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The following post is a draft of a forthcoming Cato Institute publication.

Executive Summary

Donald Trump has proposed eliminating or severely modifying the Deferred Action for Childhood Arrivals (DACA) program. Many Americans believe that the presence of unauthorized immigrants is harmful to the economy and would like to see steps taken to reduce their presence. However, a repeal or roll-back of DACA would harm the economy and cost the U.S. government a significant amount of lost tax revenue. We estimate that the fiscal cost of immediately deporting the approximately 750,000 people currently in the DACA program would be over $60 billion to the federal government along with a $280 billion reduction in economic growth over the next decade.

We arrived at our estimates by comparing and adjusting the characteristics of DACA recipients to similarly well-educated immigrants admitted through the H-1B visa program, a cohort that not only resembles the population of DACA recipients but whose own economic impact has been well-studied. We use the estimated budgetary and economic impact of H-1B visa workers and adjust it to reflect the age and earnings differences between the two groups to calculate our figures.

Background

President Obama created the DACA program in 2012 via executive action. DACA’s objective was to allow American residents who entered the country illegally as children to receive temporary protection from deportation, work permits, and an incentive to invest in their own human capital. The program only applies to those who have lived in the United States for five years or longer and do not have a criminal record. Essentially, these are people who never knowingly broke any law and have been productive and peaceful members of society since their arrival. The logic of the Obama Administration in creating DACA is that it makes little sense to expend time and resources trying to track down, arrest, and deport these people when they have not committed any crime save for being unwittingly brought across the border by others.

There is much legitimate debate in the United States over the role that immigration—both legal and illegal—plays in the economy, and what should be done about border security. Inseparable from this problem is the question of what to do with the undocumented immigrants already in the country, a sizeable population that is estimated to number 11 to 12 million.[1]

President-Elect Donald Trump has taken an absolutist position on the issue, vowing not only to build a wall with the intent of greatly reducing illegal entry from the Mexican border, but also to unilaterally nullify President Obama’s executive actions dealing with immigration, including the action which spawned DACA.

As with any sudden and dramatic shift in any policy, there are bound to be costs associated with implementation, as well as after-effects of the policy, not all of which are immediately intuitive. It is the goal of this paper to examine the costs that the wholesale repeal of DACA would impose on the American economy, both in terms of enforcement as well as the sudden loss of a large number of residents and their contributions to the domestic economy.

Who Are the DACA Recipients?

Although there have been many previous studies on the costs and benefits of immigration as a whole (we recently authored a review of such studies), it is important to note that we cannot simply assume that DACA recipients constitute a representative sample of the immigrant population. In addition to the aforementioned screening for criminal activity, workers in the DACA program tend to be younger, better educated, and more highly paid than the typical immigrant. To extrapolate from the studies on immigration in general, therefore, would significantly underestimate the opportunity cost to the economy of deporting the approximately 750,000 program participants, due to their higher level of productivity.

We instead looked for another group that might more closely resemble the demographic characteristics of those in the DACA program whose economic and budgetary impacts on the economy is well established: the recipients of H-1B visas, which are issued to skilled workers who are invited into the country to fulfill specific economic needs. This coincidence is useful.

The average DACA recipient is 22 years old, employed, and earns about $17 an hour. The majority are still students and 17 percent are pursuing an advanced degree.[2] By contrast, most recipients of H-1B visas are between 25 and 34 and hold either a Bachelor’s Degree or a Master’s Degree. In short, they appear to be a close reflection of what DACA recipients will look like a few years from now as they complete their educations.[3]

While the comparison is not perfect, as no such comparison can be, calculating costs under the assumption that DACA recipients are more like H-1B Visa holders than the general population of unauthorized immigrants will, we believe, yield a more accurate result. And given that we know the demographic and educational differences between the two groups we take those differences into account when estimating the fiscal and economic costs of repealing DACA.

Economic Costs

As of June 2016, U.S. Citizenship and Immigration Services has received 844,931 applications for the DACA program. Of these, 741,546 were accepted, with the rest either denied or pending approval.[4] It should be noted that the applicants to DACA are asked to pay the administrative fees for background checks and processing, so the administrative costs of implementing the program itself are minimal. While the Obama Administration had announced its intention to expand the program last year, this is unlikely to occur under the Trump Administration, so we will accept these numbers as representative of the affected population.

Little research has been done on the effects of DACA itself, which is why we have chosen to extrapolate the program’s economic impact from the research done on holders of H-1B visas, who are demographically similar to workers in the DACA program, as well as from the numerous studies on the economic effects of undocumented immigration generally.

One study on DACA itself was conducted by Nolan G. Pope and published in the Journal of Public Economics in 2016. Nolan found that DACA moved between 50,000 and 75,000 immigrants into employment from either outside the formal labor force or unemployment, and increased the average income of immigrants in the bottom of the income distribution.[5] This is a positive labor market outcome for a number of reasons: working and earning a higher level of income in the formal sector means that the DACA workers pay more taxes, both through payroll, income, and sales as a result of greater consumption associated with higher incomes. The Organization of Economic Co-operation and Development (OECD) cited employment as “the most important factor that weighs on migrants’ net fiscal contributions,” so it is clear that any increase in immigrant employment will tend to result in a positive fiscal impact.[6]

A 2014 survey found that 59 percent of DACA recipients reported getting their first job, 45 percent received a pay increase, 49 percent opened their first bank account, and 33 percent got their first credit card due to their participating in DACA.[7] All of these factors contribute positively to the economy. But while the survey also noted that recipients would be eligible for higher levels of education, Pope’s research completed two years later found no correlation between DACA participation and education, although it is possible that simply not enough time has passed to observe an effect.

Turning more generally to the cost-benefit analysis of unauthorized immigration as a whole, the evidence suggests that the mere presence of undocumented workers, especially non-criminals like those covered under DACA, is not nearly as detrimental to the economy as most people suppose, and may actually be a net benefit. Legalizing unauthorized immigrants and allowing them to participate in society as legal workers dramatically reduces government enforcement costs and generates broader economic benefits.[8]

Quantifying the Net Costs

Quantifying the costs of any action on immigration presents enormous difficulties, due to the complexity and number of variables involved.

Alex Nowrasteh, a scholar at the Cato Institute, points out that while the economic impact of immigration is large and positive, the fiscal impact tends to be minimal. Nowrasteh also stresses the need to take into account the long-term effects of immigration, meaning the contributions of immigrants’ children and grandchildren, which tend to be more positive than those of first generation immigrants.[9]

There are unquantifiable benefits from DACA as well, such as providing increased access to private health insurance, driver’s licenses, and auto insurance, all of which generate spillover benefits to the rest of society. This analysis also leaves out the effects of simply having more productive minds in the country capable of producing innovations and increasing labor productivity. The data show that immigrants start their own businesses and file patents at greater rates than native-born Americans.[10] 

The fiscal costs of DACA recipients are also minimal and comparable to the fiscal costs of H-1B workers.[11] Under current law, DACA recipients are ineligible for means-tested welfare benefits provided by the federal government or funded through federal matching grants to the states.[12]  Although states can extend welfare benefits to DACA recipients if they choose to, few have done so. DACA recipients, like everybody else in the United States, are eligible for emergency Medicaid. Thus, DACA does not boost government welfare expenditures above the level consumed by unauthorized immigrants.     

To reiterate, we need to isolate DACA recipients—who tend to be more educated, younger, and less prone to criminal activity—from the general population of unauthorized immigrants to derive an accurate estimate of DACA’s impact. To do this, we begin by comparing them to the holders of H-1B visas, the work permits issued for high-skilled labor. The main difference between the two groups is age, with H-1B visa holders being on average 3 to 12 years older. With this age gap also comes the concomitant difference in education and earnings, which we can adjust for in our calculations.

Thomas Church, a senior fellow at the Hoover Institution, estimates that expanding the H-1B visa program over a ten year period would increase GDP by $456 billion and tax revenues by $113 billion, assuming that 660,000 new H-1B immigrants would arrive over the decade.[13] Church obtains his results by taking the mean wages for H-1B immigrants, assuming an average wage growth of 3 percent per year, and applying the appropriate tax rates.

Church also incorporates income accrued to capital from these workers, using the relatively stable historical averages calculated by the Congressional Budget Office. Multiple studies have been conducted on the impact of immigration on native wages, and the results have been both positive and negative, albeit small in either direction. There is also some evidence that the presence of immigrant workers can increase purchasing power by reducing consumer prices. Given these conflicting and minor findings, Church has not included wage or purchasing power effects in his calculations, and we have done the same.

We take Church’s estimate as our baseline and begin by adjusting it to reflect the 741,546 participants in the DACA program—which is a bit more than his H-1B expansion called for—producing an estimated GDP gain of $512 billion and a budgetary impact of $127 billion.

However, since the average wages of DACA participants are lower than H-1B immigrants, we corrected these values to reflect the relative youth and inexperience of DACA immigrants. DACA participants earn an average of $34,000 annually and H-1B participants an average of $72,000 annually, a ratio of 47 percent. Applying this ratio to the economic and fiscal costs above yields an economic impact of $215 billion and a fiscal impact of $60 billion.

