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BEIJING—Mao Zedong, China’s “Great Helmsman,” died four decades ago. Only after his murderous reign finally ended could his nation move forward. The old dictator and his cronies wouldn’t recognize China’s capital today. Beijing has become a sprawling metropolis with night clubs and fast food restaurants. Shanghai’s transformation is equally dramatic. Always more international and commercial than Beijing, it has become a world financial center.   There’s a lot more to the People’s Republic of China, including a vast rural territory which remains poor, with average incomes well below urban PRC. But extreme poverty has given way to a genuine, if modest, prosperity.   As China has advanced on the global stage, there’s been discussion of the “Beijing consensus” or China Model. Who needs free markets and democracy if managed capitalism and autocracy can deliver sustained, even faster, economic growth? Dictators around the world want to convince themselves–and more importantly, their subjects–that oppression pays.   Yet the China Model is looking a bit frayed. China has slowing growth, a property bubble, ghost cities, inefficient state enterprises, a stock market crash, badly skewed demographics, overextended banks stuffed with political loans, and unbelievable official statistics.

 And corruption continues, by some estimates costing as much as three percent of GDP. The government’s crackdown, though widely welcomed, has not resulted in more efficient administration. Instead, one American diplomat told me that it is more difficult now to get any decision since virtually every official, especially at the local level, is a potential target. Beijing has put foreign companies in its gunsights. This makes Western firms even more nervous over investments which often have not paid off as expected.    Economic problems mean political problems. In fact, the regime has been cracking down on domestic dissent and foreign influence.   Although an authoritarian state where public criticism—through traditional or social media—is punished, China is remarkably open in other ways. Dissent is widely expressed, especially by students, who I’ve been addressing for years. In front of classmates, they have denounced Internet controls, lauded American democracy, asked about Tiananmen Square, and worried that Xi Jinping was becoming another Mao Zedong. But wimpy liberals they are not. They are patriots with a nationalist bent. Taiwan is Chinese, they tell me. So are disputed territories in nearby waters.   It’s an interesting tension that I found common during my recent trip to China. A successful businessman educated in America forthrightly declared that democracy might not be best for the world’s most populous state. He offered little praise for the Communist Party, but he obviously didn’t want to be ruled by a peasant majority either.   Particularly interesting is the question whether growing repression will impede Chinese growth. Beijing recognizes it faces a challenging future: for instance, it has just dropped its destructive one-child policy. Other repressive policies inevitably hinder commercial development, especially in today’s Internet/information-dominated economy.   Equally significant, the attempt to tighten central party control may generate widespread political instability. A reported 100,000 party members are under investigation. Having taken on the “tigers,” such as past security chief Zhou Yongkang, Xi Jinping has upset the post-Mao policy of not targeting previous leaders. There is wide disagreement over whether Xi is secure on the mountaintop or standing on a precipice.   China is fascinating, even exciting. In many ways it has the feel of a free country: arrive with your visa and you can visit where you want, meet who you want, travel how you want, and say what you want. Yet the PRC imposes a glass ceiling on liberty. Break it and you suffer a huge penalty.   But as I pointed out for the Foundation for Economic Education: “ultimately the country as well as the people may pay. China has come far. It has even further to go, however. Where it ends up is likely to depend on whether the government comes to trust its people and becomes accountable to them. If not, the 21st Century is unlikely to end up as the Chinese Century.”

Many U.S. policymakers see China as the answer to North Korean proliferation. If Beijing would just tell the North’s Kim Jong-un to behave, East Asia’s biggest problem would disappear.   Of course, it’s not that simple. To be sure, the People’s Republic of China has influence in Pyongyang, but the latter always has jealously guarded its independence.   Still, the current regime does not appear to be as stable as its predecessors. Powerful Chinese pressure, if backed by economic sanctions, might encourage now incipient opposition.   The China-North Korea relationship goes back to the Korean War. Although, Beijing no longer hides its dissatisfaction with the North, the PRC is not yet willing to abandon its sole ally.   Its reluctance is understandable. Violent conflict within the DPRK, mass refugee flows across the Yalu, loss of Chinese investments, and a united Korea hosting U.S. troops all are possibilities no PRC government desires. China’s interest is almost purely negative, avoiding what the Democratic People’s Republic of Korea could become. " title="<--break-->"> Yet China also recognizes that the status quo is not just uncomfortable, but untenable. In fact, President Xi Jinping has met six times with South Korean President Park Geun-hye, but not once with Kim. Chinese academics and analysts, as well as advocates on social media, routinely criticize the DPRK.   The North’s hallmarks are proliferation, brutal repression, instability, and war threats. Pyongyang recently declared that it was strengthening its nuclear arsenal. Both Washington and Beijing would benefit from a “new” north of some sort, whether independent or reunited with the South. Which suggests the possibility of a modus vivendi between the U.S. and China.   However, a deal will require the PRC to take the lead. Unfortunately, U.S. officials are inclined to lecture Beijing about what the latter should do. China must tell Washington that cooperation is possible, but that Beijing requires guarantees before taking tougher action against the North.   The big issues would be process and endpoint. China should indicate its willingness to go along with the U.S. to change the North’s behavior, and government, if necessary—if the PRC is protected from the consequences.   Only Beijing could decide on the necessary conditions, but several obvious issues include financial support for refugees, acquiescence to Chinese military intervention post regime collapse, guarantees for existing economic deals, U.S. troop withdrawal from a united Korea.   South Korea also would have to be brought into any discussions, but the ROK’s warming relationship with Beijing suggests that Seoul would be receptive to a deal. Unlike the U.S., the South does not attempt to dictate relations in Northeast Asia.   Washington should respond positively to any Chinese overture, since North Korea has become one of America’s no-win problems. Despite presidents having insisted for at least two decades that Pyongyang cannot be allowed to become a nuclear state, it has done so.   Despite having no great strategic interests post-Cold War in the Korean peninsula, the U.S. maintains an expensive garrison in the South and remains a constant rhetorical target of a bizarre, unstable hereditary communist regime in the North. Despite urging China to deal with the problem, Beijing has shown no interest in taking the DPRK out of America’s hands.   But it would be worth much to the U.S. if the PRC did so. As I point out for China-US Focus: “The U.S. could drop North Korea from its enemies list, turn South Korea’s defense over to the South Koreans, reduce overall military commitments and spending, ease tensions with Beijing, and improve East Asian security without pervasive American military involvement. Washington could even avoid the stigma of being a supplicant if Beijing proposed talks.”   North Korea is a challenge for both the U.S. and China. Cooperation between the two offers the best hope for maintaining peace on the Korean peninsula. Beijing should propose talks. Then the world’s two greatest powers would have an opportunity to cooperate to solve their common problem.

