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Friday afternoon, US Secretary of Commerce Wilbur Ross announced a new White House Executive Order to study “violations and abuses” of US trade agreements. The EO itself is hardly remarkable – President Trump’s first 100 Days have featured numerous executive demands for studies, investigations and reports on various international trade issues (without any actual anti-trade actions, so far) – but what was remarkable was the substance of Ross’ speech itself, which appeared to be unaware of certain basic facts about US trade agreements. In this regard, Ross’ statements raise questions about not only the White House’s basic research competence, but also what they’ll eventually produce in their final “trade agreement abuses” report.

A full accounting of the errors and omissions in Ross’ press briefing is beyond the scope of this short blog post, but the four most basic are below. (My Cato colleague Simon Lester handles some of Ross’ confusion surrounding basic World Trade Organization rules and procedures in a separate blog post, so be sure to check that out too.)

ROSS: And as far as I can tell there has never been a systematic evaluation of what has been the impact of the WTO agreements on the country as an integrated whole.

Actually, the US government has produced dozens of studies on the impact of US trade agreements, including the WTO Agreements, over the last decade or so.  Indeed, just last year both the US International Trade Commission and Congressional Budget Office produced comprehensive reviews of how our trade agreements have affected the US economy as a whole, each finding that our trade agreements have produced small but significant net benefits for the US economy in terms of GDP, employment, wages and so forth.  Furthermore, the Government Accountability Office has repeatedly examined the specific issue of US trade agreement enforcement – see, for example: here, here and here – finding limited concerns, while the USDA has often examined the benefits of US trade agreements for the American farm sector.  I could go on, but I think you get the idea.

ROSS: But there are those problems that I mentioned, then there’s also the structural problem of the [WTO] dispute resolution mechanism.  Takes a very long time, and given the composition of the WTO panels, often we’re defeated when people come and appeal it.  Because if the people on the panel are mostly people who are doing the same thing as what you’re complaining about, it’s a little bit hard to get them to vote for you.

WTO dispute settlement does, indeed, suffer from delays – a problem brought about by high use and a staffing crunch – but it’s beyond a stretch to imply, as Ross does here, that it harbors some sort of institutional bias against the United States.  In fact, the United States is very successful in WTO dispute settlement –more so than most other Members.  As my colleague Dan Ikenson noted recently–

The “WTO” doesn’t file complaints at the WTO. WTO members do. And they do so when they are aggrieved and when they are as close as possible to 100% certain that they will prevail if the matter goes all the way through dispute settlement. As a result, complainants prevail almost all of the time – on 90% of adjudicated issues. When the United States has been a complainant (as it has in 114 of 522 WTO disputes over 22 years – more than any other WTO member) it has prevailed on 91% of adjudicated issues. When the United States is a respondent (as it has been in 129 cases – more than any other WTO member), it has lost on 89% of adjudicated issues.

Just as importantly, the United States’ win/loss records in dispute settlement are also good in comparison to other WTO Members.  According to a recent Bloomberg analysis, the United States actually wins more often than average and loses less often than average and has a far better “loss rate” (i.e., we successfully defend more often) than the EU, Japan and China.  Furthermore, the United States itself has a less-than-stellar record of non-compliance with the WTO Agreements and adverse WTO dispute settlement decisions.  How these hard numbers can possibly reflect, as Ross asserts, a “structural problem” with the WTO is beyond me.

ROSS: And I think that points out one of the issues with our current relationship with the World Trade, namely Mexico and others have had very big external tariffs on many, many goods.  U.S. is the least protectionist country.  Many goods come in totally free, and others have little, tiny tariffs, like 2.5 percent.  Countries like Mexico frequently have 15, 20 percent, even more than 20 percent tariffs.

By no conceivable measure is the United States “the least protectionist country” in the world. As I noted last fall, for example, “according to a recent analysis by Credit Suisse, when you add up all forms of trade barriers imposed between 1990 and 2013, the biggest protectionist in the world isn’t China or Mexico but none other than… the United States.”  This includes the 370+ protective duties – often over 100%! – through our trade remedy (antidumping and countervailing duty) laws and our “Buy American” rules for federal procurement – measures that the Trump administration has expressly targeted for expansion.  Even the United States’ basic tariff rates aren’t the world’s lowest – not even close, actually.  As Ramesh Ponnuru recently noted, “[t]he World Bank reports that we have higher average tariff rates than Canada, Israel, the European Union, Japan, and many other countries. Our average tariff level is just slightly below the developed-world average.”  (Using a different tariff metric, the WTO also finds that the United States is not the best.) We also are about average when it comes to restrictions on trade in services.

ROSS: What are some of the problems under WTO?  Its 160-some-odd countries are participants in the WTO, and the vast majority of those are countries that export to us, and in most cases, export more than they buy from us.

The Trump administration’s obsession with trade deficits and balanced trade is well-known at this point, so I won’t rehash all of that here.  Nevertheless, calling the US trade balance a “problem under the WTO” defies the most basic of economics.  In particular, I highly recommend this recent (very short!) explainer from the San Francisco Federal Reserve on what drives the US trade balance and whether trade deficits are really a “problem” per se.  (Spoiler: it’s not the WTO Agreements and no).

There are plenty of substantive questions surrounding the alleged “violation and abuse” of US trade agreements.  Of the top of my head: Are such violations and abuses really pervasive?  Do they actually harm the economy? Either way, what should we do about them? And, finally, is the United States really so innocent here? As such, an assessment of international trade agreement violations and abuses is, in theory, worthy of undertaking.  If the aforementioned errors are any indication, however, the result of the new US investigation won’t provide many good answers.

Congress passed the Fair Labor Standards Act (FLSA) in 1938 to regulate certain employment practices between employers and employees. In order to put the law into effect, Congress delegated authority to the Department of Labor (DOL) to enforce the statute’s provisions. It’s a fundamental legal principle, however, that an executive-branch agency may only regulate those provisions that Congress has actually put into its authorizing statute. Where Congress has not address a certain practice, the agency has no authority to regulate and the practice is presumptively legal.

Fast forward almost 80 years. E.I. Du Pont De Nemours and Co. (better known as DuPont), following standard industry practice, paid their employees for otherwise noncompensable meal breaks, using that compensation as credit towards the time employees spent performing certain work duties (especially “donning and duffing” special clothing and gear) before and after their shifts. The employees sued DuPont in federal court, arguing that the FLSA forbids this type of crediting and that they must be paid overtime pay for the donning/duffing time.