We feel this is a conservative estimate due to the fact that many DACA immigrants are young and still acquiring education credentials that will boost wages later.  DACA immigrants are less like H-1B immigrants at half the salary, and more like younger H-1B workers. Additionally, the higher tax brackets associated with higher incomes would increase DACA immigrants’ fiscal contributions at a greater rate than the increase in salary. In other words, doubling the wages of DACA participants would more than double their contributions to state and federal budgets. Thus, a life-cycle comparison of the wages of the two groups would produce a narrower difference.

For comparison, an influential study by the National Research Council[14] examined the present value fiscal impact of immigration in the United States, with an emphasis on long-term impact. The study points out that immigrants become more productive over time as they learn new skills and become more fluent in English. The authors concluded that the average immigrant will have a net long-term impact on state, local and federal budgets of $80,000, which includes tax payments as well as the impact of the children of immigrants, who tend to be less costly—and higher-earning—than their parents. Multiplying this estimate by the number of DACA recipients produces an estimated fiscal impact of $59.3 billion, nearly identical to the $60 billion fiscal impact we derived from the Hoover study.

We also need to add the actual cost of deportation for current DACA recipients to the fiscal and economic estimates. For this we borrow from a study from the Center for American Progress that estimates the marginal deportation costs at just over $10,000 per removal.[15] The total deportation cost would then be $7.5 billion.

Summing these numbers produces a total cost estimate of immediately eliminating the DACA program and deporting its participants of $283 billion over 10 years. In other words, the United States economy would be poorer by more than a quarter of a trillion dollars if President Trump were to make good on his threat to repeal it.

There are other variables that potentially impact both the costs and benefits of immigrant workers, and the further into the future we attempt to project such costs and benefits the more difficult accurate estimates become. For example, our calculation used only the current number of DACA recipients, but it is estimated that there could be another one million eligible residents who have not yet applied for, or received, membership in the program.[16] We do not make any forecast regarding whether this cohort would eventually take advantage of the program and instead assume none of them would do so.

Likewise, assuming immediate deportation instead of a temporary reversion to undocumented status changes the calculus as well, considering the costs that result from people trying to live outside the law. This would need to be taken into account.

Alex Nowrasteh of Cato suggested that it is probably more realistic to assume that upon a repeal of DACA the newly unauthorized immigrants would predominantly remain in the United States and pursue employment illegally, at wages 10 percent to 20 percent less than they earned legally. If we combined that with a similar reduction in employment levels then the resulting economic impact would be a bit less—in the range of $60-$100 billion—but still significant.[17]

Regardless of the response, it is clear that there is a significant fiscal and economic cost to the immediate repeal of DACA, one borne by all of the nation’s residents and not just by those whose lives would be upended by such a move. This suggests that it would make more sense to focus immigration enforcement efforts elsewhere—if indeed the aim is to protect American national sovereignty, as well as the life, liberty, and private property of Americans.

Small Gains, Big Costs

There are valid reasons to be concerned about unauthorized immigration in the United States. The DACA program, however, screens out anyone with a criminal past as part of its core eligibility requirements. DACA participants are not eligible for means-tested welfare benefits or Obamacare subsidies.

Since DACA applicants pay their own processing fees, the program itself does not have an administrative cost, and so the only costs we need to evaluate are those that stem from having these people in the country in the first place. We submit that any such costs are far outweighed by the benefits that come from immigrants who are able to work openly and legally, pay taxes, support entitlement programs, create jobs, innovate, and sire children who will one day do the same.

The deportation of DACA participants would cost the American economy billions of dollars, as well as billions of tax dollars foregone, while doing little to address the true concerns that Americans may have about unauthorized immigrants.

[1] Jeffrey S. Passel and D’Vera Cohn, “Unauthorized Immigrant Population Stable for Half a Decade,” (Washington: Pew Research Center, September 21, 2016), http://www.pewresearch.org/fact-tank/2016/09/21/unauthorized-immigrant-population-stable-for-half-a-decade/.

[2] Tom K. Wong, “Results of Tom K. Wong, National Immigration Law Center, and Center for American Progress National Survey,” (Washington: National Immigration Law Center and Center for American Progress, June 2015), https://cdn.americanprogress.org/wp-content/uploads/2015/07/DACA-Wong_NILC_CAP-Codebook-PDF.pdf.

[3]“Characteristics of H-1B Specialty Occupation Workers,” Fiscal Year 2014 Annual Report to Congress (Washington: U.S. Citizenship and Immigration Services, February 26, 2015), https://www.uscis.gov/sites/default/files/USCIS/Resources/Reports%20and%20Studies/H-1B/h-1B-characteristics-report-14.pdf.

[4] “Number of I-821D, Consideration of Arrivals by Fiscal Year, Quarter, Intake, Biometrics, and Case Status: 2012-2016,” (Washington: U.S. Citizenship and Immigration Services, June 30, 2016), https://www.uscis.gov/sites/default/files/USCIS/Resources/Reports%20and%….

[5] Nolan G. Pope, “The Effects of DACAmentation: The Impact of Deferred Action for Childhood Arrivals on Unauthorized Immigrants,” Journal of Public Economics 143 (2016): 98-114.

[6] Organization for Economic Cooperation and Development, “International Migration Outlook,” (Paris: OECD, 2013), p. 161.

[7] Robert G. Gonzales and Angie M. Bautista-Chavez, “Two Years and Counting: Assessing the Growing Power of DACA,” American Immigration Council Special Report (Washington: American Immigration Council, June 14, 2014), https://www.americanimmigrationcouncil.org/research/two-years-and-counting-assessing-growing-power-daca.

[8] Ike Brannon and Logan Albright, “Immigration’s Impact on the Texas Economy,” Texas Public Policy Foundation (Austin: TPPF, March 2016), http://www.texaspolicy.com/library/doclib/Immigration-s-Impact-on-the-Texas-Economy.pdf.

[9] Alex Nowrasteh, “The Fiscal Impact of Immigration,” Cato Institute Working Paper (Washington: Cato Institute, July 23, 2014), https://object.cato.org/sites/cato.org/files/pubs/pdf/working-paper-21-fix.pdf.

[10] American Immigration Council, “Value Added: Immigrants Create Jobs and Businesses, Boost Wages of Native-Born Workers,” American Immigration Council Factsheet (Washington: AIC, January 2, 2012), https://www.americanimmigrationcouncil.org/research/value-added-immigrants-create-jobs-and-businesses-boost-wages-native-born-workers.

[11] Ruth Ellen Wasem, “Noncitizen Eligibility for Federal Public Assistance: Policy Overview and Trends,” Congressional Research Service (Washington: CRS, September 27, 2012).

[12] “Frequently Asked Questions: The Obama Administration’s DAPA and Expanded DACA Programs,” National Immigration Law Center (Washington: NILC, March 2, 2015), https://www.nilc.org/issues/immigration-reform-and-executive-actions/dapa-and-expanded-daca-programs/.

[13] Thomas V. Church, “Estimating the Economic and Budgetary Effects of New H-1B Visas in the Senate Gang of Eight’s Proposed Immigration Bill,” Hoover Institution (Stanford: Hoover, May 7, 2013),  http://www.hoover.org/sites/default/files/uploads/aafs/2013/05/Estimating-the-Economic-and-Budgetary-Effects-of-H-1B-Reform-In-S.744.pdf.

[14] James P. Smith and Barry Edmonston, editors, “The New Americans: Economics, Demographic, and Fiscal Effects of Immigration,” National Academies Press (Washington: NAP, 1997), p. 346.

[15]https://www.americanprogress.org/issues/immigration/news/2015/02/23/1069…

[16] Philip E. Wolgin, “What Would it Cost to Deport All 5 Million Beneficiaries of Executive Action on Immigration?” Center for American Progress (Washington: CAP, February 23, 2015),  https://www.americanprogress.org/issues/immigration/news/2015/02/23/106983/what-would-it-cost-to-deport-all-5-million-beneficiaries-of-executive-action-on-immigration/.

[17] Alex Nowrasteh, “Heritage Immigration Study Fatally Flawed,” Cato at Liberty, April 4, 2013, https://www.cato.org/blog/heritage-immigration-study-fatally-flawed

Some members of Congress are considering restructuring DC Metro’s management and oversight. Big reforms are needed given the disastrous service, safety, and financial performance of the system in recent years.

Why not privatize Metro? Countries around the world have been privatizing their transportation infrastructure in order to improve management and efficiency. Privatizing Metro buses would be straightforward, but even privatizing the subway system would not be an unheard of reform.

Hong Kong privatized its subway system in 2000. In a recent study on infrastructure, McKinsey reported:

Hong Kong’s MTR Corporation has defied the odds and delivered significant financial and social benefits: excellent transit, new and vibrant neighborhoods, opportunities for real-estate developers and small businesses, and the conservation of open space. The whole system operates on a self-sustaining basis, without the need for direct taxpayer subsidies.