Aside from one necessary clarification (see far below), it would be difficult to improve on what the New York Times, the Boston Globe, and the enrollees they interview have to say about ObamaCare.

First, from yesterday’s New York Times article, “Many Say High Deductibles Make Their Health Law Insurance All but Useless”: 

But for many consumers, the sticker shock is coming not on the front end, when they purchase the plans, but on the back end when they get sick: sky-high deductibles that are leaving some newly insured feeling nearly as vulnerable as they were before they had coverage.

“The deductible, $3,000 a year, makes it impossible to actually go to the doctor,” said David R. Reines, 60, of Jefferson Township, N.J., a former hardware salesman with chronic knee pain. “We have insurance, but can’t afford to use it.”…

“We could not afford the deductible,” said Kevin Fanning, 59, who lives in North Texas, near Wichita Falls. “Basically I was paying for insurance I could not afford to use.”

He dropped his policy…

“Our deductible is so high, we practically pay for all of our medical expenses out of pocket,” said Wendy Kaplan, 50, of Evanston, Ill. “So our policy is really there for emergencies only, and basic wellness appointments.”

Her family of four pays premiums of $1,200 a month for coverage with an annual deductible of $12,700…

Alexis C. Phillips, 29, of Houston, is the kind of consumer federal officials would like to enroll this fall. But after reviewing the available plans, she said, she concluded: “The deductibles are ridiculously high. I will never be able to go over the deductible unless something catastrophic happened to me. I’m better off not purchasing that insurance and saving the money in case something bad happens.”

“While my premiums are affordable, the out-of-pocket expenses required to meet the deductible are not,” said [Karin] Rosner, who makes about $30,000 a year…

“When they said affordable, I thought they really meant affordable,” [Anne Cornwell of Chattanooga, Tenn.,] said.

And from today’s Boston Globe article, “High-Deductible Health Plans Make Affordable Care Act ‘Unaffordable,’ Critics Say”:

“We can’t afford the Affordable Care Act, quite honestly,” said Cassaundra Anderson, whose family canvassed for Obama in their neighborhood, a Republican stronghold outside Cincinnati. “The intention is great, but there is so much wrong. . . . I’m mad.”…

The Andersons’ experience echoes that of hundreds of thousands of newly insured Americans facing sticker shock over out-of-pocket costs…

“This will be an issue at least one more time in the 2016 election. It could absolutely still hurt Democrats,” said Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public Health. “Polls about the Affordable Care Act have a considerable amount of middle-income people who say either the program has done nothing for them or actually hurt them.”…

“Unfortunately, what we are headed toward now is universal crappy health insurance,” said Dr. Budd Shenkin, a California pediatrician…“It’s just not a good deal for people,” he said.

“We’re in the process of looking at going without insurance,” [Cassaundra Anderson] said, calculating that the family will be better off financially just paying the $2,000 tax penalty for not abiding by the law’s mandate. “What am I even paying these insurance people for? Why should we reenroll?”…

“I cannot get anything with this insurance. Nothing,” said [Laura] Torres, who avoids seeking treatment for her thyroid condition and high blood pressure because of cost. “I just pay my monthly payments, try to take care of myself, go to work, and hope something serious doesn’t happen to me.”…

Amete Kahsay, 53, works as a temporary warehouse packer in Columbus. The Affordable Care marketplace is her only option for health insurance. She and her husband, an airport shuttle driver, pay $275 a month for a “bronze” plan with a $13,200 deductible.