The district court disagreed, finding that the statute was silent about the practice and so DuPont had done nothing illegal under the FLSA. On appeal, the U.S. Court of Appeals for the Third Circuit invited DOL to file an amicus brief regarding whether DuPont had violated the law—essentially allowing it to regulate. DOL admitted in its brief that the FLSA was silent on the issue, but argue that the statute implicitly forbade the practice. The Third Circuit then adopted that view by granting DOL Skidmore deference (by which judges defer to agency interpretations according to their persuasiveness), and reversed the district court’s ruling.

Cato has now filed an amicus brief supporting DuPont’s petition for Supreme Court review. We argue that Third Circuit ignored the basic administrative-law and constitutional axiom that agencies can only exercise the powers delegated to them. Indeed, under Supreme Court separation-of-powers precedent, Congress must give executive agencies at least some “intelligible principle” to follow. The Third Circuit, however, would give any agency a virtually unlimited power to write any regulations it thinks a statute should cover, without any congressional authority.

Moreover, when the court accorded Skidmore deference to the DOL amicus brief, it violated DuPont’s due process rights for two reasons. First, this was the first time in the FLSA’s long history that DOL had ever interpreted the statute to forbid the practice at issue—and two other circuit courts had already ruled that the practice was legal—so DuPont was denied fair notice. Second, by inviting a nonparty government agency into the litigation and deferring to its view, the court decided the case with bias towards one of the parties before it.

The Supreme Court should take DuPont v. Smiley and explain that the Constitution’s separation of powers does not allow such judicial enabling of executive mischief. Administrative agencies simply cannot take it upon themselves to rewrite duly enacted legislation and then thrust their statutory revisions on private litigants for the first time in litigation.

Following Trump’s electoral success in rustbelt states, the spotlight has been on white, rural, post-industrial poverty. J.D. Vance, author of the now-famous memoir Hillbilly Elegy, discussed some possible explanations for rural poverty yesterday in a podcast. In the interview, he suggests that geographic (im)mobility is partly to blame for the erosion of areas like Appalachia: the poor simply aren’t migrating to jobs. 

Vance is right that Americans have limited interest in relocating, and are relocating less than before. According to calculations[1] using University of Chicago data, the proportion of individuals unwilling to relocate for work is high: 42% of Americans say they will not move within the United States for work, and 68% of Americans will not move outside the country for work. A full quarter (25%) of Americans would not consider traveling further for a job, even if the decision resulted in unemployment. Meanwhile, Census data suggests that relocation—whether inter-state, inter-county, or intra-county—is down (Figure 1). 2016 had the lowest relocation rate in seventy years (Figure 2).

Figure 1. Type of Move, 1948–2016

Figure 2: Number of Movers and Mover Rate, 1948–2016

 

Why are people relocating less than ever? One explanation Vance misses is that government policy gets in the way. For example, research provides evidence that land use regulations put pressure on housing prices in high-opportunity areas, which in turn eliminates the fiscal rewards of relocation for the poor and unskilled. Tragically, this means low-income Americans are trapped in job deserts with little in the way of opportunities, amenities, or hope.

You can listen to more of Vance’s interview regarding the causes of white, rural, post-industrial poverty, here.

[1] Author’s own.

Donald Trump’s first 100 days in office have set U.S. foreign policy on a dangerous course. Trump’s actions and rhetoric have raised the profile of America’s military power while weakening other sources of U.S. influence. Such an approach is in line with the “peace through strength” formula Trump espouses. However, the deepening militarization of U.S. foreign policy carries a host of risks and costs that may cause more headaches than victories.

The growing role of the military in U.S. foreign policy is not a new phenomenon. Barack Obama’s presidency was hardly peaceful. This was especially true in the Middle East, where the “light footprint” approach reduced the on-the-ground U.S. military presence but made extensive use of air power to conduct foreign policy by precision strike. However, Obama also spearheaded multilateral initiatives that relied on other sources of American power and influence, such as the Iran nuclear deal and the Trans Pacific Partnership (TPP). Not all of these initiatives were successful, but they demonstrate a foreign policy approach that places value on non-military tools.

Thus far into his presidency, Trump does not seem to share Obama’s appreciation for the value of non-military tools for dealing with foreign policy problems. One of Trump’s first executive orders withdrew the United States from the TPP, a key component of American economic engagement in East Asia. The TPP and a growing American military presence were the two key pillars of the Obama administration’s “pivot to Asia,” with the TPP emblematic of the softer side of U.S. policy. Granted, the TPP was not yet in force when Trump withdrew from it, which mitigates the diplomatic downside of withdrawal. But the loss of economic and diplomatic influence associated with withdrawing from the TPP leaves military power as the primary means for the administration to implement U.S. policy in East Asia. 

Greater reliance on U.S. military power in East Asia is already evident in the Trump administration’s policy toward North Korea. The administration wants to apply “maximum pressure” to Pyongyang in order force them to negotiate on Washington’s terms. As former defense official Van Jackson points out, this theory of victory depends heavily on U.S. military signaling and is more aggressive than previous administrations. Jackson argues, “the Trump administration appears to be a much more permissive—even enabling—environment for such coercive beliefs” due to “the prominence of the Pentagon in President Trump’s national security policy to date.”

Staring down North Korea through displays of military might and rhetoric hinting at military action fits with “peace through strength,” but probably won’t stop North Korea from testing new missiles or accepting the maximal conditions the United States has placed on negotiations.

Relying heavily on U.S. military power in matters of foreign policy is by no means exclusive to East Asia. Trump’s cruise missile strike against Assadspecial forces raid in Yemen, and loosening of the rules of engagement for counterterrorism missions point to a growing role for the U.S. military in Middle East policy. Recently, Trump said that Iran was “not living up to the spirit” of the nuclear deal, despite the fact that the State Department confirmed that Iran is complying with the deal. What the administration will do with the Iran deal remains uncertain, but the deepening militarization of U.S. foreign policy in the Middle East combined with a general hatred of the deal by President Trump point to growing tensions.

Fortunately there are things that Trump can do to rein in the militarization of U.S. foreign policy, if he is so inclined. Filling vacancies at State and Defense with civilian experts would provide additional, non-military voices in the policymaking process. These appointees may not be able to match the influence of the retired and active generals in Trump’s administration, but the current absence of civilian appointees ensures that the generals will heavily influence Trump’s foreign policy.

Congress could also fight back against the militarization of U.S. foreign policy through its control of the budget. Trump’s planned cuts to agencies like USAID and the State Department would devastate two non-military tools of U.S. influence. After the proposed cuts were announced, several prominent Republican senators spoke out in opposition. Congress could also demand that Trump obtain new authorizations for the use of military force if he wants to get the United States more directly involved in Yemen or Somalia.