MTR’s railway system covers 221 kilometers and is used by more than five million people each weekday. It not only performs well—trains run on schedule 99.9 percent of the time—but actually makes a profit: $1.5 billion in 2014. MTR fares are also relatively low compared with those of metro systems in other developed cities. The average fare for an MTR trip in 2014 was less than $1.00, well under base fares in Tokyo (about $1.50), New York ($2.75), and Stockholm (about $4.00).

That sounds pretty darn good. The average fare on the DC Metro is about $3. The on-time record of Metro is unclear, but in technical terms I think “crappy” best describes it. Note that Hong Kong’s 99.9 percent on-time record means that “of the average 5.2 million passenger trips made on the MTR heavy rail and light rail networks on each normal weekday, 5.195 million passengers safely reach their destinations within 5 minutes of their scheduled arrival times.” In 2014, “the system ran for 120 consecutive days without a single delay over eight minutes.” Wow.

That stellar performance induces strong demand for the Hong Kong system, which in turn generates high fare revenues. The ratio of passenger fares to operating costs is a high 185 percent, which means that fares fully cover operating costs and part of capital costs. MTR raises other funds for capital from real estate deals under which it gains from land value increases near stations. The Hong Kong system is profitable and unsubsidized. By contrast, the average ratio of fares to operating costs for U.S. subway systems is just 46 percent, and the systems are heavily subsidized.

The MTR is probably the best-run subway system in the world. The system is an “immaculately clean, well-signposted, cheap, regular, convenient system.” And there’s free Wi-Fi in most stations.

The system is so admired that MTR has been contracted to run systems in other cities. CNN says: “MTR Corporation now operates the London Overground, and two lines of the Beijing Metro, as well as parts of the Shenzhen and Hangzhou Metro systems in China, the Melbourne Metro in Australia and the Stockholm Metro in Sweden … London Overground enhanced its punctuality from 88.4% in 2007 to 96.7% in 2013 after MTR took over its operation for a year.”

Can we get MTR Corporation to expand into Washington? Metro Board Chairman Jack Evans wants a federal takeover of Metro, but how about a private takeover?

Massive preparations are underway here in the District of Columbia for Donald Trump’s inauguration. Temporary fencing is going up along with bleachers and roadblocks. In addition to thousands of well-wishers, thousands of protesters are expected. It will doubtless be an unforgettable day. 

It is worth remembering that before Mr. Trump can take any official action whatsoever, he must first take an oath to support and defend the Constitution. There are many other checks and balances in our system, but the oath of office is supposed to be the first line of defense. Mr. Trump can use the bully pulpit (and his Twitter account) to respond to his critics, but he must respect their right “to peaceably assemble, and to petition the Government for a redress of grievances,” as the First Amendment makes clear.

Can you imagine the outcry if Mr. Trump were to threaten to arrest protesters at his inauguration? It would be deafening—and fully justified. And yet, if you can believe it, there have been previous attempts to do just that. We should remember such episodes in our history.

In January 1997, Rev. Patrick Mahoney and a few other anti-abortion protesters planned to demonstrate along the sidewalks adjacent to President Bill Clinton’s inaugural parade route. When word got around about these modest plans, something had to be done. Mahoney and his Christian Defense Coalition received oral and written warnings that they would be arrested if they proceeded with their small protest. Shocked by such threats, Mahoney went to court to seek an emergency injunction to protect his group’s constitutional right to protest on the big day: January 20, 1997.

It soon became apparent that this story was bigger than a low-level bureaucrat trying to intimidate some guy that didn’t have any political connections. Attorneys trained at our best law schools arrived in court to double down. Yes, the local U.S. Attorney admitted, Randall Myers, counsel for the National Park Service, had informed Mahoney that his people wouldn’t be arrested if their signs offered congratulations to Clinton, but they would be arrested for signs containing any criticisms of Clinton. This blatant discrimination between viewpoints could be justified, said the local U.S. Attorney.

The Court of Appeals was pretty flabbergasted by such claims. Here is an excerpt from the unanimous ruling: “[A]ll constitutional authority supports the position we would have thought unremarkable, that a government entity may not exclude from a public forum persons who wish to engage in First Amendment protected activity solely because the government actor fears, dislikes, or disagrees with the opinions of those citizens. None of the authorities offered by the government is to the contrary. Indeed, none is on point.” Ouch! That’s a body slam in legal circles. And a well-deserved one.

Let’s fast-forward to recent news. Since Mr. Trump’s election, the left has been busy with plans to organize a resistance movement. California Assembly Speaker Anthony Rendon has promised to “lead the resistance to any effort that would shred the social fabric of our Constitution.” It was recently announced that California has retained former Attorney General Eric Holder to defend the Constitution from the Trump administration. That was not a wise move. In 1997, Holder was the U.S. Attorney in the District of Columbia. He was the one who tried to justify arresting protesters that were critical of President Clinton. If Holder is the Constitution’s defender, we’re in big trouble.

One of the reasons that our Bill of Rights is in trouble is because there are not many people or organizations that make a principled defense when it is attacked. Let’s resolve to do better going forward.

For related Cato scholarship, go here, here, and here.

I got my dinner and a show last night. The dinner was fine, but the show? Not so great. Not much substance was covered in the DeVos confirmation hearing before the Senate Health, Education, Labor and Pensions committee, and when meaty issues were brought up they were too often smothered in gotcha questions and commentary rather than meaningful discussion.

A good part of the hearing was occupied by bickering over each committee member only getting one, five-minute questioning period, and whether or not that was committee tradition or an effort by the GOP majority to protect the witness. Maybe that’s insightful stuff if you care about the politics of all this—though I doubt it—but it doesn’t tell us one whit about where the nominee stands on the federal role in education.

The good news is that when DeVos was asked about her views on federal policy, she was deferential to states and districts. I don’t recall her stating resolutely that the Constitution leaves ed power to the states and the people—she stated little resolutely—but she hit the right notes. Included in that was telling committee chair Lamar Alexander (R-TN) that she would not use the power of her office to try to coerce school choice. She said she would try to convince Congress to push choice—an unconstitutional goal, but at least using the constitutionally correct process—but she would not try to do it unilaterally.

Of course, talk is cheap—we’ll see what happens. After all, President-elect Trump promised to “immediately” spend $20 billion to, in some way, incentivize choice expansion.

Alas, what will probably be most discussed about the hearing will amount to political point scoring. A big one stems from Chris Murphy (D-CT) demanding to know if DeVos thought guns should be in schools. DeVos said such policy should be left to states and “locales”—you know, federalism—and when she gave an example of why a school might need a gun, she referred back to a rural school she discussed with Sen. Mike Enzi (R-WY) that had a fence to protect students from bears. She said there was a good chance it had a gun on the premises, maybe to protect against grizzly attacks.

Sadly, rather than acknowledging the legitimate, serious issues behind this—for both legal and practical reasons, maybe there shouldn’t be a blanket national policy on guns and schools—DeVos opponents have mocked her out of context.

Another seeming stumble was under questioning by Sen. Al Franken (D-MN), who held forth on what constitutes the education “mainstream” before asking about measuring student “growth” versus “proficiency.” DeVos started by talking about “mastery,” asking if she understood Franken’s question right, and before she could clarify Franken stepped on her to say that she didn’t seem to comprehend the issue and hence the committee needed more time to question her. Maybe she does not know the issue, but Franken didn’t really give her a chance to answer.  

Finally, Maggie Hassan (D-NH) and Tim Kaine (D-VA) questioned DeVos quite a bit about the Individuals with Disabilities Education Act (IDEA), in particular its application were taxpayer money to follow a child to a private school. Many observers have asserted that DeVos did not know that IDEA was federal law when she answered that decisions on accommodations—perhaps thinking about when non-federal funds are in use—should be state and local decisions.

To hear the questioning, you’d think IDEA was flawless law. It isn’t. More important, its application would not, or at least should not, be as simple as requiring that any private school taking a voucher student should have to provide a full range of services. That a school is chosen means families voluntarily accept what it has to offer. Indeed, choice fundamentally changes the education power structure, empowering families rather than making them dependent on bureaucratic protections like IDEA against politically controlled, assigned government schools. It is also indisputable that lots of public schools don’t provide full accommodations, and when a student’s challenges are very substantial districts sometimes send kids to private schools.

One final complaint. (I get to do this because I gave up my family dinner to watch this stuff.)  Two senators—Elizabeth Warren (D-MA) and Tim Kaine—invoked Trump University to demand that DeVos hold for-profit colleges “accountable,” as if Trump U had been an actual university receiving federal funding. Of course it wasn’t, and the education secretary did not have jurisdiction over it. If the senators did not know that, they’ve got some studying to do. If they did, there goes any pretense of objective focus on policy, not politics.

So after almost four hours and one inconvenienced meal, what did I learn? Not much about DeVos except a stated deference to states and localities and support for school choice. About the hearing process? That it is a lot more about grandstanding and ginning up controversy than open-mindedly discussing issues. About my digestive system? That political dinner theater makes me go crawling for the Pepto.

Like the foreign policy commentary you see here on Cato’s blog? If you’re a PhD candidate or recent PhD, you should consider applying for our visiting research fellow position.