Shortly after they signed up for insurance last year, her husband rushed her to the emergency room when she experienced dizziness. The visit, which included a CT scan of her brain, cost $1,700. She paid the charge from her savings, then returned to her native Ethiopia, where care is cheaper, to consult a neurologist and seek follow-up care.

“I support Obamacare. Without it, I wouldn’t have any type of insurance. But I’m not sure it’s worth the money,” said Kahsay, a US citizen who is registered as an independent voter. “Now, unless I get very, very sick, like only if it’s life-threatening, I won’t go to the doctor. I just lay down and take a rest.”

The necessary clarification is that these people are not complaining about high-deductibles in a market system. In a market system, consumers who choose high deductibles save money on their premiums and therefore have more resources to help them pay their out-of-pocket expenses. ObamaCare, on the other hand, manages to pair high deductibles with higher premiums, stripping many people of this benefit of high-deductible plans and leaving them unable to pay their medical bills. 

With two Republican presidential candidates embracing a value-added tax (VAT), it is worth looking back at the original federal debate over that bad policy idea.

Richard Nixon appears to have been the first U.S. leader to push for a VAT, which is not surprising given that he was perhaps the most statist GOP president of the 20th century. With a three-percent VAT in mind, Nixon called for new federal financing of local schools in his 1972 State of the Union address.   

A 1972 Congressional Quarterly article examined Nixon’s VAT. (The first link when you Google “richard nixon vat congressional quarterly”). The article reveals that the administration looked fondly on a VAT because of its large revenue-raising potential—both for funding schools and for funding a general expansion of the welfare state:

Two major reasons were apparent for the Nixon administration’s consideration of a value added tax. The first was the condition of federal finances.

The budget for fiscal year 1973, which the President sent to Congress Jan. 24, included a five-year forecast showing that in fiscal 1977 the only surplus funds foreseeable would result from a proposed increase in Social Security taxes. Projected costs of existing and proposed programs were expected to absorb all revenues from existing taxes and other sources. This meant that no new programs could be inaugurated without new taxes to finance them or reduction of existing programs to release funds. Though initially pledged for education, revenues from an expanding value added tax might provide future funding for other programs.

The second reason was the situation in public schools and school districts.

Tax expert Alan Schenk notes that Nixon had been plotting to impose a VAT from soon after he came into office in 1969. But imposing a new and powerful tax as a spigot to fund local government was an awful idea that would have undermined federalism and dangerously centralized fiscal power in the nation.

Thankfully, the Nixon proposal went nowhere in Congress, the ACIR came out against it, and it was dropped. America’s economy dodged a bullet. If Nixon had been successful, the rate would probably have soared over time from an initial 3 percent to maybe 20 percent today—just as rates in Europe have risen—and that would have fueled growth in new and expanded entitlement programs.  

The congressional testimony highlighted in the CQ article indicates that most experts leaned against a VAT, but the ideological split was interesting. Some conservatives liked the VAT because it was “efficient,” while liberals generally disliked it because it was “regressive.”

Libertarians had a different view. The Nixon administration’s VAT proposal received a sharp rebuke from economist Murray Rothbard in a 1972 Human Events article. Some of Rothbard’s economic reasoning is dubious, but his main thrust regarding tax transparency is on target. He argued:

It is now easy to see the enthusiasm of the federal government and its economic advisers for the new scheme for a VAT. It allows the government to extract many more funds from the public — to bring about higher prices, lower production, and lower incomes — and yet totally escape the blame, which can easily be loaded on business, unions, or the consumer as the particular administration sees fit.

The VAT is, in short, a looming gigantic swindle upon the American public, and it is therefore vitally important that it not pass. For if it does, the encroaching menace of Big Government will get another, and prolonged, lease on life.

Occupational licensing is supposed to protect consumers against people who would practice a trade without the proper qualifications. In the first Supreme Court case on the question, Dent v. West Virginia (1883), the Court held that government may require people to be trained and educated before taking up the medical profession, because “such regulations” help “secure” the public “against the consequences of ignorance and incapacity as well as of deception and fraud.” But, the Court warned, if states impose licensing requirements that are not aimed at protecting “the general welfare of [the] people,” those restrictions “can operate to deprive one of his right to pursue a lawful vocation.”

But Dent was decided before the advent of “rational-basis scrutiny,” the rule under which courts today typically ignore violations of the right to earn a living. Under today’s law, state governments are given extremely broad power to limit economic freedom in whatever way lawmakers or unelected bureaucrats think best. That raises a crucial question—one on which the federal Courts of Appeals are now divided: may government restrict economic freedom, not to protect the public, but solely to protect the private benefits of a preferred group of people? Does such “mere protectionism” qualify as a “legitimate state interest” under the lenient “rational basis” rule?

Today, PLF and the Cato Institute have asked the Supreme Court to answer that question in a case involving teeth-whiteners: people who help clean teeth by shining a special kind of light on them. Officials in Connecticut ordered a group of teeth-whiteners to cease operations because they were not licensed dentists. Represented by our allies at IJ, a teeth-whitening company called Sensational Smiles sued, arguing that forcing them to spend the money and time needed to get a dentist’s license was irrational—they don’t offer dental services, after all. In this case, the licensing requirement was not being used to protect the public. Instead, it was a form of “mere protectionism” that barred competition against established dentists.