The deepening militarization of U.S. foreign policy is Trump’s most worrisome “achievement” of his first 100 days. Valuing military power so highly over diplomatic and economic tools limits policy options and can make military conflict more likely, as peaceful avenues for resolution are shut down. Hopefully Trump will recognize that there are other tools at his disposal for conducting U.S. foreign policy, and the warlike first 100 days prove to be a fluke—and not the trend. 

The White House denounced a federal judge this week that enjoined the president’s executive order denying certain federal grants to sanctuary cities, and it raised the case of Kate Steinle to illustrate why sanctuary cities are such a problem. Almost two years ago, Steinle, a 32-year-old medical device sales rep from California, was shot and killed on a San Francisco pier. City police have charged an unauthorized immigrant named Juan Francisco Lopez-Sanchez who has confessed to killing her. Her death led Donald Trump to denounce sanctuary cities such as San Francisco and call for tougher border security and deportations. But in reality, the facts of this tragedy do not support these policies:

  • Lopez-Sanchez did not end up in San Francisco due to lax border security, and the case actually shows the opposite. In recent years, Border Patrol caught him each time he attempted to cross.
  • Lopez-Sanchez only ended up in the city because the Justice Department ignored an Immigration and Customs Enforcement (ICE) request to take custody. The department has since changed its policies.
  • ICE sent a request to the city to detain Lopez-Sanchez knowing that the city would only hold a person subject to a federal warrant. Yet ICE chose not to seek a warrant. Yet it has refused to change its policies.
  • San Francisco’s Sheriff’s Department could not legally hold Lopez-Sanchez who had no history of violence. Investigators have since shown that he was not trying to kill Steinle.
  • Lopez-Sanchez’s mental illness is the relevant cause of the tragedy, not his immigration status. Yet even after a federal judge instructed that he receive care, none was apparently provided.
  • This case is a tragic anomaly. Undocumented immigrants generally are half as likely as other people in the United States to commit these types of serious crimes.

Case highlights improving border security

Lopez-Sanchez is a Mexican national who had resided illegally in the United States on and off since at least 1991. In the early 1990s, he compiled various drug convictions in Arizona, Washington, and Oregon. Immediately following his conviction for imitation drugs in Oregon in June 1994, the federal government took custody and deported him to Mexico. A month later, he returned to Arizona and was arrested for violating his probation there. After the state released him, San Francisco arrested him for a $20 marijuana purchase charge, but he failed to appear in court, and seven months later, Washington convicted him of another felony drug charge. In April 1997, the federal government took custody and deported him again.

This period reflects the relative lack of border security in the 1990s. But after his first two deportations, he appears never again to have successfully snuck into the United States. After his deportation in 1997, Border Patrol agents apprehended and deported him in January 1998. They caught him again in February 1998 at which point he was imprisoned for felony illegal reentry until his fourth deportation in March 2003. In July 2003, Border Patrol apprehended him again, and he was imprisoned for felony reentry a second time until his fifth deportation in June 2009. Less than three months later, Border Patrol caught him a fourth time, and he was imprisoned until March 2015.

Thus, from 1997 to 2015, Lopez-Sanchez probably never crossed the U.S.-Mexico border without being caught. The case is hardly an example of the lack of border security. Indeed, he highlights the myth of border insecurity.

Case led to changes in federal prisoner policies

In March 2015, the Federal Bureau of Prisons (BOP) under the Department of Justice (DOJ) had custody of Lopez-Sanchez. DOJ told San Francisco that Lopez-Sanchez was due to be released, and San Francisco Sheriff’s Central Warrant Bureau sent a request to pick him up from the prison for prosecution of his 20-year-old marijuana charge. Lopez-Sanchez was arrested for his $20 marijuana buy in 1995. In 2006, the San Francisco Board of Supervisors made marijuana the “lowest enforcement priority” and called for the state to legalize it. By 2015, the sheriff’s department should have known that the city district attorney would decline to prosecute the 20-year-old marijuana charge.

DOJ could have referred Lopez-Sanchez to Immigration and Customs Enforcement (ICE) for deportation, but inexplicably, DOJ decided to honor the San Francisco request instead of a request from ICE that DOJ detain him for deportation. This is even stranger because DOJ never contacted San Francisco before Lopez-Sanchez’s three other deportations. On March 26, 2015, the transfer occurred, and DOJ sent an automated notice to ICE, which immediately sent a request to the city to detain him until they could pick him up, and the following day, the San Francisco Superior Court predictably dismissed the charges against him. San Francisco never should have sent the request, nor should DOJ have transferred him.

The DOJ decision was the only reason that Lopez-Sanchez came to San Francisco in 2015, not a lack of border security or insufficient interior enforcement. Attorney General Loretta Lynch announced in February 2016 that DOJ would no longer release individuals who may be deportable to localities without going through ICE first. In a letter, DOJ told the House Appropriations Committee, “Now, BOP offers ICE, instead of the states and municipalities, the first opportunity to take into custody and remove an individual.” This is appropriate because ICE is best able to assess the immigration implications of a transfer. Committee Chairman John Culberson responded by declaring, “Had that policy been in effect last summer Kate Steinle would still be alive.”

San Francisco’s policy was legal

In 2015, San Francisco’s Administrative Code prohibited “use of any city funds or resources to assist in the enforcement of federal immigration law or to gather or disseminate information regarding the immigration status of individuals” unless “such assistance is required by the federal or state statute, regulation, or court decision.” (Section 12H.2) That section has since been amended to change “immigration status” to “release status.” In a March 2015 memo, the Sheriff’s department interpreted the law to ban officers from providing “access to inmates in jail” or “release dates or times” to ICE unless the ICE request is supported by a court-issued warrant or a signed court order.

One big myth in this case is that San Francisco did not detain Lopez-Sanchez after it dismissed the marijuana charge. In fact, the city continued to hold him for nearly three weeks based, the Sheriff’s department claimed, on a confusion over whether his federal prison term was complete. It claimed that “federal transportation orders reflected two conflicting release dates.” This confusion is baffling because DOJ had literally just released him to San Francisco custody. In any case, during this time, it contacted DOJ to confirm that he had completed his federal prison time and was not the subject of any active warrants. Finally, on April 15, the Sheriff’s department released him without informing ICE.

Steinle’s family filed a wrongful death lawsuit against San Francisco for its decision not to inform ICE of Lopez-Sanchez’s release. A district court judge dismissed the claims against the city because it found, in part, that they did “not plausibly allege that Steinle‘s death resulted from a violation” of law. The only possibly relevant federal statute bans any policy that would prevent city employees from transmitting information regarding the immigration status of the individuals, not their release dates. “Given that ICE issued a detainer request for Lopez-Sanchez well before his release, there is no question that ICE was aware of Lopez-Sanchez‘s immigration status,” the court concluded. Thus, San Francisco could not have been in violation of the law.

