairs office provided the following statement:

“NSA followed the appropriate procedures following a whistleblower retaliation claim against former NSA Inspector General George Ellard. Following thorough adjudication procedures, Mr. Ellard continues to be employed by NSA.”

After I’d finished the TAC piece, Ellard’s attorney, Terrence O’Donnell of the Washington mega law firm of Williams & Connolly, sent me the following statement about his client, George Ellard:

The Office of the Assistant Secretary of Defense (ASD) examined and rejected an allegation that former NSA Inspector General, George Ellard, had retaliated against an NSA employee by not selecting that employee to fill a vacancy in the OIG’s Office of Investigations.

In a lengthy, detailed, and well-reasoned memorandum, the ASD concluded that Dr. Ellard had not played a role in that personnel decision or, in the terms of the applicable laws and regulations the ASD cited, Dr. Ellard “did not take, fail to take, or threaten to take or fail to take any action” associated with the personnel decision.

This judgment echoes the conclusion reached by the Department of Defense’s Office of the Inspector General.  An External Review Panel (ERP) later came to the opposite conclusion, leading to the ASD review.  The ASD concluded that “the evidence cited in the ERP report as reflective of [Dr. Ellard’s] alleged retaliatory animus toward Complainant … is of a character so circumstantial and speculative that it lacks probity.”

In assessing Dr. Ellard’s credibility and in rendering its decision, the ASD also considered Dr. Ellard’s “distinguished career of public service, spanning more than 21 years of service across the executive, legislative, and judicial branches, culminating in almost 10 years of service as the NSA IG.”  Dr. Ellard, the ASD noted, has been “entrusted to address some of our nation’s most challenging national security issues”; successive NSA Directors have consistently rated Dr. Ellard’s performance as “Exceptional Results” and “Outstanding”; and he has been “commended by  well-respected senior officials with whom [he has] worked closely over the years for [his] ability and integrity.”

Dr. Ellard is serving as the NSA Chair on the faculty of the National War College, a position he held prior to the ERP review.

Quite a bit to unpack in that statement. Let’s start with the ASD’s decision to overrule the External Review Panel (ERP), a key component of the Obama-era PPD-19, the directive designed to prevent in all government departments or agencies the very kind of thing Ellard allegedly did. Here are the key paragraphs of PPD-19 with respect to ERP recommendations:

If the External Review Panel determines that the individual was the subject of a Personnel Action prohibited by Section A while an employee of a Covered Agency or an action affecting his or her Eligibility for Access to Classified Information prohibited by Section B, the panel may recommend that the agency head take corrective action to return the employee, as nearly aspracticable and reasonable, to the position such employee would have held had the reprisal not occurred and that the agency head reconsider the employee’s Eligibility for Access to Classified Information consistent with the national security and with Executive Order 12968. (emphasis added)

An agency head shall carefully consider the recommendation of the External Review Panel pursuant to the above paragraph and within 90 days, inform the panel and the DNI of what action he or she has taken. If the head of any agency fails to so inform the DNI, the DNI shall notify the President. (emphasis added)

Taking the ERP’s recommendations is strictly optional.

What’s so significant about the ERP recommendation in Ellard’s case was that the ERP not only apparently believed that the whistleblower in question should be given a fair chance at getting the position he or she originally applied for within the IG itself, but that Ellard’s actions were–in the view of three non-DoD IG’s who examined the case–so severe that they recommended he be terminated. 

O’Donnell quoted from a Pentagon memo clearing Ellard that is not public. The ERP’s findings, along with their record of investigation, are not public. Nor do we know how thorough–or cursory–the ASD’s review of the Ellard case was prior to the decision to clear Ellard. Given all of that, who are we to believe?

There are some key facts we do know that lead me to believe that the ERP’s recommendations were not only likely soundly based, but that the whistleblower retaliation problem inside the Pentagon is deeply entrenched.