Federal courts are divided over whether such “mere protectionism” is constitutional under the rational basis test. The Fifth, Sixth, and Ninth Circuits in recent years—and the Third, Fourth, and Eighth Circuits in past decades—have all held that however lenient the rational basis test may be, it still requires that the government act in the interests of the public, rather than the private interests of the politically powerful. These holdings were consistent with Supreme Court precedent that held that licensing laws must be “must have a rational connection with [a person’s] fitness or capacity to practice” the trade—rather than being acts of spite or mere preference.

But in 2003, the Tenth Circuit ruled that the government can use its licensing powers for “mere protectionism”—to forbid people from engaging in a business solely as a favor to those the legislature prefers. And in the New Jersey case, the Second Circuit agreed. It ruled against the teeth-whiteners, holding that lawmakers can bar entrepreneurs from a business out of a “simple preference for [other people] over [them].” In other words, the legislature need not even pretend that its restrictions on economic opportunity—or other rights subject to the “rational basis” test—benefit the public. It can simply pick winners and losers however it wants, without constitutional limitation.

That holding contradicts eight centuries of Anglo-American common law, which has held since the days of Magna Carta that however broad the government’s power may be, it has one basic limitation: it must use its powers to serve the general public, not the private interests of the rulers or their cronies. That’s not a very strong limitation—there’s a lot the government can still do that benefits the politically powerful—but it must at least aim at the public benefit, not the private benefit. Even in its most pro-government cases, such as the 2005 eminent domain case, Kelo v. New London, the Supreme Court has held that government must use act in the public interest: “the City would no doubt be forbidden from taking [Kelo’s] land for the purpose of conferring a private benefit on a particular private party,” the Court said there.

The Second Circuit rejected this principle. “Much of what states do is to favor certain groups over others,” the judges declared. “We call this politics.” But as the Supreme Court observed in 1943, “[t]he very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities…as legal principles…. One’s right to life, liberty, and property, to free speech, a free press, freedom of worship and assembly, and other fundamental rights may not be submitted to vote; they depend on the outcome of no elections.” (Note the reference to “property,” to which the rational basis test applies.)

Of course, the people who will suffer most from the rubber-stamp approach that the Second Circuit took are those who lack the political influence to get the government to do its bidding. These people—including members of minority groups, and unknown entrepreneurs just starting out—must look to the courts to protect their rights, instead. By withdrawing judicial protection for the constitutional rights, the Second Circuit essentially throws them to the mercies of the very legislatures that took their rights away. As Prof. Robert McCloskey put it, the idea that these people can protect themselves through the political process is “a polite fiction,” because “the scattered individuals who are denied access to an occupation by State-enforced barriers are about as impotent a minority as can be imagined.”

Here’s hoping the Supreme Court steps in to protect their rights.

[Cross-posted at PLF’s blog.]

The Open Government Partnership is an “international platform for domestic reformers committed to making their governments more open, accountable, and responsive to citizens.” Shortly after the OGP’s creation, in my November 2012 study, “Grading the Government’s Data Publication Practices,” I gave the OGP unenthusiastic praise. It appeared to substitute meetings about open government with actual forward motion on the government transparency that President Obama promised in his first presidential race.

But an important commitment emerged late last month from the “Third Open Government National Action Plan for the United States of America.” The plan includes “a wide range of actions the Administration will take over coming months to strengthen, deepen, and expand upon” U.S. open government efforts. Among them (at the bottom of page 10) is the commitment  to develop a machine-readable government organization chart. 

The lack of a machine-readable government organization chart has been an emphasis of mine in writings and speeches since at least 2012. The Washington Examiner’s Mark Tapscott cited my quest for one in a favorite article calling me a “digital Diogenes.”

Having access to data that represents the organizational units of government is essential to effective computer-aided oversight and effective internal management. Presently, there is no authoritative list of what entities make up the federal government, much less one that could be used by computers. Differing versions of what the government is appear in different PDF documents scattered around Washington, D.C.’s bureaucracies. Opacity in the organization of government is nothing if not a barrier to outsiders that preserves the power of insiders—at a huge cost in efficiency.

The promise to produce a useful organization chart is not self-delivering, of course, and there are ways that this commitment could go off the rails. But the phrasing of the commitment suggests understanding of what a well-published digital organization chart is.

The General Services Administration and National Archives Office of the Federal Register will “capture agencies’ organizational directories as machine-readable raw data in a consistent format across the U.S. Federal government.” That suggests to me that the relationships among agencies, bureaus, and program offices (to use one nomenclature) will be represented in a consistent manner government-wide. Each sub-unit of government must have a unique identifier that embeds its relationship to its parent, like the identifiers in this document published by the National Institute of Standards and Technology in 2008. We’re not talking about a flat digital phone book.

It is not clear whether this commitment is a commitment of the Obama Administration to make this the authoritative organization chart. Obviously, an org chart that doesn’t accurately represent and guide the government’s own actions is not much of an org chart. But if the White House (i.e. OMB) and other important actors such as the Treasury Department (which cuts the checks) rely on and use this machine-readable government organization chart, then we will really have something. That will raise the pressure on Congress to make its processes more transparent by referring to agencies and their sub-units in legislative documents using the same identifiers.