Case highlights flawed ICE detainer policy

San Francisco has pointed to two court decisions on detainers that, if courts in San Francisco followed the same logic, could make the city liable for damages if it honored ICE detainers. First, a federal district court decision in Oregon found that ICE detainers cannot be the basis of further detention of a noncitizen and that the county violated the detainee’s Fourth Amendment rights by detaining her without probable cause. Second, in allowing a suit by a wrongfully detained U.S. citizen to proceed, the Court of Appeals for the Third Circuit has also found that “immigration detainers do not and cannot compel a state or local law enforcement agency to detain suspected aliens subject to removal.” The First Circuit issued a similar ruling on a preliminary manner a similar case.

In light of the fact that this area of law is so fraught—as a recent Congressional Research Service review found—San Francisco explicitly stated that it would honor any judicial warrant. In this case, ICE would have had no difficulty providing a judge with probable cause that Lopez-Sanchez was in the United States illegally if it had sought a warrant. Moreover, ICE already knew San Francisco’s policy—it had refused 98 percent of all ICE detainer requests the year before and the sheriff had met with ICE officials to tell them that it would not honor their detainers—yet the agency still chose not to seek a warrant in this case. The city held Lopez-Sanchez for three weeks after the initial detainer, so the agency cannot claim that it had insufficient time to seek a warrant.

ICE has simply chosen not to seek warrants because it believes it should not have to, even if they know that the person will be released. That was a mistake. Throughout the 19 days that Lopez-Sanchez was detained, as the judge in the Steinle lawsuit put it, “ICE took no further action to detain or deport Lopez-Sanchez other than issuing the detainer request.” Unlike DOJ, ICE has still not altered its policies in response to the Steinle death.

Killer’s mental health is more relevant than his criminal history or immigration status

When San Francisco released Lopez-Sanchez, he had no history of violence. His earlier convictions were nonviolent drug offenses, and his only offenses in almost two decades were immigration violations. While Lopez-Sanchez is a clearly unstable person, he was not a serious criminal. His first conviction was for huffing toxic chemicals. He then attempted to sell heroin and was caught in less than a month. Then he was convicted for selling fake drugs. After each of his last three deportations, he was almost immediately caught at the border. Neither the city nor the federal government had any reasonable basis for concluding that Lopez-Sanchez posed a threat to anyone other than himself.

The White House’s statement claims that Lopez-Sanchez “gunned down innocent Kate Steinle.” But the public facts indicate that the shooting was an accident. Lopez-Sanchez claims to have found the gun, which was stolen, and to have taken sleeping pills and been shooting at sea lions. Witnesses observed him “acting bizarrely” before the shooting, and investigators determined that the gun was “clearly aimed at the ground,” and the bullet ricocheted off the pavement and travelled at least 90 feet before hitting Steinle.

Lopez-Sanchez’s mental health is much more relevant than his criminal history or his immigration status. Indeed, a federal judge who sentenced him recommended that the government send him to “a federal medical facility as soon as possible.” That apparently never happened.

Undocumented immigrants do not increase crime

The key question is whether states and localities should—even if they don’t have to legally—aid the federal government in removing people who are not violent criminals. The president believes that the Steinle case proves that a general crackdown on unauthorized immigrants is warranted. But the reality is that, as a recent Cato Institute report found, unauthorized immigrants are much less likely than other people in the United States to commit these types of serious crimes. We know this because they are three times as likely to be incarcerated in state or federal prisons as native-born Americans, excluding those who are jailed solely for immigration offenses.

This conclusion fits with a lot of other research finding that increases in immigration are correlated with lower crime rates. Moreover, research has shown that when crackdowns on immigrants occur—even when it is targeted at those with contact with law enforcement—it has no positive effect on crime rates. For example, multiple researchers found that when Secure Communities—a program that automatically contacted ICE after an FBI background check by local police—was rolled out, the areas where it was implemented first saw no greater reduction in crime than areas where it was not implemented. This means that the deportees were no more crime-prone than the population at large—probably because the actual criminals were already being deported.

As I have written before, a crackdown on undocumented immigrants could actually increase crime because immigrants help reduce crime in various ways, including through intervening to stop crimes as they are happening or acting as witnesses against criminals. Given the complicated relationship between police and their communities, the research supports allowing localities the opportunity to decide how to handle immigration status and release information about immigrants they encounter.

Yesterday, Federal Communications Commission Chairman Ajit Pai announced his intention to reverse Obama administration “net neutrality” rules governing the internet that were put in place in 2015. Some commentators are criticizing the announcement as a give-away to large telecom companies and an attack on consumers. But the Obama rules create some serious problems for consumers—problems that Pai says he wants to correct.

Under the Obama rules, internet service providers (ISPs) were subject to “rate-of-return” regulations, which the federal government previously applied to AT&T’s long-distance telephone service back when it was a monopoly more than 50 years ago. Ostensibly, rate-of-return regulation gives government officials the power to review and approve or reject ISP rates. In reality it basically guaranteed ISPs government-enforced market protection and profitability, in exchange for regulators ensuring that ISPs won’t be too profitable.

As I explained in a 2014 post, rate-of-return regulation involves more than just telecom. It basically is an attempt to settle fights between “producers” and “shippers”—whether those are farms, mines, and factories on one side and railroads and shipping lines on the other, or Netflix and Hulu on one side and ISPs on the other. In all those cases, the producers and shippers need each other to satisfy consumers, but they fight each other to capture the larger share of consumers’ payments. If shippers charge more, then farmers, factories, and Netflix must charge less in order to maintain the same level of sales.

The political resolution of these issues was the Interstate Commerce Act of 1887 and its ensuing rate-of-return regulations, which were initially written with railroads in mind. Similar efforts were later extended to trucking, air transportation, energy, and telecom. It took about 100 years for policymakers to accept that those efforts hurt consumers much more than it helped them, forcing on consumers too many bad providers with high prices and poor quality.

Since 2007 Regulation has published seven articles on traditional telephone regulation and why such regulation would be inappropriate for the internet.

  • Bruce Owen explicitly makes the link between the concerns of traditional transportation common carrier regulation and the contemporary notion of “internet neutrality.”
  • Hal Singer and Christopher Yoo argue that the one-size-fits-all architecture that policymakers envision of the internet has been a myth for some time. Network providers employ an array of business arrangements and prices to manage congestion and maintain quality of service, but that diversity will be weakened by net neutrality rules.
  • Yoo also notes that traditional rate-of-return telecom regulation assumes a monopoly service. The expansion of wireless high-speed internet has allowed multiple competitive providers to offer service to a large majority of American consumers while restraining capital costs.
  • Gerald Faulhaber explains that service quality will suffer to the extent that internet access providers can’t charge more for streams that impose greater costs on the system.
  • Dennis Weisman points out that internet regulation will likely protect competitors from competition rather than serve consumer interests, just like the old telephone regulatory scheme did.
  • And Larry Downes argues that the movement to re-regulate telecom is propelled by some firms’ quest for rents under new regulation, and by the FCC wanting to regain its former political power and the benefits that come with it.