The Defense and Foreign Policy department is seeking candidates for a visiting fellow post. This one-year paid fellowship allows candidates to expand upon the policy implications of their dissertation research, and contribute to the work of the Cato defense and foreign policy department.

In order to apply, candidates must be either A.B.D. PhD candidates or a recent PhD graduate in political science, history or a related field, and must have authorization to work in the United States.

Candidates should also share Cato’s commitment to moving U.S. foreign policy towards prudence and restraint, and the policy implications of their work should be broadly compatible with a pragmatic, realist or restrained approach to foreign policy. You can find more information about Cato’s work on defense and foreign policy issues here.

During their time at Cato, the visiting fellow is responsible for:

  • Producing one scholarly paper (8,000-10,000 words) in the Institute’s Policy Analysis series on a foreign policy issue (which may or may not be part of the fellow’s dissertation)
  • Organizing at least two events
  • Authoring op-eds and blog posts
  • Handling media requests on international security issues

Fellows will work from Cato’s Washington, D.C. offices for the 2017-2018 academic year. Predoctoral fellows will receive $40,000, and postdocs will receive $50,000 in addition to health care coverage. Ideally, the fellow’s work at Cato would overlap considerably with his or her dissertation, making the fellowship useful both for policy research and finishing or refining the candidate’s dissertation.

If you are interested in applying, please submit a C.V. and a writing sample via Cato’s online application system no later than February 15, 2017. The application can be found here.

In case you missed it, Ben Carson has been labeled as being “at odds with fair housing.” During his senate confirmation hearing last week, Carson was required to defend his position on Affirmatively Furthering Fair Housing (AFFH), the Department of Housing and Urban Development’s (HUD’s) controversial 100-page-plus contemporary interpretation of the Fair Housing Act.

It may sound appalling that anyone anywhere would be against fair housing. Still, there are sane reasons to object to the rule. Carson suggested a couple of possibilities; for example, he worries about Washington, D.C. administrators demanding that local communities “go looking for a [racial] problem” when no evidence of such a problem exists a priori.

If you don’t like intemperate federal agencies running riot, there is another process-related objection that Carson missed: AFFH may insert the federal agency into policy areas not even remotely authorized by the legislation it purportedly interprets.

The table below provides a comparison of the original Fair Housing Act language and AFFH language, so that you can decide for yourself:

Fair Housing Act of 1968 (original legislation) Affirmatively Furthering Fair Housing of 2015 (HUD’s re-interpretation) 1)    Prohibits landlords from discriminating against minority tenants. 1)    Stated objective is to “replace segregated living patterns with truly integrated and balanced living patterns [within cities].”  2)    Uses the word “segregated” or “segregation” a total of 0 times. 2)     Uses the word “segregated” or “segregation” a total of 126 times and urges“overcoming historic [geospatial] patterns of segregation.” 3)    The original FHA law uses the word “zoning” just 1 time, wherein it instructs the HUD Secretary to refer discriminatory local zoning or land use laws to the Attorney General so that he/she can file a lawsuit. 3)    The AFFH mentions “zoning” 53 times, wherein it suggests that communities change their zoning to improve racial integration (not a bad suggestion, but a departure from the original law). 4) The original FHA law uses the word “affirmatively” 2 times. Each time, it asks executive departments and agencies to administer their programs and activities in a way that affirmatively furthers “the purposes of this subchapter,” where the subchapter focuses on prohibiting a discriminatory relationship between landlord/seller and tenant/buyer. 4) The AFFH rule uses the word “affirmatively” 423 times, wherein it redefines the term to mean “replacing segregated living patterns with truly integrated and balanced living patterns” and “transforming racially and ethnically concentrated areas.” 5) The original FHA law uses the word “concentration,” referring to the concentration of poverty or concentration of minorities in cities, 0 times. 5) The AFFH rule uses the word “concentration” 56 times and urges “reducing racial or ethnic concentrations of poverty.”

HUD believes the rule merely implements the Fair Housing Act’s intent.  You can form your own view.

This morning the Supreme Court of Florida declined to hear McCall v. Scott, the Florida teachers’ union lawsuit against the state’s popular scholarship tax credit, which helps nearly 100,000 low-income students attend the school of their choice. That means the lower court’s decision dismissing the lawsuit stands, and the law is safe from further challenge on these grounds.

As I wrote back in August, the union and its allies had alleged that the scholarship program unconstitutionally supported a “parallel” system of public education and violated the state constitution’s historically anti-Catholic Blaine Amendment, which prohibits publicly funding religious schools. However, the trial court judge rejected this claim, holding that the plaintiffs lacked standing to sue because the scholarships were privately (not publicly) funded and that they were unable to prove that the scholarship program adversely impacted the district school system. The union appealed but the appellate court unanimously upheld the lower court decision. Today’s state supreme court decision is the proverbial nail in the coffin for the union’s legal challenge.

Supporters of the scholarship program expressed their satisfaction this morning:

“The court has spoken, and now is the time for us all to come together to work for the best interests of these children,” Doug Tuthill, [president of Step Up for Students, Florida’s largest scholarship organization], said in a statement. “We face enormous challenges with generational poverty, and we need all hands on deck.”

After the lawsuit was filed in 2014, supporters of the program — including parents and clergy members — waged a full-court press supporting the program. Almost exactly a year ago, they staged a massive rally in Tallahassee.

“On behalf of all the scholarship children, their families and their clergy in the Save Our Scholarships coalition, I commend the state Supreme Court on their wise application of the law,” Reverend R.B. Holmes of Bethel Missionary Baptist Church in Tallahassee, said in a statement. “We look forward to working together with all parties to improve the educational outcomes of low income children in our state.”

School choice is safe in Florida. But just north of the panhandle, Georgia’s scholarship tax credit faces a similar legal challenge. Oral arguments in Gaddy v. Georgia Department of Revenue are scheduled for next week, which just happens to be National School Choice Week. For justice to prevail, the Georgia Supreme Court should dismiss that case as well. 

Last week, President-Elect Trump received a visit from none other than Robert F. Kennedy Jr., who our colleague Walter Olson refers to as America’s Most Irresponsible Public Figure. Keeping with this title, Kennedy will be joining the Trump team on a panel to vet vaccine safety.

This, like many of Trumps moves, will create international debate. For example, the most prominent advocate in Britain of the idea that there is a link between vaccinations (in his case the MMR or measles, mumps and rubella vaccine) and autism was Dr. Andrew Wakefield, whose 1998 Lancet paper (now retracted) attracted vast global interest. But Dr. Wakefield’s conduct of the research behind that paper was judged so unacceptable by the regulatory body, the General Medical Council, that his license to practice medicine was revoked. In that vignette we see a microcosm of the whole debate, because too many of the anti-vaccination advocates are not citing evidence and science at the highest level. And such episodes matter because if public confidence in vaccination falls too low, the rate of uptake of the vaccines will fall, herd immunity will fall, and epidemics of preventable yet dangerous disease will recur.

Much anti-vaccination anxiety focuses on the role of the mercury-based chemical thiomersal, which was once widely used to helped preserve vaccines but which is used less today. Nonetheless systematic reviews of the field have repeatedly affirmed that there is no evidence to suppose that thiomersal precipitates autism (see M Maglione et al, 2014, Pediatrics, 134: 325-337.)

Autism is a serious condition, which deserves serious investigation. No harm need come from this new Trump-inspired investigation as long as it is not in itself used to damage the credibility of existing vaccination protocols.

Among the many failures of federal policies over the decades, the failures of Indian policies stand out. The government has deprived American Indians of their lands, resources, and freedom in many ways. It has failed to create an institutional structure supportive of prosperity on reservations. And the Bureau of Indian Affairs has been mismanaged for two centuries, as I discuss here.

Naomi Schaefer Riley addresses the failures of Indian policies in The New Trail of Tears, which she will discuss at an upcoming AEI forum. I will be commenting on Riley’s book at the forum.

One of Riley’s themes is the failure of federal and tribal efforts to provide a decent education for children on reservations. Riley visited numerous schools, and she reports on the disheartening conditions that she saw.  

Last week the Washington Post reported:

The federal government has repeatedly acknowledged and even lamented its failure to provide adequate education for Native American children. Now, nine Native children are taking to the courts to force Washington to take action.

The children are all members of the Havasupai Nation, whose ancestral homelands are in and around the Grand Canyon. They attend an elementary school that is run by the federal Bureau of Indian Education and is, according to a lawsuit filed Thursday, hardly recognizable as a school at all.

Havasupai Elementary School does not teach any subjects other than English and math, according to the complaint; there is no instruction in science, history, social studies, foreign language, or the arts. There aren’t enough textbooks or a functioning library or any after-school sports teams or clubs, according to the complaint. There are so many and such frequent teacher vacancies that students are allegedly taught often by non-certified staff, including the janitor, or they are taught by a series of substitutes who rotate in for two-week stints. The school shuts down altogether for weeks at a time.

The Obama administration has been candid about the federal government’s failure to meet the needs of nearly 50,000 Native young people in nearly 200 schools the Bureau of Indian Education oversees.