I’ll report here on the success or failure of the project. The national action plan does not give a definitive timeline or deadline, but it does speak of action on its commitments in terms of “months.”

In this installment of positive news, we look at tiny 3D cameras that could revolutionize brain surgery, a new way of growing large quantities of red blood cells and progress in the fight against Leukemia. 

NASA’s 3D Camera Could Improve Brain Surgery 

Tiny 3D cameras developed by NASA may revolutionize the way doctors practice brain surgery. A device, known as MARVEL (short for Multi-Angle Rear Viewing Endoscopic Tool), is a 0.2 inch diameter camera that is attached to an endoscope - a snaking instrument used to examine the inside of the human body. NASA officials claim that MARVEL could make brain surgery quicker and cheaper, with less recovery time required. Before this technology can reach the operating room, the team needs to develop prototype for the FDA’s approval.  

Scientists Have Found a Way to Make Red Blood Cells 

The global blood supply remains in a state of constant shortage, a precarious situation for patients undergoing intensive surgery. Promisingly, a group of scientists have discovered a new way of producing large quantities of red blood cells, which perform the critical oxygen-ferrying duties of blood. The scientists identified a particular gene within stem cells and modified it so that these stem cells mature into red blood cells in greater numbers. 

These Are the Genes Linked to Aging 

New research has pinpointed 1,500 genes responsible for human aging. Scientists examined blood samples amongst 14,983 aging adults of European ancestry, and measured levels of RNA—the genetic product that our genes produce when they’re active. One caveat to these finding is that while individuals with Hispanic or Native American ancestry largely matched these markers, the RNA crossover dropped to only 27 percent in populations with African ancestry. 

New Kind of ‘Designer’ Immune Cells Clear Baby’s Leukemia 

A baby in London has been cleared of a previously incurable form of Leukemia thanks to an experimental cell therapy that creates ‘designer immune cells.’ After all other treatment options had failed, the doctors injected the baby with genetically edited cells in a tiny 1-milliliter intravenous infusion. The therapy works by adding new genes to healthy immune cells known as T-cells. The T-cells are rendered invisible to a powerful leukemia drug that would usually kill them and reprogramed to only fight leukemia cells. 

The Hill reports the Senate GOP is trying to decide how much of ObamaCare to repeal via the budget-reconciliation process:

[Senate Majority Leader Mitch] McConnell only needs 51 votes instead of the customary 60 because he is moving the repeal measure under a special budgetary process known as reconciliation. The downside of the strategy is that that package can only include provisions designed to impact the budget deficit.

As a result, popular parts of the law, such as the prohibition against discriminating against pre-existing conditions and allowing young adults to stay on their parents’ health plans until age 26, cannot be included.

First of all, ObamaCare’s most enduring myth is that its pre-existing conditions provisions are popular. This myth is based entirely on misleading poll questions that ask about only the (presumed) benefits of those regulations. When pollsters ask about not only the benefits but also the costs of those regulations, 2-to-1 public support flips dramatically to 5-to-1 opposition. Second, that last part is a matter of debate, not fact.

As the Heritage Foundation’s Paul Winfree and I explain (in The Hill, as it happens):

A full-repeal bill…would recognize that ObamaCare creates a single, integrated program of taxes and subsidies that work in concert to expand coverage, and would eliminate that entire program as a whole. Its primary effect would be budgetary. According to the Congressional Budget Office (CBO), full repeal would eliminate $1.7 trillion of spending and “would reduce deficits during the first half of the decade.” Retaining ObamaCare’s spending cuts would ensure that repeal reduces deficits in perpetuity.

With respect to the opinion, held mostly by Democrats, that The Hill portrays as fact, we write:

Opponents will try to argue that repealing ObamaCare’s health-insurance regulations (e.g., community rating) would have only an incidental effect on the budget. Yet those regulations are merely part of that larger, integrated program to expand coverage: community rating taxes the healthy to subsidize the sick; the individual mandate enforces those transfers by making part of that implicit tax explicit; additional regulations further enforce that implicit tax; explicit premium subsidies reduce those implicit taxes, and supplement the implicit subsidies, for low-income taxpayers; and the employer mandate imposes an implicit tax on workers that both reduces and offsets direct spending on premium subsidies.

Every relevant authority has held these provisions were designed to create a single, integrated program of taxes and transfers, and has rejected attempts to isolate those regulations from other parts of that program.

Winfree and I then cite former Senate Majority Leader Harry Reid (D-NV), former House Speaker Nancy Peolosi (D-CA), the Obama administration, and the Supreme Court, all of whom fell over themselves to argue that those regulations are part of a single, integrated program. As a result:

To treat ObamaCare’s health-insurance regulations as separate from that larger scheme is to renounce the Supreme Court’s King ruling and everything ObamaCare’s authors have said about how the law works. It would amount, to quote the Obama administration, to “seizing on isolated phrases [and] giving them a meaning divorced from statutory context [to] advance a radically different conception of the Act’s operation.”

Thus, “Congress may repeal those regulations via reconciliation just as it can repeal rules regulating any other government spending Congress zeroes-out through that process.”