Hopefully, Pai’s efforts will mean that bad regulations on internet service will be thwarted before they have been allowed to take hold. However, the news isn’t entirely good. Back in June 2016 I wrote about how an appeals court approved the Obama rate-of-return regulation even though previous attempts to regulate the internet under different provisions of the Telecommunications Act had been rejected by the courts. This approval may complicate Pai’s attempt to reverse course.

The beauty of the United States where policy is concerned is that state variations allow for lots of decent analysis. Nowhere is this more clear than on the minimum wage, where a fascinating new empirical paper by Terra McKinnish from the University of Colorado Boulder adds further light as to whether Econ 101 holds in regards to raising statutory pay rates.

Remember, there are (to simplify) two main theoretical stories of the labor market. In an ordinary competitive model, imposing a minimum wage above the equilibrium wage rate leads to an increase in the quantity of labor supplied (more people want to work at the higher wage) and a reduction in the quantity demanded (employers want fewer worker hours at the higher price). The difference between the two is the increase in “unemployment” – i.e. the difference between the worker hours people are willing to work and the demand for worker hours at that wage rate. Raising the minimum wage in a competitive labor market is said to have “disemployment effects.”

In the past decade though, some academics have posited a different theory of the labor market, implying that all or many employers have “monopsony power” - monopoly power but in the purchase of labor. Profit maximization would lead firms to pay less than the value of the marginal product of labor and employ less labor-hours than would be the case in a competitive market. The implication is that when there is a strong element of monopsony in the labor market, the imposition of a higher minimum wage can lead to both an increase in pay per hour and an increase in hours of employment. Workers would gain unequivocally from the minimum wage, while previously exploitative employers would lose.

Let’s put aside for a second that in reality the labor market is complex, dynamic, and there could be elements of both. Empirically, the question is which provides a better explanation of the real labor market we see.

Here’s where McKinnish’s new study comes in. She seeks to exploit the variation in minimum wage rates between states and the compressing effect of the 2009 federal minimum wage increase to analyze whether a relative increase in a minimum wage within a state led to more commuting into that state to work for under 30s or more commuting out of the state to work.

Suppose I’m residing and working in a state whose minimum wage is unchanged and a neighboring state increases its minimum wage relative to the one I am in. A result of more commuting from my state to the neighboring state would be consistent with the monopsony story that a higher minimum wage could support more employment or at least the idea that the disemployment effects of higher minimum wages were small. On the other hand, if the higher minimum wage in the neighboring state resulted in more commuting out of the state then this would signify the disemployment effects of Econ101, and thus the competitive labor market story.

McKinnish employs difference-in-differences techniques to try to find the answer, using commuting records of people earning both low and modest hourly rates to control for other factors which could influence commuting, such as the health of the economy.

Upon doing all this, three key findings arise from her work:

  1. Prior to the 2009 federal minimum wage increase, there is no evidence that low-wage workers commuted at higher rates (relative to moderate-wage workers) to neighboring states with a higher minimum wage.
  2. After the federal minimum wage increase, low-wage workers modestly increased out-of-state commuting out of states most affected by the federal minimum wage increase.
  3. Moderate-wage workers reduced the rate at which they commuted out of states most affected by the federal increase following the rise in the rate (consistent with the idea that increasing minimum wages leads to employers replacing low productivity workers with higher productivity ones).

The implications of this finding are 3-fold. First, it directly refutes the narrative presented by some in the media that people commute towards states with higher minimum wages. Second, it suggests that the real labor market looks much more like the competitive model than the monopsony one. Third, it suggests that studies which seek to examine the effects of minimum wage increases using data based on the residential location of the worker will tend to understate the disemployment effects of the wage rise.

In all, this study is further evidence to support the Econ 101 view of minimum wages. See here and here for more.

According to former Reagan adviser Martin Feldstein, “Higher projected budget deficits could raise long-term interest rates, potentially triggering… a serious economic downturn.”

Has that ever happened?

From 1977 to 1981 10-year bond yields nearly doubled, rising from about 7.4% to 13.9%, but budget deficits were relatively small, around 2.5% of GDP.  Budget deficits were doubled from 1984 to 1993 (about 5% of GDP), yet bond yields were nearly cut in half, falling from 12.4% to 5.9%. Bond yields were no lower from 1997 to 2000 when the budget moved into surplus. But yields fell dramatically in 2008-2012, a period of record budget deficits.

One possible objection is that larger budget deficits were caused by recessions, which is why bond yields did not rise with larger deficits or fall with surpluses.  The graph addresses this concern by using CBO estimates [.xls] of cyclically-adjusted budgets (“with automatic stabilizers,” in CBO vocabulary). 

Still, there is clearly no correlation between bond yields and any measure of yearly budget deficits and surpluses. And that is also true in other times and places – Japan’s chronic large deficits and debt being an obvious example.

Another possible objection centers on Feldstein’s use of the phrase “projected budget deficits,” as though the CBO’s notoriously inaccurate long-run projections could somehow have an entirely different effect from actual deficits. I criticized the analysis and evidence behind that conjecture in a Treasury Department presentation which was condensed and simplified in a Cato Institute paper. I found the underlying analysis illogical and contradictory and the evidence worthless.

There is no need to make up stories about alleged effects of deficits on bond yields in order to make a strong case for minimizing frivolous government borrowing (e.g., to pay for transfer payments or government employee compensation).

Chronic deficits add to accumulated debt, and that debt will have to be serviced with future taxes even if it is rolled-over indefinitely. That is reason enough for Congress to keep growth of federal spending below the growth of the private economy – a task which requires frugality in spending but also a tax and regulatory climate which minimizes impediments to investment, entrepreneurship, education and work.

The “first 100 days” was a dictatorial metaphor from the start. It entered the presidential lexicon in 1933, when journalists likened FDR’s legislative onslaught to Napoleon Bonaparte’s 1815 breakout from Elba and subsequent three-month rampage, ending at Waterloo.  

Thankfully, President Trump’s first 100 days haven’t been nearly so dramatic. It’s as if Napoleon, instead of marching to Paris and then to war, just sat around his Tuscan villa, hand in his waistcoat, ranting about his enemies.