“Indian education is an embarrassment to you and to us,” [Interior Secretary Sally] Jewell told the Senate Indian Affairs Committee in 2013.

The Bureau of Indian Education (BIE) oversees 183 Indian schools with 41,000 students, as I discuss in this study. The BIE operates about one-third of the schools, and tribal governments operate the other two-thirds.

The poor performance of the schools does not seem to be caused by a lack of funding. The schools received $830 million of federal aid in 2014, which is $20,000 per pupil. The GAO reports that “the average per pupil expenditures for BIE-operated schools—the only BIE schools for which detailed expenditure data are available—were about 56 percent higher than for public schools nationally.”

If more money is not the answer, what is? How about private management and school choice? Rather than running schools, the federal government could provide education block grants to the tribes, who would then outsource school management to expert education firms. Even better, federal funding could flow directly to Indian parents in the form of vouchers to be used at schools of their choice. I’ll be interested to see what former BIE head Keith Moore says about those options at the AEI forum.

More on school choice here.

At 5:00 this afternoon—almost guaranteeing it will interrupt my usual dinner time—the confirmation hearing for education secretary-nominee Betsy DeVos will take place. With my Hungry Man “Gamer Grub” on a tray and my laptop right next to it, I’ll be live-tweeting the proceedings. So, too, will Jason Bedrick, though I have no idea what he’ll be eating if he’s dining at all. One can easily lose one’s appetite while witnessing political theater.

Here are the things I’m hoping to hear discussed:

  • Broadly speaking, what does DeVos think is the proper federal role in education? I know my—and the Constitution’s—answer.
  • What role, if any, should the federal government have in advancing school choice? For my answer, see the point above. And this. And this.
  • Does school choice work? Dems are likely to point to Michigan—DeVos’s home state—to answer “no.” In contrast, Jason and the Manhattan Institute’s Max Eden show that a fair reading of the Michigan research indicates the answer is “yes.”
  • President-elect Trump talked about getting rid of the Common Core. How would DeVos do that? Here’s what I think.
  • How should the Every Student Succeeds Act—the more hands-off successor to No Child Left Behind—be implemented? I say follow the spirit and letter of the law.
  • How do we get control of skyrocketing college prices, not to mention massive noncompletion? It is unclear what DeVos will say, but the evidence is powerful that Washington must do the opposite of what it has been doing.
  • What will be DeVos’s approach to for-profit colleges? I hope she’ll put them in the full higher education context.
  • What is the federal role in enforcing civil rights? My answer here.
  • Finally, won’t school choice—educational freedom—destroy the “cornerstone” of democracy, or America, or something else equally foundational? The answer—despite decades of rhetoric—is crystal clear: Quite the opposite.

There could be a lot of substance to chew on if the hearings stick to issues and not political theatrics. But if we mainly get the latter, at least I’ll have my frozen Salisbury steak, or some other grub, on which to chew.

In what follows, I update my annual Misery Index calculations. A Misery Index was first constructed by economist Art Okun as a way to provide President Lyndon Johnson with a snapshot of the economy. 

The original Misery Index was just a simple sum of a nation’s annual inflation rate and its unemployment rate. The Misery Index has been modified several times, first by Robert Barro of Harvard and then by myself. My modified Misery Index is the sum of the unemployment, inflation, and bank lending rates, minus the percentage change in real GDP per capita. A higher Misery Index score reflects higher levels of “misery,” and it’s a simple enough metric that a busy president without time for extensive economic briefings can understand at a glance.

Below is the 2016 Misery Index table. For consistency and comparability, all data come from the Economist Intelligence Unit (EIU).

Venezuela holds the inglorious spot of most miserable country for 2016, as it did in 2015. The failures of the socialist, corrupt petroleum state have been well documented over the past year, including when Venezuela became the 57th instance of hyperinflation in the world.

Argentina holds down the second most miserable rank, and the reasons aren’t too hard to uncover. After the socialist Kirchner years, Argentina is transitioning away from the economy-wracking Kirchner policies, but many problematic residues can still be found in Argentina’s underlying economic framework.

Brazil, at number 3, is a hotbed of corruption and incompetence, as the recent impeachment of Brazilian President Dilma Rousseff indicates. It’s similar in South Africa, at number 4, where corruption runs to the very highest office. President Zuma of South Africa just recently survived impeachment after the Constitutional Court unanimously decided that Zuma failed to uphold the country’s constitution.

Egypt, ranked fifth most miserable, is mired in exchange controls, a thriving Egyptian pound black market, and military-socialist rule. However, Egypt is likely suffering even more than this table indicates, as the EIU’s inflation estimate for Egypt (17.8 percent) is far off from the Johns Hopkins-Cato Institute Troubled Currencies Project, which I direct, estimate of 150.7 percent.

Next, with a Misery Index score of 36.0, is Ukraine, a country still feeling the effects of the highly-publicized civil war that began three years ago. With a civil war and endemic corruption, it comes as a shock to no one that Ukrainians are miserable?

Azerbaijan is plagued by corruption, fraud, and incompetence, and currency devaluations are commonplace – the manat has been devalued twice since 2015, losing 57 percent of its value against the dollar. This weakness in the currency markets makes it difficult to do business, and the Azerbaijani economy has faltered as a result.

Turkey faces a despotic leader in Islamist Erdogan, who devotes all of his resources to staying in power rather than governing the state, leading to a strongly depreciating currency and a populous mired in fear. The Turkish lira has lost over 24 percent of its value against the dollar in the last year, and the economy is in the process of spontaneously dollarizing. Not surprisingly, Turkey is a member of the Fragile Five, which also include Brazil, India, Indonesia, and South Africa.

The reasons for Iran’s rank on this list are almost too obvious and plentiful to enumerate, but it’s safe to say that a combination of corruption, incompetence, theocratic-authoritarian rule, and more have led to its state of misery.

Rounding out the ten most miserable countries is Colombia. The Colombian government has been so preoccupied negotiating peace talks with the rebel FARC group that the economy has been neglected, causing interest rates to spike as the economy stands still.

On the other end of the table one finds Japan with the low score of 0.4. Japan’s low misery is not the result of high GDP per capita growth (Japan’s figure is only 0.7 percent), unlike most other countries at the bottom. Instead, it’s Japan’s -3.5 percent inflation rate that drives the score down. China is the next best, with the second-least miserable score of 4.5, almost entirely due to its high (6.3 percent) GDP per capita growth rate.

Also of note on this list is the United States. In President Obama’s final year in office, the United States ranked lower than Slovakia, Romania, Hungary, China, and even Vietnam. What a legacy.

Last week the Supreme Court heard oral arguments in Expressions Hair Design v. Schneiderman—an important First Amendment case in which Cato filed an amicus brief—challenging a New York law that allows merchants to advertise “discounts” for paying cash, but makes it illegal to tell their customers that they’re charging an economically equivalent “surcharge” for using a credit card. More simply, the New York legislature was lobbied by credit-card companies to abridge the rights of merchants to convey—and the right of people to receive—information about how prices are structured in the marketplace.  

During the argument, Justice Stephen Breyer invoked a familiar trope when he opined: “We are diving headlong into an area called price regulation. It is a form of price regulation, and price regulation goes on all over the place in regulatory agencies. And so the word that I fear begins with an “L” and ends with an “R”; it’s called Lochner. And there we go.”

Lochner v. New York (1905) involved the Fourteenth Amendment rights of bakers to contract with their employers regarding working hours, and whether the state could restrict those contractual relationships. Unionized bakers had lobbied the New York legislature to put certain conditions on employment that favored bigger bakeries as against upstart immigrant entrepreneurs. The established bakeries could afford to employ more people to keep their shops running for the long hours required in that industry. The Supreme Court recognized the cronyism involved and struck down the law as violating economic liberty.

Lochner became discredited under the New Deal as improper judicial interference with legislative authority. It continues to be seen in progressive and conservative circles alike as the consummate example of “judicial activism,” whereby judges substitute their policy judgment for that of the people’s elected representatives. To say the least, such criticism gets both the history and the law wrong. (For more on how the conservative call for “judicial restraint” is actually based on progressive legal theories, see Ilya Shapiro’s essay in National Affairs.)

So is Justice Breyer really worried that protecting the First Amendment rights of merchants and customers is akin to the states’ ability to regulate the working conditions for bakers in the early 1900s? Lochner had nothing to do with the First Amendment, but it has become a familiar tool for judges to use to advance the theory of judicial deference in cases they don’t like.

Broadly defined, judicial deference is the theory that judges should be restrained when reviewing legislation passed by majorities. This practice is a product of the Progressive-era idea that democracy is the touchstone of our republic, and that people get their rights at the polls. This view, however, goes against our Founding ideal that preservation of liberty is the ends for which we have delegated the government limited powers—and that the judiciary is the branch that should assure that majorities are staying within their bounds.

James Madison made it clear that majorities are dangerous in Federalist 10. He argued that one of the most basic threats to liberty was the ability of “factions” to come together to seek concentrated benefits from majorities through favorable legislation and regulation, rather than competing in the marketplace. The Court in Lochner recognized these dangers when striking down the arbitrary legislation involved, and it has therefore become a symbol of anti-democratic values for progressives who advocate for deference to legislatures.