Read the whole thing.

Too many advocates of trade liberalization don’t really understand the case for free trade. Consider this sympathetic interview by Steve Inskeep of NPR with U.S. Trade Representative Michael Froman, the chief negotiator of the Trans-Pacific Partnership:

INSKEEP: Froman argues the TPP, the Trans-Pacific Partnership, will give U.S. industries more access to foreign markets. Granted, there’s a trade-off. Other nations get more access to the U.S. for their products. Froman contends that, at least, happens slowly as tariffs or import taxes drop.

FROMAN: The tariff on imported trucks from Japan, as an example, won’t go away for 30 years. On apparel and textiles, we worked very closely with the textile manufacturers in the U.S. to come up with an outcome that they could be comfortable with, so that we’ll let in clothes coming that are made Vietnam or made in Malaysia, but they’ve got to use U.S. fabric.

Inskeep refers to the lowering of U.S. tariffs as “a trade-off,” and Froman accepts that characterization. Both operate from the premise that Americans want other countries to reduce their barriers to our exports, and that the “trade-off” for that benefit is that we must reduce our own trade barriers.

That’s backwards. The benefit of trade is that we get access to goods and services that we might get otherwise, or we get to pay lower prices for the goods we want. More broadly, we want free – or at least freer – trade in order to remove the impediments that prevent people from finding the best ways to satisfy their wants. Free trade allows us to benefit from the division of labor, specialization, comparative advantage, and economies of scale.

This is a point that Cato scholars and our Herbert A. Stiefel Center for Trade Policy Studies have been making for years. As Center director Dan Ikenson wrote last year:

Arguably, opening foreign markets should be an aim of trade policy, but real free trade requires liberalization at home. The real benefits of trade are measured by the value of imports that can be purchased with a unit of exports – the so-called terms of trade. Trade barriers at home raise the costs and reduce the amount of imports that can be purchased with a unit of exports, yet holding firm to those domestic barriers while insisting that foreign markets open wider is the U.S. trade negotiating strategy. Indeed, that’s almost every government’s negotiating strategy. It is the crux of reciprocity-based trade negotiations, which, at its core, is a rejection of free trade.

Ikenson and Scott Lincicome made that case at greater length, with specific emphasis on the “central misconception” that “exports are good and imports are bad,” almost five years ago.

Thirty years ago in the Cato Journal, the economist Ronald Krieger explained the difference between the economist’s and the non-economist’s views of trade. The economist believes that “The purpose of economic activity is to enhance the wellbeing of individual consumers and households.” And, therefore, “Imports are the benefit for which exports are the cost.” Imports are the things we want—clothing, televisions, cars, software, ideas—and exports are what we have to trade in order to get them.

And I wrote more about this persistent misunderstanding in The Libertarian Mind (buy it now!):

Politicians just don’t seem to get this. President Obama’s official [2010] statement on “Promoting U.S. Jobs by Increasing Trade and Exports” mentions exports more than forty times; imports, not once. His Republican critics agree: Senator Rob Portman says that a trade agreement “is vital to increasing American exports.” More colorfully, during his 1996 presidential campaign, Pat Buchanan stood at the Port of Baltimore and said, “This harbor in Baltimore is one of the biggest and busiest in the nation. There needs to be more American goods going out.” That’s fundamentally mistaken. We don’t want to send any more of our wealth overseas than we have to in order to acquire goods from overseas. If Saudi Arabia would give us oil for free, or if South Korea would give us televisions for free, Americans would be better off. The people and capital that used to produce televisions—or used to produce things that were traded for televisions—could then shift to producing other goods. Unfortunately for us, we don’t get those goods from other countries for free. But if we can get them cheaper than it would cost us to produce them ourselves, we’re better off.

Sometimes international trade is seen in terms of competition between nations. We should view it, instead, like domestic trade, as a form of cooperation. By trading, people in both countries can prosper. And we should remember that goods are produced by individuals and businesses, not by nation-states. “South Korea” doesn’t produce televisions; “the United States” doesn’t produce the world’s most popular entertainment. Individuals, organized into partnerships and corporations in each country, produce and exchange. In any case, today’s economy is so globally integrated that it’s not clear even what a “Japanese” or “Dutch” company is. If Apple Inc. produces iPads in China and sells them in Europe, which “country” is racking up points on the international scoreboard? The immediate winners would seem to be investors and engineers in the United States, workers in China, and consumers in Europe; but of course the broader benefits of international trade will accrue to investors, workers, and consumers in all those areas.

The benefit of international trade to consumers is clear: We can buy goods produced in other countries if we find them better or cheaper. There are other benefits as well. First, it allows the division of labor to work on a broader scale, enabling the people in each country to produce the goods at which they have a comparative advantage. As Mises put it, “The inhabitants of [Switzerland] prefer to manufacture watches instead of growing wheat. Watchmaking is for them the cheapest way to acquire wheat. On the other hand the growing of wheat is the cheapest way for the Canadian farmer to acquire watches.”

I hope that USTR Froman, Senate Finance Committee chair Orrin Hatch, and other advocates of trade liberalization will come to understand and to advocate the strong case for free trade, which economists have understood since Adam Smith in 1776.