Of the umpteen items in Trump’s “100-day action plan,” unveiled last fall in Gettysburg, Pennsylvania, he’s barely moved on most, reversed himself on others, and been stymied by Congress and the courts on the few where he’s made a serious push. The candidate who proclaimed “I alone can fix it” is learning that, on the home front at least, our political system remains resistant to one-man rule. 

It’s reassuring to learn that our system of separated powers still has some life left in it, at least when it comes to domestic affairs. The danger is that, with his agenda stalled on the home front, Trump may overcompensate abroad. Perversely, it’s in the exercise of military force—the area where presidents can do the most damage—that checks and balances are weakest.

No administration has accomplished more in the first 90 days” the president insisted recently—a claim that ranks with prior Trumpian whoppers like “largest audience ever to witness an inauguration” and “biggest electoral college win since Ronald Reagan.” Trump was closer to the mark a few days later, when he called the 100-Days metric a “ridiculous standard.”

However, the blustery press release the White House put out Tuesday, “100 Days of Historic Accomplishments,” embraces the skewed premise that presidential success should be measured by sheer volume. “President Trump has accomplished more in his first 100 days than any other president since Franklin Roosevelt,” it blares, because he’s “signed 30 executive orders” and “A SLEW OF LEGISLATION”! 

But of course Trump’s 100-day record can’t measure up to FDR’s 15 major bills passed in the panicked atmosphere of the Great Depression. Nor has he pulled off anything as mammoth as Obama’s $787 billion stimulus package, signed less than a month after his inauguration, during the worst financial crisis since the Depression. But so what? In the modern era, most presidents can’t manage a legislative blitzkrieg absent a national emergency. As political scientist David R. Jones notes, 

President George W. Bush’s first term produced an impressive six landmark acts, but four were prompted largely by a single dramatic event, the terrorist attacks of 9/11: the Authorization for Use of Military Force against the terrorists, the USA Patriot Act, the Authorization for Use of Military Force Against Iraq Resolution of 2002 and the Homeland Security Act of 2002, which established the federal department.

Are we supposed to be disappointed that Trump hasn’t (yet) enjoyed the proverbial “good crisis” you never want to waste? 

All presidents resent looking weak and ineffectual, Trump perhaps more than most. But it’s hard not to, given the vast gulf between media-stoked public expectations for the job and what presidents can realistically achieve. It’s enough to give a guy a complex

In his first three months, Trump has learned that the presidency can be an incredibly frustrating job. Government doesn’t run like a business or a reality show—you can’t just say “you’re fired” to Congress or the Courts. 

“Oh, if I could only be President and Congress too for just 10 minutes!” a young FDR once heard his cousin Teddy exclaim. There’s at least one area where a president can. It’s in the exercise of military power where the president approaches the strongman status Trump seems to crave. That’s something he’s learning as well. 

So far, Trump has put additional boots on the ground in Syria, loosened rules of engagement designed to minimize civilian deaths, and dropped more bombs in Yemen than Obama did in any year of his presidency. And when Trump gave the order to launch 59 Tomahawk missiles at a Syrian airfield on April 6, he discovered that it made him look presidential—made him president, in fact. As Fareed Zakaria gushed the day after the Syrian strike: “Donald Trump became the president of the United States [last night].” (So maybe he has an extra 77 days—until mid-July—before his real 100 days are up.)

Zakaria was hardly alone in cheering Trump’s illegal airstrikes in Syria. The chorus of media accolades the Syria attack earned Trump had to be immensely gratifying to our ratings-obsessed president. But there’s a reason Madison warned against ceding unilateral war-making powers to the president: “the trust and the temptation would be too great for any one man.”

In his first 100 days, Trump has discovered that he is “one of the only men on Earth who enjoys the privilege of looking over a menu of place names and being able to give an executable order to blow them to smithereens.” What’s more, American “opinion leaders” will score it as a big “win” when he does. In the months and years to come, we may, indeed, grow sick of winning. 

The most remarkable thing about Rep. Tom MacArthur’s (R-NJ) amendment to the House leadership’s American Health Care Act is how little the conservative House Freedom Caucus got in exchange for supporting an ObamaCare-lite bill they had previously opposed.

The MacArthur amendment would allow states to apply for waivers that would:

  1. Exempt their individual and small-group insurance markets from ObamaCare’s “essential health benefits” coverage mandates as early as 2018;
  2. Allow insurers in those markets to consider the health status of previously uninsured applicants (if the state sets up some more direct form of subsidy for people with pre-existing conditions, either within or outside the commercial market) as early as 2019; and/or
  3. Allow states to loosen ObamaCare’s “community rating” price controls as they apply to age early as 2020.

These waivers may never happen. They certainly won’t happen in time to save consumers from the AHCA’s rising premiums, or to save Republicans from the inevitable backlash against the AHCA. But even if they did happen, they would increase the penalties ObamaCare imposes on insurers who offer quality coverage for the sick, and thereby accelerate ObamaCare’s race to the bottom.

The opt-out concept is not irredeemable. But the MacArthur amendment would require dramatic changes to make it even a modest step toward ObamaCare repeal.

The Secretary Can Block MacArthur Waivers

Supporters claim the amendment prevents the federal government from blocking or forcing states to alter waiver applications because it requires the Secretary of Health and Human Services to approve any and all waivers that provide the necessary information. But this is not quite true.

The amendment requires waiver applications must “demonstrate[]that the State has in place a program that carries out the purpose described” in the parts of AHCA that create subsidy programs for people with preexisting conditions. The Secretary could deny waiver applications on the basis that a state’s program does not adequately carry out the purpose of those parts of the AHCA, and refuse to approve the waiver until the state makes whatever changes the Secretary requires. The Secretary could also reject waivers on the basis that the information provided in the application is otherwise not truthful or accurate.

Donald Trump’s HHS Secretary Tom Price might not. But Secretary Bernie Sanders would.

MacArthur Waivers: Too Little, Too Late

Though the amendment allows states to waive the EHB mandates as early as January 1, 2018, the earliest states could do so would be 2019.

So even in states that are eager to provide premium relief, consumers would still feel the pinch of ObamaCare’s rising premiums, plus the 15-20 percent premium surcharge the AHCA would impose, in 2018—a year with mid-term elections, no less.

MacArthur Waivers Accelerate the AHCA’s Acceleration of ObamaCare’s Race to the Bottom

ObamaCare penalizes insurers who offer high-quality coverage to the sick, causing a race to the bottom in quality. You’ve seen the headlines. A “stampede to narrow networks.” Insurers fleeing the market. Complete collapse of the Exchanges in many counties. The ObamaCare provisions causing that race to the bottom are the same provisions that leave older women (age 55-64) facing the largest premium increases under the law: its community-rating price controls.