O’Donnell’s statement also claimed that the ASD’s decision to reverse the ERP and clear Ellard of wrongdoing “…echoes the conclusion reached by the Department of Defense’s Office of the Inspector General.” But it’s the DoD IG itself, as an institution, that is also under a major cloud because of other whistleblower retaliation claims coming from former NSA or DoD IG employees–specifically former NSA senior executive service member Thomas Drake and for DoD Assistant Inspector General John Crane. As I’ve noted previously, the independent Office of Special Counsel found adequate evidence of whistleblower retaliation and document destruction to refer the matter to the Justice Department’s own IG; Crane’s case is getting a look from the Government Accountability Office (GAO), Congress’s own executive branch watchdog.

The DoD and NSA IG’s have clear conflicts of interest when employees from within their own ranks are implicated in potential criminal wrongdoing. PPD-19 was supposed to be the answer to such conflicts of interest, but it’s lack of teeth from an enforcement standpoint renders it a badly flawed remedy for an extremely serious integrity problem.

And what about Congress? PPD-19 speaks to that as well:

On an annual basis, the Inspector General of the Intelligence Community shall report the determinations and recommendations and department and agency head responses to the DNI and, as appropriate, to the relevant congressional committees. 

But Congress doesn’t need to wait for the IC IG to tell it what is already publicly known about the Ellard, Drake, and Crane cases. It has ample cause to not only investigate these cases, but to take action to replace PPD-19 with a whistleblower protection system that actually protects those reporting waste, fraud, abuse, or criminal conduct and punishes those who attempt to block such reporting. Two options that deserve consideration are 1) empowering OSC to examine these kinds of cases and issue unreviewable summary judgments itself or 2) revive the expired Independent Counsel statute, rewritten with a focus on whistleblower reprisal case investigations.

One thing is beyond dispute. The PPD-19 process is not the answer for protecting whistleblower and punishing those who retaliate against them. We need a credible system that will do both. The only question now is whether anybody in the House or Senate will step up to the task of building a new one. 

For years, Randal O’Toole has warned governments that urban rail systems usually make no economic or practical sense. They are more expensive and less flexible than bus systems. But cities keep making wildly optimistic assumptions about rail costs and ridership, and new lines keep getting built. It is a triumph of politics over experience.

The other day, the Washington Post reported ridership data on phase 1 of D.C. Metro’s Silver Line:

But of the five stations that opened in July 2014, only the end-of-line Wiehle-Reston station has come close to projected ridership. At three stops in Tysons — McLean, Greensboro and Spring Hill — ridership is a mere fraction of what planners projected in a 2004 environmental impact report. In May of this year, for example, average daily weekday ridership was 1,618 at the McLean station, slightly below the 1,634 in May 2015 and well below the 3,803 the Silver Line was projected to serve in its first year of operation, according to the 2004 report.

So actual ridership on some parts of this Northern Virginia line are less than half of the original estimate. By the way, the cost of the project ended up almost doubling from what the planners and politicians had promised. Federal taxpayers picked up part of the tab.

Phase 2 of the project is under construction, and it will extend the Silver Line to Dulles Airport, 28 miles from D.C. The project never made sense to me. The airport already has the dedicated and congestion-free Dulles Access Road that connects the airport to the inner suburbs and downtown.

Let’s say you are a NYC businesswomen flying into Dulles for some lobbying in D.C. If you take the rail system, it will probably take you much longer to get downtown than if you took a taxi along the Access Road. Then when you get off the Metro downtown, you may still need a cab to get to your final destination.

Or let’s say you are a Virginia family flying out of Dulles on vacation. Would you want to drive to a Metro station with all your bags, leave your car parked there, and then risk missing your plane by taking the unreliable rail system? I don’t think so. I’ll bet ridership on Phase 2 of the Silver Line will come in low as well.

For decades, federal subsidies have induced state and local officials to build costly and inefficient light- and heavy-rail systems when bus systems and highway expansion generally make more sense. Congress should end the bias in favor of rail by ending federal aid for urban transit, as discussed at DownsizingGovernment.org.