The Commerce Clause, while invoked since the New Deal as a warrant for progressive federal policy, actually provides protections for businesses against state regulations that burden interstate commerce. In Brown-Forman Distillers Corp. v. New York State Liquor Authority (1986), for example, the Supreme Court struck down New York’s Alcoholic Beverage Control Law on the ground that it regulated the price of alcohol outside the state.

Or take this hypothetical example: Colorado gets its electricity from a grid that services 11 states, Canada, and Mexico. Electricity used anywhere within this grid can come from any source that services it and, once loaded onto the grid, this electricity is identical, regardless of how it was produced or the fuel used to generate it. Yet Colorado renewable-energy regulations require that all energy that enters the state be created in compliance with certain parochial standards, which excludes the type of power generated by a particular power company in California. What Colorado has effectively enacted is an extraterritorial law, regulating economic activity outside the state and thus violating the Commerce Clause (more technically, the Dormant Commerce Clause, in the sense that Congress hasn’t explicitly legislated to prohibit the Colorado regulation).

This situation is not hypothetical, however, but the actual case of Energy & Environment Legal Institute v. Epel, wherein the U.S. Court of Appeals for the Tenth Circuit held that Colorado’s regime evaded Commerce Clause scrutiny because it did not consist of pure price controls. No matter that the regulations has a clear anticompetitive and protectionist effect on the interstate energy market—favoring in-state (complying) producers over out-of-state ones—the court sanctioned any state’s adoption of extraterritorial regulation so long as the state is savvy enough to crafts its rules as something other than a price-control mechanism.

Accordingly, Cato has joined the Pacific Legal Foundation, National Federation of Independent Business, and Reason Foundation on an amicus brief supporting a request that the Supreme Court take the case and restore a (relatively) free and competitive interstate energy market. This brief comes at an important crossroads for state-federal economic regulation, particularly relating to environmental norms. Indeed, California’s attempt to regulate out-of-state emissions was raised before the Court in Rocky Mountain Farmers Union v. Corey (2015)—turnabout is fair play?—and North Dakota is suing Minnesota for attempting to regulate its neighbors’ emissions.

The ban on extraterritorial regulation vis-à-vis the Commerce Clause is essential to preserving the competitive-federalism regime enshrined in the Constitution and the Supreme Court’s precedents. If states were able to impose their regulatory schemes on out-of-state companies in interstate industries, the 50 “laboratories of democracy” would not be able to function as such.

Under a regime of federal rivalry, competition for voters, taxpayers, and industries forces states to be accountable to those they govern and innovative in their search for solutions to vexing problems. If a state finds a cheaper, more efficient way to solve a policy conundrum, people and businesses will flock to it. But if states can impose the costs of their regulatory regimes on their neighbors, they could blunt this competitive effect.

The Supreme Court should take up Epel and flesh out federal constitutional protections for interstate commerce.

Nearly a week has passed since the Fifth Circuit affirmed the injunction against President Obama’s executive action on immigration, known as DAPA (Deferred Action for Parents of Americans). After digesting the 70-page majority opinion and 54-page dissent (plus the 11-page DAPA memo that’s an appendix), I can say that there aren’t any real surprises but we should keep in mind the following points as this case moves forward to the Supreme Court:

  1. Standing is very important. Have the plaintiffs been hurt by the federal action in a way that gets them into court? If the 26 states simply don’t like President Obama’s policy, that isn’t enough. Both the Fifth Circuit and the district court accepted Texas’s argument that DAPA would force the state to incur the cost of issuing driver’s licenses, which is indeed a direct cost of an executive decision that expands eligibility for various state benefits. Ironically, one of the key precedents supporting the argument for state standing is Massachusetts v. EPA (2007), which found states to have standing to challenge the Bush-era EPA on climate-change (in)actions because, roughly speaking, their coastlines are eroding. Texas’s claim of harm here, if anything, seems stronger and less nebulous.
  2. “Justiciability” is similarly crucial. (Indeed, it takes more than half the majority opinion to get past these “threshold” matters.) That is, even if the state plaintiffs are hurt such that they have standing, if a court can’t adjudicate the dispute – because, say, there’s an exercise of prosecutorial discretion that courts don’t review – then the case should be dismissed as “non-justiciable” (as the dissent argues). This is likely to be the point on which the case will ultimately turn; just look at the administration’s immediate reaction: “The Department of Justice remains committed to taking steps that will resolve the immigration litigation as quickly as possible in order to allow DHS to bring greater accountability to our immigration system by prioritizing the removal of the worst offenders, not people who have long ties to the United States and who are raising American children.” But the lawsuit doesn’t challenge the ability of government to prioritize the deportation of human traffickers over nannies – and indeed immigration authorities have been doing that since time immemorial! Can you shoehorn an entirely new federal program/benefit into that uncontroversial enforcement discretion?
  3. The appellate court didn’t simply affirm the district court’s finding that the executive action violated the Administrative Procedure Act, but also added a further justification, that DAPA exceeds the executive’s statutory authority. If the Supreme Court ends up leaving the injunction in place, it doesn’t much matter for practical purposes whether it does so because (a) the administration violated the APA by not engaging in notice-and-comment rulemaking, (b) it doesn’t have the legal authority under the relevant immigration laws, or (c) it exceeds the president’s power under Article II’s Take Care Clause (as Cato argues in our amicus brief). The district judge focused entirely on the first (administrative) point, with which the Fifth Circuit agreed but then went on to provide an alternative holding on the second (statutory) point. And the third (constitutional) point looms atmospherically in the background.