The AHCA would accelerate that race to the bottom. It would free consumers to buy less coverage (i.e., with lower actuarial values) than ObamaCare allows. But because it would preserve community rating, the adverse selection against comprehensive health plans would be even more severe. Coverage for the sick would get worse even faster than under ObamaCare, as insurers do even more to make their plans unappealing to the sick, or leave the market entirely.

As noted above, MacArthur waivers would allow willing states to loosen ObamaCare’s “age rating” bands even further, and to let insurers take health status into account for previously uninsured applicants. But these provisions would not be enough to prevent a race to the bottom. In fact, while it’s a good thing that MacArthur waivers would allow healthy people even more freedom to purchase less-comprehensive coverage, the fact that it would preserve community rating for sick enrollees who switch plans means it would create even more adverse selection than the AHCA would. So the race to the bottom would be even more swift and severe.

A Better Way to Let States Opt-Out

If the Republican Congress wants to provide real relief to consumers and take a step toward keeping its pledge to repeal ObamaCare, here are the features of a state opt-out provision that would accomplish both goals.

First, allow states to opt out of all of Title I of ObamaCare. This would stabilize insurance markets immediately, and cause premiums to fall dramatically for the vast majority of consumers in the individual market. If Republicans want to weather a tough mid-term election, they are going to need millions of voters happy because their premiums fell.

Second, don’t require states to get approval from the federal government. Let states opt out of ObamaCare simply by notifying the Secretary of Health and Human Services. Giving the Secretary any authority to approve a state’s plans also gives her the authority to deny those plans.

Third, let residents of all 50 states purchase insurance licensed by ObamaCare opt-out states. This would tie the opt-out idea to President Donald Trump’s campaign promise to let consumers and employers purchase insurance across state lines. As such, it would give states an added incentive to opt out of ObamaCare (states that did so could collect premium-tax revenue from out-of-state purchasers) and allow residents of all states to opt out of ObamaCare at their discretion.

MacArthur Amendment Exempts Congress from MacArthur Waivers

Then again, maybe the whole opt-out idea is doomed. The MacArthur amendment exempts Congress, which gets coverage through the District of Columbia’s small-business Exchange, from any waiver that the District might pursue. Authors of the amendment apparently included the language because otherwise the bill would run afoul of Senate rules and cause the entire AHCA to require 60 votes in the Senate rather than just 51. Since this problem would apply to any waiver or opt-out idea, maybe Congress should just stick to keeping their promise to repeal ObamaCare outright.

Conclusion

What I wrote about the AHCA two months ago still applies:

The House leadership bill isn’t even a repeal bill. Not by a long shot. It would repeal far less of ObamaCare than the bill Republicans sent to President Obama one year ago. The ObamaCare regulations it retains are already causing insurance markets to collapse. It would allow that collapse to continue, and even accelerate the collapse. Republicans would then own whatever damage ObamaCare causes, such as when the law leaves seriously ill patients with no coverage at all…The fallout could dog Republicans all the way into 2018 and 2020, when it could lead to a Democratic wave election like the one we saw in 2008. Only then, Democrats won’t have ObamaCare on their mind but single-payer…

The [AHCA] merely applies a new coat of paint to a building that Republicans themselves have already condemned. Since the most important asset health reformers have is unified Republican opposition to ObamaCare, at least in theory, it would set the cause of affordable health care back a decade or more if Republicans end up coalescing around this bill and putting a Republican imprimatur on ObamaCare’s core features. If this is the choice, it would be better if Congress simply did nothing.

Congressional Republicans and President Trump took office with a mandate to repeal and replace ObamaCare. Yet even as 76 percent of Republican voters and 80 percent of Trump voters want Congress to repeal and replace ObamaCare, both the moderate and the conservative wings of the House GOP now appear ready to snub their base by supporting a bill that does neither. Good luck turning out those voters in 2018. 

Last week, invoking a seldom-used provision of a 1962 law, President Trump launched an investigation to determine whether steel imports present a threat to U.S. national security. An affirmative finding by the Commerce Department would permit the president to impose trade restrictions in response to the threat. But the real threat to U.S. national security is not an abundant supply of cheap imported steel. The real threat is a hyper-litigious steel industry intent on isolating the U.S. economy at enormous cost to downstream U.S. industries, exporters, and consumers. 

With the Trump administration full of steel executives and their lawyers one needn’t ponder too long to get the gist: U.S. trade policy is in the hands of an industry that accounts for 0.3 percent of U.S. GDP, has never had much interest in cultivating foreign demand for its products, has limited stakes in the global trading system, and is monothematic in its demand for aggressive trade law enforcement.

The wall of tariff’s protecting U.S. steel interests is already much higher than the walls erected to insulate virtually any other industry from foreign competition. Currently, there are 151 antidumping and countervailing duty (anti-subsidy) measures in force against most types of steel from most major exporters. And that severely impairs the competitiveness of America’s far more numerous, far more economically significant downstream, steel-using companies.

Under U.S. trade remedy laws, the authorities are prohibited by statute (on account of steel industry lobbying) from even considering the impact of prospective antidumping and countervailing duties on the operations of downstream companies. Absurd self-flagellation, right? The absurdity is magnified when you grasp that the duties paid by U.S. importers (i.e., the steel users), which are big enough deterrents to doing business with foreign suppliers in the first place, aren’t even the biggest concern. Under the seriously corrupted, capriciously-administered U.S. trade remedy laws, the importers don’t even know what their final duty liability is going to be until about one year (on average) after the product is imported.  The amount of duty paid upon entry of the product is an estimate of the duties that ultimately will be owed when Commerce gets around to “calculating” the actual incidence of dumping or subsidization next year.  Imagine getting a supplemental bill today for the groceries you purchased last April.  Would you even buy those groceries in the first place, without knowing the final price tag? Of course not. And that’s the intention of the retrospective nature of the U.S. trade remedy laws.

Although portrayed as U.S. companies against Chinese or other foreign predators, the laws are more aptly described as weapons used by U.S. upstream industries to cut off their U.S. customers from alternative suppliers.  I’m not making this stuff up.  

Over the past 20 years, the Cato trade center has produced a very large body of accessible analyses on the subject of antidumping. Since it’s looking likely that the subject will be a prominent feature of trade policy over the next 3 years, 9 months, below are links to our extensive work on the subject. 

Antidumping administration at the Commerce Department: 

Antidumping policy toward China:  

The adverse, but intentionally ignored impacts of AD measures on downstream industries and exporters:

How to drain the antidumping swamp:

The absence of any legitimate economic rationale for antidumping:

Sundry commentary about the AD regime:

Former Energy Department Undersecretary Steven Koonin caused quite a stir yesterday in an interview with Mary Kissel of The Wall Street Journal when he stated Federal scientists purposefully misled the public about climate change. He recounted that the 2014 National Assessment of Climate Change Impacts in the United States emphasized a dramatic increase in Atlantic hurricane power beginning in 1980. However, this conveniently chosen segment of the historical record does not tell the entire story—the narrative that hurricanes are right now getting more frequent and intense due to climate change just does not stand up to scrutiny.