One reason why the Venezuelan regime has been so effective in slowly—but surely—installing a full-fledged dictatorship is because of the internal divisions of the opposition. Unfortunately, those divisions are once again coming to the fore, even now that Nicolás Maduro’s fraudulent constituent assembly has revealed the regime’s ultimate goal beyond reasonable doubt.   

The opposition boycotted the legislative elections of 2005 in protest of the lack of independence of the Electoral National Council (CNE), which granted the government total control of the National Assembly for five years. It only decided to participate again in elections once it perceived it could beat Chavismo in the polls. However, as the popularity of the government began to wane—once the economy started to deteriorate—the regime became more ruthless in its approach: disqualifying candidates, jailing opponents, blackmailing voters, rigging the electoral registry, calling off scheduled elections, and engaging in massive voter fraud. Even when Chavismo accepted some electoral defeats, such as some gubernatorial elections or the legislative election of 2015, the government swiftly moved to strip those offices held by the opposition of meaningful power or resources.

In 2013, Maduro was elected president in a highly questionable election that undoubtedly involved CNE sanctioned voter fraud—enough to tip the election for Maduro. However, the opposition continued to insist on pursuing an electoral path forward. After winning an absolute majority in the legislative election of 2015, the opposition saw how the government-controlled Supreme Court systematically stripped powers from the National Assembly effectively rendering it useless. Even then, the opposition insisted in getting rid of Chavismo through democratic means. Last year, the opposition triggered the mechanism calling for a recall referendum on Maduro. Polls indicated that the vote would have gone in the opposition’s way with a comfortable margin. Unsurprisingly, the CNE arbitrarily suspended the process, leaving the opposition with no alternative other than civil resistance.

Sunday’s fraudulent vote to elect the members of Maduro’s constituent assembly exemplifies the glaring corruption in the CNE. According to its authorities, 8.1 million people voted in the election. Yet, Reuters reported that at 5:30 pm—just a couple of hours before the polls closed—only 3.7 million people had voted. Moreover, the software company that set up the country’s voting system denounced yesterday that the government had rigged the vote by “at least” one million votes. No wonder that the head of the CNE, Tibisay Lucena, is one of the 13 senior officials of the Venezuelan regime recently sanctioned by the U.S. government.

Yesterday, Henry Ramos Allup, former president of the National Assembly and leader of the Democratic Action Party, made a perplexing statement: his party will stand for scheduled gubernatorial elections in December. Other figures of the Democratic Unity Roundtable, the umbrella opposition group, are also considering participating. Diosdado Cabello, perhaps the second most powerful government figure, appropriately mocked Ramos Allup for agreeing to participate in elections under a CNE that the opposition accuses of perpetuating massive fraud.

This division is a problem for the opposition. While some leaders insist in the immediate departure of the regime through civil resistance, others are willing to compromise in exchange for bogus regional elections. It is no wonder that, despite backing from the majority of Venezuelans, the opposition parties do not command their enthusiastic support.

Albert Einstein once said that the definition of insanity is “doing the same thing over and over again and expecting different results.” This definition certainly fits certain elements of the opposition.

Courts in modern times are generally protective of the First Amendment, specifically our freedoms of speech and press. On the whole, they vigorously oppose any attempt by government to minimize those essential liberties; they recognize that a free press is critical to any society that values expression and intellectual diversity. The Supreme Court’s 1983 ruling in Minneapolis Star v. Minnesota Commissioner of Revenue (1983), striking down certain taxes on ink and paper, shows that attempts to regulate the media as a group, even when broadly applied, are considered unacceptable if they crowd out certain viewpoints.

The University of California San Diego (UCSD), a public university, attempted to do something similar when it defunded certain student organizations in a thinly veiled attempt to censor one organization’s opinions. The Koala, a satirical newspaper funded by student activity fees, published an article mocking “safe places” that sparked controversy on campus and debate in the school’s student government. In response, the student government enacted a “Media Act” that defunded all student-printed media organizations, in order to prevent the The Koala from publishing further articles that contradicted the student government’s political sensibilities.