But even the progressive foundation for judicial deference has its limits. Indeed, the New Deal case United States v. Carolene Products (1938)—the root of the modern presumption of constitutionality of most statutes—explicitly carved out exceptions. In that case’s famous (or infamous) footnote 4, the Supreme Court indicated that this presumption would not apply to certain categories of legislation, including those that run afoul of the First Amendment. And just because a law may have some connection to economics, does not mean that judges should ignore the Constitution when a state has abridged the right of the people to speak freely.

This is not the first time Justice Breyer has used a “parade of horribles” argument when a state legislature has violated the First Amendment. In Sorrell v. IMS Health (2011)—a case in which the Court ruled 6-3 that a Vermont law restricting the sale, disclosure, and use of records revealing the prescribing practices of individual doctors was an unconstitutional speech restriction—Breyer writing in dissent warned: “At best the Court opens a Pandora’s Box of First Amendment challenges to many ordinary regulatory practices that may only incidentally affect a commercial message. At worst, it re-awakens Lochner’s pre-New Deal threat of substituting judicial for democratic decisionmaking where ordinary economic regulation is at issue.”

Justice Oliver Wendell Holmes’s dissent in Lochner denigrated the majority for deciding the case “upon an economic theory which a large part of the country does not entertain”—implying that the Court was invoking laissez-faire ideology to enact “Mr. Herbert Spencer’s Social Statics.” In response to Justice Breyer’s concerns in Sorrell, Justice Kennedy noted that while “[t]he Constitution ‘does not enact Mr. Herbert Spencer’s Social Statics[,]’ [i]t does enact the First Amendment.”

Let’s hope that the Court majority sticks to that principle in Expressions Hair Design and similarly rebuffs Breyer’s bogeyman.

Jason Richwine just blogged about my recent Mariel Boatlift post that confirmed George Borjas’ finding of wage increases for those with only a high school degree in post-Mariel Miami.  George Borjas understood my quick extension of his research.  Below are some of Richwine’s points and my quick responses. 

“The point is not especially interesting, since the standard immigration narrative has always been that efficiency gains come at the expense of the natives with whom immigrants most directly compete – high school dropouts, in the case of Mariel.”

It’s important to identify which skill-group of Miamians could have benefited from the Boatlift.  George Borjas pointed out in his report for the Center for Immigration Studies:  “Economic theory predicts that immigration will redistribute income by lowering the wages of competing American workers and increasing the wages of complementary American workers as well as profits for business owners and other “users” of immigrant labor.”  Borjas focused on the benefits for business owners and other “users” of immigrant labor in that paper. 

Although he argues that dropouts and workers with only a high school degree are not substitutes, he doesn’t provide evidence of potential complementarity.  In at least the Mariel case, there is some evidence of that.  My post shifts the narrative from “only businesses and the rich gain from low-skilled immigration” to “the real beneficiaries could be a much larger pool of workers who actually bothered to finish high school.”  That matters. 

Furthermore, if “efficiency gains come at the expense of natives with whom immigrants most directly compete,” then who gains in Richwine’s analysis?  The cross-skill wage elasticities for those above a high school degree are not statistically significant.  They are for workers with only a high school degree according to Table 4 in this paper by Borjas and Joan Monras.  My Mariel post is perfectly consistent with those findings. 

“But it would have been simple to determine the HS-and-below impact directly from the Borjas and Monras paper: Just take a weighted average of the dropout and graduate wage effects reported in their Table 4.  Doing that yields a negative number that does not reach statistical significance.”

I didn’t work backward from Borjas and Monras because they ended their analysis in 1984.  Using 1984 in my post would have unfairly biased my results against Borjas’ findings in his Mariel paper.  I chose 1986 because wages for dropouts were at their nadir in that year and to be consistent with Borjas’ Mariel paper. 

Furthermore, Richwine’s point that combining wages for dropouts and high school only workers yields a result that is statistically insignificant shows yet again that high school graduate wages increased to outweigh the negative wage effects on dropouts.  I don’t think Richwine intended to neutralize Borjas’ findings in exactly that way.    

“Overall, Nowrasteh frames his argument as the following: Borjas may or may not be right about Mariel lowering the wages of dropouts, but if he is, then we must also conclude that Mariel raised the wages of dropouts and high-school-only natives put together. The argument doesn’t work. Across several different methodological scenarios that do not alter Borjas’s conclusion, Nowrasteh’s numbers – both his own and those of economists who previously studied the same question – do not tell a consistent story. His claim that accepting Borjas requires accepting that HS-and-below natives benefited from Mariel is therefore unconvincing.”

Those who swooned over Professor Borjas’ Mariel paper have consistently failed to note the increase in wages for high school graduates that Borjas and Monras discovered.  To quote their paper:

“As before, the estimated own wage effect is negative and significant, with a wage elasticity of about -0.9. Similarly, the estimate of the own employment effect is not distinguishable from zero.  The analysis, however, shows that the cross effects are numerically important.  Although the supply shock of the predominantly low-skill Marielitos lowered the wage of high school dropouts, it raised the wage of workers with a high school education, and this effect is both numerically and statistically significant. The cross-wage elasticity is about +0.7.  In addition, the unemployment rate of workers with more than a high school diploma also fell significantly [Emphasis added].”

That such dramatically different findings can result from such minor changes in methodology weakens all of the research on this topic – including mine.  Reading the work by Card, Peri and Yasenov, Borjas, and Borjas and Monras, and then conducting my own replication and extension of their results has significantly weakened my confidence in any of these findings.  For instance, weekly earnings for Hispanic dropouts between the ages of 25 and 59 increased in Miami shortly after the Boatlift (Figure 1).  Hispanic dropouts should be the most substitutable for Marielitos but they’re not according to Borjas’ methods.  This graph would well fit into David Card’s research. 

Figure 1

Weekly Earnings for Hispanic Dropouts Age 25-59

 

 

It’s baffling how anybody can replicate these findings, look at these graphs, and maintain their confidence in this research. 

This week the Cato Daily Podcast (Subscribe!) focuses on the importance of trade as the Trump Administration arrives next week. Here’s a quick rundown.

Monday:

Daniel J. Ikenson and Daniel J. Mitchell discusses the backgrounds and new roles for Trump’s “protectionist triumvirate” of Wilbur Ross, Peter Navarro, and Robert Lighthizer.

Tuesday:

Simon Lester discusses the potential fallout of President-elect Trump’s taking to Twitter to threaten companies like Carrier, Ford, Toyota, and General Motors.

Wednesday:

Daniel R. Pearson discusses how multinational corporations make location decisions. For all the handwringing over cheap labor outside the United States, Pearson notes that American workers are far more productive than workers in lower-wage countries. He adds that the savings from lower-priced inputs like steel could contribute substantially to a firm’s decision to increase production outside the United States.

Thursday:

Daniel J. Ikenson makes a sobering assessment of the Presidential powers governing trade. As it has in many other areas, Congress has delegated many powers governing trade to the executive branch.

Friday:

Daniel J. Mitchell and Daniel J. Ikenson discuss the so-called “border adjustment tax” included in a House tax reform a Congressional attempt to head off attempts to restrict trade. Depending on your perspective, the border adjustment tax could be a poison pill for tax reform or an effort to level the playing field in international trade, or both.

Please susbscribe to the Cato Daily Podcast.

President Obama is abandoning America’s five decade-old policy on asylum seekers that guarantees Cubans asylum in the United States. The change comes at a time when more Cubans will have arrived at U.S. borders than at any time since 1980, and it is a major win for the Cuban regime and opponents of immigration, both of which oppose Cuban immigration to the United States. But the sudden reversal is bad policy that will harm efforts to secure the border and aid the regime most hostile to human rights in the Western Hemisphere.

In 1966, Congress passed the Cuban Adjustment Act (CAA), which grants lawful permanent residency to any Cuban national who has resided in the United States for at least two years (later lowered to one). Each of the last eight administrations has interpreted the law to allow almost all Cubans who arrive at U.S. borders to apply for “parole”—a discretionary legal status that permits them to enter and wait a year to receive a green card to stay permanently.

This system has served the United States extraordinarily well. Because Cubans who enter illegally cannot apply for a green card, border security is enhanced as they never try to sneak past Border Patrol. Instead, they just line up and turn themselves in at a port of entry. They show their Cuban passports, receive background checks, and then are admitted. The United States has very few unauthorized immigrants from Cuba precisely because all Cuban immigrants who make it into the country are paroled and adjusted to legal permanent residency.

America—and specifically Miami—has benefited enormously both economically and culturally from the presence of Cuban immigrants. After the Mariel boatlift that initially brought about 125,000 refugees to Florida, Miami’s population has grown much faster than other cities. Despite often arriving destitute, U.S. Cubans today have achieved the same median income as all Hispanics and actually have the highest rate of home ownership. The Kauffman foundation ranked Miami in the top two cities in the entire country for entrepreneurship in 2016, driven in part by its large immigrant population. Miami also has the best ranking in the state for upward mobility.