The offending figure is on Page 42 of the document (reproduced here). It is in Chapter 2 of the report, which is called “Our Changing Climate.”

These are graphs of something called the Power Dissipation Index (PDI) for Atlantic and Eastern North Pacific hurricanes. Note that the data begins in 1970 and ends in 2009. The text explains the beginning date by saying “there is considerable uncertainty in the record prior to the satellite era (early 1970s).”

This is true, but phenomenally disingenuous. Another hurricane scientist, conspicuously absent from the author list, is Chris Landsea of the National Hurricane Center, who developed the Center’s historical hurricane archive, known as HURDAT2. According to Landsea, the problem in the early record (which should be obvious) is that some storms will be missed, not the other way around! In his words, in a 2013 article in Monthly Weather Review, “Some storms were missed, and many intensities are too low in the pre-aircraft reconnaissance era (before 1944 in the western half of the basin) and in the pre-satellite era (before 1972 for the entire basin).

Therefore, prior to 1972, any history is likely to underestimate the PDI rather than overestimate it.

One of us (Maue) calculated the PDI using the HURDAT2 data back to 1920, shown below:

We have included the trend line from the National Assessment. It’s also noteworthy to see what happened after 2009. The accompanying text says “Adapted from Kossin et al. 2007,” meaning they added two more years. Why didn’t they add through 2013, the year before publication of the Assessment? One potential reason is a close look at the chart (which goes through 2016) would have destroyed the narrative.

When the National Oceanic and Atmospheric Administration released the Assessment on May 6, 2014, it said, “The report, a key deliverable of President Obama’s Climate Action Plan, is the most comprehensive and authoritative report ever generated about climate changes that are happening now in the United States…[emphasis added].”

The President’s Action Plan eventually resulted in the Clean Power Plan, arguably the most expensive environmental regulation ever promulgated. The flamboyant, cherry-picked misrepresentation of the hurricane data record was indeed a “deliverable.”

A more “comprehensive” and “authoritative” report would have noted that periodic changes in the north-south gradient of temperature in the Atlantic Ocean (known as the Atlantic Multidecadal Oscillation or AMO) are related to hurricane activity. The trendline in the Assessment begins in a “negative” AMO period, which is associated with suppressed hurricane activity, and ends during a very positive phase which is associated with enhanced hurricanes. A more accurate representation should have begun in 1950, which would have represented a complete AMO cycle. Of course, there wouldn’t be any trend, as expected. Instead, the Assessment cherry picked data to tell a story, and the concocted cheap excuse as to why it did it is risible.

Let’s just quote NOAA’s Geophysical Fluid Dynamics Laboratory updated overview of current research as of April 13, 2017: “It is premature to conclude that human activities – and particularly greenhouse gas emissions that cause global warming – have already had a detectable impact on Atlantic hurricane or global tropical cyclone activity.” Now, that is an entirely different story than we have been told.

EPA Secretary Scott Pruitt has argued that the Paris Agreement on Climate Change is a bad deal for the U.S. because it doesn’t bind China and India. But that implies it could be fixed by imposing the same ruinous terms on developing countries—which would in fact just spread the damage. The real reason for pulling of the Paris Accord is that it is a futile gesture based on empty and dishonest premises.

The first thing to note is that the same computer models that say global warming is a problem also say that Paris will not fix it. If one were to graph the standard warming projections over the next century with and without Paris, the two lines overlap almost exactly. Whatever greenhouse gas (GHG) concentration we would have reached in the year 2100 without Paris, we will reach it shortly thereafter with. For all its costs, the Paris treaty will have almost no effect on global warming, and by depleting global income it will make it harder for countries to adapt and innovate in response to whatever changes occur. Thus not only does Paris not solve the problem, it arguably makes it worse.

This, by the way, was equally true of the earlier Kyoto Protocol: all cost and no benefit. Under current technology and economic realities we have only two options: do nothing and adapt to whatever changes the climate will undergo over the next century, or take a lot of costly and futile actions today and adapt to whatever changes the climate will undergo over the next century. There has never been a third option involving costly actions today that stop the climate from changing.

Paris binds countries to meet their self-imposed Nationally Determined Contributions, or NDCs. The Obama Administration submitted an NDC that committed the U.S. to a twenty six percent reduction in GHG emissions below 2005 levels by 2025 through specific regulatory measures, all of which were enacted by Executive Order rather than by passing laws in Congress. It amounts to an attempt by one Administration to bind all future Administrations despite lacking legislative warrant. If the U.S. NDC was supposed to be legally binding then it should have gone through Congress. And now that some of those measures have been repealed by the current Administration, it is dishonest to keep the existing NDC as part of the Paris Agreement.

Paris embeds an inconsistency between calling for the use of the “best available science” while also prejudging what that science is allowed to say. The Accord’s preamble calls climate change an “urgent threat” even though mainstream climate science and economics does not imply this, instead placing global warming rather low on the list of problems confronting the world. The Agreement enshrines the ill-defined and arbitrary target of holding “the” global average temperature to 2oC above pre-industrial levels while completely ignoring the critical question of how it should be measured. Nor does it say how much of the warming is natural and should not be counted against the 2oC limit. This omission alone makes the overall target absurd, since it could bind the world to taking actions to prevent the sun from shining brighter.

The Paris Agreement also veers into absurdity by its political and ideological language, requiring countries to address extraneous themes like gender equity, biodiversity, poverty eradication, migrants, disabled persons, a “just transition of the workforce,” “creation of decent work,” and so on. Having larded the treaty with social justice slogans, its authors cannot be surprised if they become points of contention. It is not surprising that conservative governments will dislike these items, and if the authors respond that they can simply be ignored, then they should not have been in the treaty to begin with.

Finally, a proponent might acknowledge all these problems yet still defend Paris as a “good first step” in the expectation that later steps will yield big benefits.  But this is flawed reasoning. In any well-structured policy transition the first step yields the highest benefits at the lowest cost—the so-called low hanging fruit. Subsequent steps cost more and yield less, until the point is reached where costs exceed benefits and the process stops. Paris, like Kyoto, cost too much to implement while yielding unmeasurably small benefits. Subsequent steps will only be worse. It is a bad first step on a road to nowhere.

Pulling out of the Paris treaty would send a signal that the U.S. will not bind itself to bad deals based on hype and empty slogans. If this is the best global climate diplomacy could come up with then it is time to pursue other options.

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