The Koala sued in an attempt to restore its funding, but the federal district court remarkably ruled against them. Cato has joined the Foundation for Individual Rights in Education on an amicus brief supporting its claim.

There is a longstanding, constitutionally based tradition of public universities’ serving as conduits for freedom of expression, a tradition that UCSD has unceremoniously abandoned. By providing funding to certain groups and not others, the university is effectively restricting certain members of the public from a public forum, in blatant violation of the First Amendment.

The lower court misread well-established jurisprudence regarding the scope of such forums, and failed to consider the evidence of viewpoint discrimination prevalent in the school’s Media Act. Not only does this rule have a discriminatory effect, but also it constitutes unconstitutional retaliation in direct response to the controversy surrounding The Koala’s article.

In addition, the Supreme Court has established that student activity fee programs are required to respect viewpoint-neutrality, in order to ensure that political bias does not stifle speech. UCSD has violated all of these core constitutional principles in pursuit of political correctness and the comfort of ideological homogeneity.

In The Koala v. Khosla, the U.S. Court of Appeals for the Ninth Circuit should reverse the lower court’s decision and stop UCSD’s efforts to seek vengeance against student groups for satirical articles.

With President Trump’s backing, Senators Tom Cotton (R-AR) and David Perdue (R-GA) introduced the RAISE Act, which would reduce legal immigration by 50 percent over 10 years. See here, here, here, and here for our earlier commentary about why this goal makes little sense and the justifications for it are spurious. But how it would achieve this goal is also revealing.

  • The senators no longer consider parents of U.S. citizens “immediate family” (p. 7). Such is these senators’ view of family relations in 2017.
  • Through an opaque formula—see here for an explanation—it eliminates virtually all hope for legal immigrants to sponsor their spouses and minor children for visas. Immigrants, I suppose, don’t deserve “immediate family.”
  • They end all of the current green card categories and void all applications from all legal immigrants (p. 16) despite them having waited in line in many cases for decades. This is so cruel that it’s almost impossible to imagine putting the idea on paper.
  • Their new point-based “merit” system has no more visas for employment-based immigrants than current law and counts the family of the workers against the quota, meaning that half will not even be “merit-based” (p. 17).
  • Its “merit” track would assign points in the following scheme. You need 20 points:
    • simply being age 26 is worth nearly twice as much (10) as being an entrepreneur who invests $1.4 million in their U.S. business (6).
    • Being fluent in English is worth as much as being an entrepreneur who invests $1.8 million in their U.S. business (12).
    • A 30-year-old fluent in English with any bachelor’s degree (28 points) is better off than a 36-year-old foreign STEM master’s degree holder with 10 years of work history with limited English (17).
    • It downgrades qualified applicants with spouses who are less qualified. Such that:
      • a 46-year-old Nobel laureate with a doctorate in a non-STEM field who is proficient in English and invests $1.4 million in a new business start-up but has a 46-year-old wife with a high school degree and no English gets fewer points (35.9) than a couple of bachelor degree holders who get jobs for $70,000 in Mississippi and who can speak English (36).

This strange ill-conceived proposal should go nowhere for many other reasons, but this bill’s cruelty toward legal immigrants who tried to come to the country the right way and its nonsensical “merit” system are good enough.

Occupational licensing started with the idea that jobs with serious consequences – doctors being the prototypical example – require some sort of government certification and oversight. But that rather innocuous motivation has ballooned into a harmful and unsustainable state of affairs.

From laws requiring licenses to braid hair to ones requiring licenses for floral design and casket manufacturing, occupational licensure has put barriers in the way of people who wish to do non-dangerous jobs and has done little to protect consumers. Instead, it’s frequently used as a way for politically well-connected people and state licensing boards to freeze out their competition, a textbook example of regulatory capture. The end result makes it harder for people to find fruitful employment, particularly low-income workers who often don’t have the time or money to get licenses.