Most importantly, U.S. immigration policy has allowed 10 percent of all Cubans to escape the most tyrannical regime in the hemisphere. This policy is a direct assault on a regime that preys on its own people, and for this reason, the regime has repeatedly condemned it. President Obama said that the United States will now treat “Cuban migrants the same way we treat migrants from other countries.” But Cuba is not like all other countries. It is the only dictatorship on America’s side of the world. As I wrote in the Miami Herald last year:

The basic principle that people should not be treated differently based on national origin is valid, but Cubans receive special treatment not due to where they are from, but due to how they are treated where they are from. Cubans aren’t treated uniquely because they are Cubans, but because, according to Freedom House, Cuba is the only “unfree” country in the Western Hemisphere.

The communist system has no electoral process, political dissent is a criminal offense, corruption is rampant, independent media is banned, and all forms of everyday activities are regulated, including internal movement. Cuba is the 12th most unfree country in the world. It is less free than Iran and South Sudan. Even communist China received a higher score. No other country in the Americas comes close. In 2015, the pretend socialists in Venezuela were still 50th and ranked “partly free.” Haiti and Honduras came in at 57th and 62nd respectively. This is why Cubans are singled out.

Congress stated in 1996 that the law would end when “a democratically elected government in Cuba is in power.” As long as Cuba remains unfree, America will continue to welcome Cubans. Rather than repeal this principle, Congress should expand it to any country in our part of the world that is unfree. 

The fact remains, however, that President Obama cannot end the Cuban Adjustment Act (CAA) itself, which guarantees permanent residency after one year to any Cuban who legally entered the United States. Because the normal asylum system is so backlogged, this change could result in Cubans filing asylum claims under the normal system, as Central Americans do, and waiting in line for a year before applying for a green card under the CAA as they always have. Ultimately, this could dilute the impact of the policy shift.

Nonetheless, the current asylum system, which is already massively backlogged, will only grow more so as a result. At a time when a record number of asylum seekers from Central America are coming to the border, the United States is going to throw the Cuban refugees in with the rest, making a dysfunctional system that much more broken. It will also increase illegal immigration as Cubans will know that they can no longer be guaranteed admission, and those who believe that they will have their asylum claims quickly dismissed will seek illicit means of entry.

Some people claim that the only reason that so many immigrants are coming right now is that they fear that the administration would do exactly what it has just done by changing the law. But the fact is that the rise in Cuban arrivals in recent years started before President Obama announced any changes in Cuban policy. Its true causes are 1) the Cuban regime’s relentless assault on human rights, and 2) its decision to end restrictions on travelling abroad, which has led many oppressed Cubans to seize the chance to leave.

Despite President Obama’s hopeful message after the death of Fidel Castro, the Cuban government continues its oppressive policies. Nearly 10,000 people were arbitrarily arrested in 2016 alone, and there was a particularly large surge of arrests after Castro’s death, demonstrating that his death means little.

Donald Trump, whose statement condemning the Cuban dictator after his death had more moral clarity than any single statement that the president-elect has ever made, should immediately reverse this policy upon assuming office. The United States should honor its commitment to remain open for as long as the electoral process in Cuba remains closed to the Cuban people.

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

A new paper has been published in the journal Geophysical Research Letters that examines trends in heavy rainfall amounts across the U.S. The paper is authored by Newcastle University’s Renaud Barbero and colleagues, and, to summarize, finds that the heaviest rainfall events of the year have been increasing in magnitude since 1951 when averaged across nearly 500 stations distributed across the U.S. (note: results from individual stations may differ from the general finding).

Someone with a critical eye might ask the real question, which is “how much?” That such a number does not jump out of this paper—a cynic would say—probably means it is very small. Read on and you will find the answer.

That rainfall on the rainiest day of the year is increasing is, of itself, hardly surprising considering that the total annual rainfall amount averaged across the U.S. has also been increasing during this same period (again, results from individual locations/regions may (and do) depart from this generality).

Changes in heavy rainfall like this are often luridly described as a “disproportionate increase” in extreme events, or that extreme precipitation increases are “worse than expected.”

This is not the case—or at least wasn’t the case when we published a paper in the International Journal of Climatology on this very subject back in 2004. In that paper we found the same thing that Barbero and colleagues found with regards to the heaviest daily rainfall events of each year—they were getting heavier. But, we were careful to note, that so too was the total yearly rainfall, and as a result, the increase of the heaviest daily rainfall events was completely proportional to the increase in annual rainfall increase. In other words, the increase on the wettest day each year was neither “disproportionate” nor “worse than expected.”

In fact, this result was not a surprise at all. It’s basic climatology.

Let’s have a look, and while we’re at it, we’ll update our old analysis (which ended with data from 2001) with data available from a new “extremes” dataset which runs through 2010.

The “extremes” data set we’ll use is the one compiled by Markus Donat and colleagues and includes gridded data (3.75° longitude x 2.5° latitude grid) on annual daily rainfall extremes as well as data on annual total rainfall. This data is available using this handy on-line tool. We selected the region of interest as shown in Figure 1.

Figure 1. Study area used in this analysis.

Now, let’s look at the relationship between total annual rainfall and daily maximum rainfall for each year, averaged across the gridcells contained in our study area, as shown in Figure 2. Years with more total rain also have more rainfall on the wettest day of the year. This is no different during the first half of the 20th century (1901-1950; blue points) than it has been in the time since (1951-2010; red points). Any human-caused climate change (which should be more evident in the latter period) hasn’t led to a change in this general climatological relationship.

Figure 2. The average of the annual total precipitation (across the grids in the boxed area in Figure 1) plotted against the average of the annual daily maximum precipitation for two different time periods.

Let’s dig in a bit further. In Figure 3a (top) we plot the amount of precipitation falling during the wettest day of the year averaged across our study area. The data run from 1901-2010 and show a small, but statistically significant increase. Figure 3b (middle) shows the average total annual precipitation over the same period. Again, a slight and significant increase. And finally, Figure 3c (bottom) shows that the proportion of annual precipitation delivered during the wettest day of the year (Figure 3a divided by Figure 3b) exhibits no overall trend. In other words, the relationship between total rain and heavy rain remains unchanged. Each of these precipitation histories shows a good bit of temporal variation. If human-caused climate change is playing a role here, it is neither readily discernible nor resulting in unusual behavior.

Figure 3. (a, top) The daily precipitation on the wettest day of the year averaged across the region depicted in Figure 1, 1901-2010; (b, middle) The total annual precipitation averaged across the region depicted in Figure 1, 1901-2010; (c, bottom) the proportion of total annual precipitation delivered during the wettest day of the year, 1901-2010.

From Figure 3a we can also see the actual increase in the amount of rainfall falling on the rainiest day of the year. It’s just a tad more than one-tenth of an inch. We submit that that isn’t “extreme,” “disproportionate” or even “consequential.” It’s just a very small number. To emphasize to the point of ridiculousness, hold your thumb and index finger a tenth of an inch apart and imagine the horrific damage that this increase in rain must cause!

In fact, if global warming has a hand in increasing annual precipitation totals, this would seem as a good thing (positive externality) considering the anticipated increase in water-use demand. According to a recent report from the Pacific Institute on our nation’s water-use trends:

We conclude that considerable progress has been made in managing the nation’s water — but the current pace is not likely to counter the demands of continued population and economic growth, climate change, and increasing tensions over scarce water resources. National water use remains high, and many freshwater systems are under stress from overuse. While there is reason to believe this may be changing, we must continue efforts to improve water-use efficiency in our homes, businesses, and on our nation’s farms.

All of this confirms that our original finding from 2004 continues to remain valid and thus our conclusions from that paper are worth repeating:

Our results support the contention that, where changes are significant, there is an increase in the amount of rain occurring on heavy rain days. However, our results provide no support for the argument that the increase in total annual rainfall observed across the USA is disproportionately occurring on the wettest days — a contention that may have arisen from methodological constraints rather than true changes in the nature of precipitation delivery…

Our results argue strongly that the increase in rainfall in the coterminous 48 states that has been observed in the last 100 years has not resulted in any systematic disproportion in the percentage of that increase allocated to the heaviest rain days.

But then, as is the case now, the actual amount of the increase is so small as to be operationally meaningless, even if it were caused by emissions of dreaded carbon dioxide (a hypothesis that is rather difficult to prove).  The same holds true for the large majority of other impacts from anthropogenic climate change—despite what you may read in the other media outlets.

 

References:

Barbero, R., H. J. Fowler, G. Lenderink, and S. Blenkinsop, 2016. Is the intensification of precipitation extremes better detected at hourly than daily resolutions? Geophysical Research Letters, doi: 10.1002/2016GL071917.

Donat, M. G., et el., 2013. Updated analysis of temperature and precipitation extremes indices since the beginning of the twentieth century: The HadEX2 dataset. Journal of Geophysical Research-Atmospheres, 118, 1-16, doi: 10.1002/jgrd.50150.