Fortunately, the Supreme Court has offered some hope for those who don’t want needless barriers thrown their way when they want to make a living. In 2014, the Court held in North Carolina State Board of Dental Examiners v. Federal Trade Commission that a licensing board that had banned non-dentists from offering teeth-whitening services had violated federal antitrust laws – and that all licensing boards do the same when they engage in anticompetitive practices. (This was incidentally the first and only case in which Cato filed a brief supporting the federal government.) The Court further clarified that licensing boards have antitrust immunity if they’re subject to “active supervision” by the state in question.

States can get around this requirement by simply rubber-stamping everything done by the licensing boards, undermining the intended procompetitive effects of the decision in the process. In addition, there are valid concerns that the decision undermined state sovereignty in light of the fact that under Parker v. Brown, 317 U. S. 341 (1943), the Sherman Antitrust Act doesn’t apply to state government agencies.

Sen. Mike Lee (R-UT), who chairs the judiciary committee’s antitrust subcommittee, has been thinking about these issues and last week unveiled an innovative proposal. Joined by Sen. Ted Cruz (R-TX) and Sen. Ben Sasse (R-NE), Lee introduced legislation that would give states incentives to reform their licensing laws by giving them paths to immunity from liability. S.1649, or the “Restoring Board Immunity Act,” establishes a limited exemption for state licensing boards under antitrust law, but conditions that exemption on a state’s implementing one of two reforms. Option one is for a state to establish day-to-day supervision of licensing authorities through a new occupational-licensing oversight board, which would periodically review occupational regulations. Option two is for a state to create a cause of action that would allow for judicial review of occupational-licensing laws under a standard of intermediate scrutiny – requiring the state to prove that a licensing law meets that standard should it be challenged in a court of law, and award attorney fees in successful challenges.

The bill is not perfect. The “Office of Supervision” created to supervise the licensing authorities that are mentioned in Section 5 of the bill may be subject to similar public-choice and regulatory-capture problems as the current licensing boards, for example. It nonetheless represents a massive improvement over current occupational-licensing regimes. It provides an incentive for states to reform their laws and helps clarify the NC Dental case to ensure that states can’t simply rubber-stamp whatever licensing boards do.

This sort of out-of-the-box thinking is what we need from both Congress and state legislatures to ensure that all Americans can earn an honest living without needless interference from those claiming to protect them.

The Fed is embarked on a program of rate hikes, namely increases in the interest rates it pays on reserve balances and on reverse repos. Its justification is what it perceives to be a strong labor market and an expected rise in inflation. The two criteria are interconnected because in the economic model it employs, a strong labor market (as indicated by employment growth and a falling unemployment rate) will eventually result in a rise in the inflation rate. Thus far, the Fed has proved to be wrong.

The Fed in effect is targeting inflation at 2 percent, as measured by the personal-consumption expenditures (PCE). But actual inflation remains stubbornly below 2 percent. It was up 1.4 percent, year over year, in June. The core rate is running at 1.5 percent. Two percent is not in sight.

Fed officials appear committed to further rate hikes, though with less conviction. Why pursue a policy when the facts do not support it?

I believe there are two possible explanations. First, officials are willing to follow the predictions of a model even when it clearly has ceased to explain the economic facts (if it ever did). Second, there other unstated reasons for raising short-term interest rates. The first explanation is likely true for some Fed officials, especially so for Chair Yellen.

The second explanation likely drives policy for other officials. There is fear that unconventional monetary policy (a prolonged period of low interest rates) has generated asset bubbles. Those officials realize the Fed is in danger of repeating policy errors that led to the dotcom bubble and bust, and the housing boom and bust. It would be impolitic to say so, however. Code language is used, such as the need to return to “normal” monetary policy.

What prognosis is there for future rate hikes? The model points to higher interest rates, and reality to no further rate hikes. I opt for the latter, at least for the rest of this year.

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