Michaels, P. J., P. C. Knappenberger, O. W. Frauenfeld, and R. E. Davis, 2004. Trends in precipitation on the wettest days of the yeas across the contiguous USA. International Journal of Climatology, 24, 1873-1882, doi: 10.1002/joc.1102.

China’s first and only aircraft carrier, the Liaoning, recently passed through the Taiwan Strait after conducting exercises in the South China Sea. Initial reporting and commentary on the transit paint a pretty dire picture. In The New York Times Bonnie Glaser of the Center for Strategic and International Studies called the transit “a show of force” that may be seen “as a test of U.S. resolve” by the incoming Trump administration. The BBC called the transit “the latest escalation amid tensions” between China and Taiwan, and Camila Domonoske’s story at NPR called it “a provocative move.”

Such coverage of the Liaoning’s transit is emblematic of the high degree of attention paid to China’s military exercises, but it also is emblematic of a tendency to read too much into these exercises.

Military exercises involving Chinese air and naval forces have received a lot of focus in recent months. The Liaoning’s first live-fire exercises in mid-December 2016 received a good deal of coverage. Earlier that month, China flew a “nuclear-capable” H-6 bomber aircraft over the South China Sea. In September, the South China Sea played host to Russian and Chinese naval forces participating in a joint naval exercise.

These exercises stir up plenty of angst within the China-watching community over Beijing’s strategic intentions, and are often used to portray China as a dangerous actor. Framing military exercises as signaling tools is not a bad thing, and such analysis can provide useful information about state behavior. However, the reaction to the Liaoning’s transit of the Taiwan Strait and other recent Chinese exercises demonstrates the limitations of this approach.

For example, while the Liaoning was in the Taiwan Strait it stayed to the west of the strait’s midline and (as of yet) there is no evidence that it launched fighter aircraft during its transit or even had aircraft on the flight deck while it passed through the strait. Such behavior is consistent with the Liaoning’s previous transit of the strait in late 2013. The timing of the transit, coming around a month after Trump’s phone call with Taiwan’s president and hints at dropping the One China policy, bolsters the perception of the exercise as a signal. However, given the recent transit’s similarity to the 2013 transit, it is not obvious that China is trying to signal a challenge to Taiwan or Trump beyond the longstanding military challenge it has posed to Taiwan. If the carrier traveled to the east of the strait’s midline or scrambled aircraft then an intimidating signal would be obvious, but behaving in a consistent way suggests continuity in China’s approach rather than reactionary behavior in response to recent events. Therefore, interpreting the Liaoning’s recent transit of the Taiwan Strait as a signal of intimidation or test of American resolve is problematic.

Analysts should keep an eye on Chinese military exercises and movements in East Asia, but they should not put each instance under a microscope looking for a signal. Instead, analysts ought to look at the character of the exercises and movements over time to identify consistencies and deviations. This is where the most valuable signaling information exists. Consistent behavior signals a degree of stability, while deviations signal a change in Beijing’s calculus that could either be a one-off response or become a “new normal” in their behavior.

Divining deeper political or strategic intentions from military exercises has utility, but it is important to remember that such analysis is fraught with difficulties and is an imperfect approach. The tendency to interpret every exercise or movement as a signal of aggression or intimidation can lead to overreaction and inadvertent escalation. Looking at exercises over a long-term period and teasing out consistent behavior and deviations would provide much more useful information on the signals that China is trying to send. 

Some on the left are still blasting judges as activist for standing up to Obama administration assertions of executive power in the regulatory sphere. That might prove shortsighted considering what’s on the agenda for the next four years, or so I argue in a recent piece in the Providence Journal (alternate version).

I take particular exception to a Bloomberg View column in which Noah Feldman, professor at Harvard Law, assails federal district judge Amos Mazzant III for enjoining the Department of Labor’s overtime rule for mid-level employees. In a gratuitous personal jab, Feldman raises the question of “whether Mazzant sees an opportunity for judicial advancement with this anti-regulatory judgment” in light of the election results, though he offers not a particle of evidence that the judge, an Obama appointee, is angling for higher appointment under the new administration.

The problems with the overtime rule were both substantive and procedural. As I mention in the piece, “more than 145 charitable nonprofits signed a letter begging the department to allow more than a 60-day public comment period. It refused.” That letter is here (via, see Aug. 5, 2015 entry). I also mention that a court recently struck down the Department of Labor’s very bad “persuader rule” that would have regulated management-side lawyers and consultants.

After pointing out that many of the rulings restraining the Obama administration have been written or joined by Democratic-appointed judges, I go on to say:

Judges rule all the time against the partisan side that appointed them.

And we’ll be glad of that when the Trump executive orders and regulations begin to hit, and Republican-appointed federal judges are asked to restrain a Republican White House, as they have often done in the past.

We should be celebrating an energetic judiciary that shows a watchful spirit against the encroachments of presidential power.

Read the full piece here or here [cross-posted from Overlawyered]

Yesterday in this space Gene Healy previewed last night’s farewell speech by President Barack Obama before an arena of supporters in Chicago’s McCormick Place. I wrote up my own reaction to the address for the National Interest and the results are here. The speech had little policy and less law in it, but the President did take up some themes of national unity and not demonizing opponents that – timed as they are amid confirmation season – may turn out to have a short shelf life.   

As I note, “Obama’s words have always held broader appeal than his policies.” And this President shows at best limited self-awareness of why his initiatives have met with so much opposition, as on topics of economic intervention: “his administration’s implacably pro-union policies, along with its many new mandates on employers and heavy regulatory hand in general, played a key role in driving business-oriented voters home to the Republican Party in recent elections.”

In his post-Presidency Obama plans to take up the worthy cause of redistricting reform, where I am cautiously optimistic he may do some good. And I also liked the passage in which he lauded the Founders’ “essential spirit of innovation and practical problem-solving,” a spirit

born of the Enlightenment, that made us an economic powerhouse – the spirit that took flight at Kitty Hawk and Cape Canaveral, the spirit that cures disease and put a computer in every pocket.

It’s that spirit – a faith in reason, and enterprise, and the primacy of right over might, that allowed us to resist the lure of fascism and tyranny during the Great Depression, and build a post-World War II order with other democracies, an order based not just on military power or national affiliations but on principles – the rule of law, human rights, freedoms of religion, speech, assembly, and an independent press.

That order is now being challenged – first by violent fanatics who claim to speak for Islam; more recently by autocrats in foreign capitals who see free markets, open democracies, and civil society itself as a threat to their power.

With perhaps a word or two changed here or there, that’s a passage I would have been happy to write myself. I hope it augurs well for his public service as a former President. Read the whole thing here.

Becoming an EMT in Missouri requires 144 hours of training, including instruction in CPR, trauma care, handling hazardous materials, and medical ethics. But Ndioba “Joba” Niang and Tameka Stigers don’t want to be EMTs. They both want to run salons offering traditional African-style hair braiding. Braiding hair, however, requires at minimum 1000 hours of training, 90 percent of which isn’t even generally relevant to African-style hair braiding.

That’s because the Missouri Board of Cosmetology and Barber Examiners (an administrative board made up primarily of practicing barbers and cosmetologists, as well as the owners of in-state cosmetology/barbering schools) has declared that anyone wanting to braid hair professionally must be a licensed cosmetologist or barber—despite the fact that neither licensing program offers any training whatsoever in the services Niang and Stigers intend to offer. Defended as necessary to protect Missouri’s consumers from the health, safety, and fraud risks caused by untrained hair braiders, this licensing regime is actually a thinly disguised cartel in which insiders have built up arbitrary and expensive licensing requirements in an effort to limit competition.

It is for this reason that Niang and Stigers, with the assistance of the good people at the Institute for Justice, have filed suit challenging Missouri’s licensing regime as a violation of the Fourteenth Amendment’s Due Process and Equal Protection clauses. A federal district court upheld the licensing regime, using an extremely deferential form of judicial review that requires judges to blindly accept the government’s justifications of its actions, and even supply their own if they don’t find the government’s compelling enough. Under that form of review, as long as there is any potentially conceivable “rational basis” for the law, courts will not strike it down.

Cato, joined by the Reason Foundation, Individual Rights Foundation, and Senator Rand Paul (R-KY), has filed an amicus brief urging the U.S. Court of Appeals for the Eighth Circuit to reverse the district court and reject its rubber-stamp approach to the core judicial function of keeping the other two branches in check. The district court’s application of the rational basis test undermines the constitutional guarantee of procedural due process by denying plaintiffs both the right to a meaningful opportunity to be heard and to have their case judged by an impartial tribunal.

Deprivations of economic liberty require meaningful judicial scrutiny that actively engages with the facts of the case without putting a finger on the scales in favor of the government. As the Supreme Court has held in other contexts, meaningful scrutiny is especially important in situations like this one, where there are strong indications that the government’s proffered justifications are just pretextual smokescreens for illegitimate anti-competitive cartel behavior—and when the victims of the regulations lack sufficient numbers and resources to overcome the cartel through political means.

In Niang v. Carroll, the Eighth Circuit should reverse the lower court because Missouri’s licensing scheme for traditional African hair braiders isn’t rationally related to any legitimate governmental purpose.

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