For more detailed examinations of the Fifth Circuit ruling, see Josh Blackman’s diligent series of posts on standing, justiciability, the procedural claim, the substantive claim,  the dissenting opinion generally and on standing and justiciability.

So where do we go from here? The Supreme Court is certain to take the case, but the question is when: recent practice suggests that for the case to be heard this term, the Court must be in a position to “conference” the case by the end of January. That means that all the briefing must be complete in time for consideration by the justices and their clerks a little before that. SCOTUSblog’s sources indicate that we can expect the government to file a cert petition by the end of the week. Texas will then have 30 days to reply. The government will probably discourage its amici from filing briefs because that would give Texas reason to ask for a 30-day extension on its deadline – but Texas could ask for that extension regardless, and the Court grants such requests as a matter of course.

But the government may not actually be in such a hurry. Earlier this year, it delayed in filing its “emergency” motion to stay the district court’s February ruling, and then it took a while to decide how to respond to the Fifth Circuit’s denial of that motion, ultimately deciding against seeking Supreme Court review at that stage. So it could be that for either political or legal reasons – because it’s unsure or dubious of whether it will find five votes at the high court – it won’t mind having Texas v. United States pushed into the next term.

That would keep the case alive through the presidential election. Hillary Clinton’s response on this issue at the Democratic debate Saturday night was muddled – she thought that the government had already appealed and claimed that DAPA covered the parents of so-called DREAMers, which it doesn’t (because the president’s own legal advisers said he couldn’t go that far) – but she has said previously that she would expand on President Obama’s actions.

And, of course, if a Republican wins the White House, he or she could withdraw the DAPA memo, thereby ending the program and mooting the case. Stay tuned.

[Cross-posted from Forbes.com]

It isn’t every day that University of Chicago economists Eugene Fama and Richard Thaler see eye to eye. Fama, who won the Nobel Prize in 2013, is one of the best known proponents of the efficient market hypothesis. Thaler, in contrast, champions behavioral economics. Indeed, Thaler spends a great deal of time criticizing the efficient market hypothesis in his recent book, Misbehaving.

Both economists, however, seem to be on the same side when it comes to bitcoin. Commenting on Fama’s recent interview with the Bitcoin Uncensored podcast, Thaler tweets: “Must say I agree with Fama here. Only value of bitcoin seems to be to crooks& [sic] tax cheats. Negative social value.”

Fama and Thaler are not alone. Many regulators worry that, absent sufficient government oversight, cryptocurrencies like bitcoin will be used to conduct illegal transactions and transfers on a massive scale. For example, Sen. Joe Manchin has claimed that the “clear ends of Bitcoin [are] for either transacting in illegal goods and services or speculative gambling.” Likewise, Sen. Charles Schumer has described bitcoin as “an online form of money laundering.” Some have even warned that bitcoin might be used to fund terrorism. Like Fama and Thaler, many people outside the bitcoin community seem to believe bitcoin is basically for criminals.

But they’re wrong. To date, the black market transactions that trouble Fama, Thaler, and others have been quite limited. Consider Silk Road, the premier bitcoin-for-drugs website in operation from February 2011 to October 2013. The best available evidence suggests there were roughly $1.2 million worth of transactions made on Silk Road each month. More recent estimates put the figure at roughly $4.7 million per month. That modest figure hardly made Silk Road the Amazon of drugs, as Gawker once claimed. Amazon averaged roughly $6,204.2 million per month in 2013. That’s more than 370 times the highest monthly transactions volume estimated for Silk Road. Silk Road was not even the Etsy ($112.32 million per month) of drugs.

One might counter that the volume of transactions on Silk Road was low because so few people were using bitcoin at the time. But the volume of transactions on the Silk Road was also small relative to the total volume of transactions conducted in bitcoin. The monthly transactions volume for the entire bitcoin system averaged just under $16 billion from February 2011 to October 2013. That means that Silk Road transactions were responsible for a measly 0.03 percent of all transactions conducted in bitcoin. In other words, it was not just that few people were using bitcoin, but that of those who did few were buying and selling illegal substances on Silk Road.

What about terrorism? The U.S. Treasury Department itself has found no evidence of bitcoin’s widespread use in funding terrorism. That really shouldn’t come as a surprise. Terrorist groups have much more convenient ways to secure funding outside of legitimate banking channels. Moreover, to the extent that terrorists are located in developing regions, they would encounter the same hurdles to adopting bitcoin that others in developing countries face.

If they aren’t buying cocaine or funding terrorists, what are users doing with all that bitcoin? Answer: a lot of things. They are purchasing flights, Xbox games, and, well, anything sold on Overstock.com. They are paying college tuition. They are ordering satellite television. They are purchasing premium memberships on dating sites and then using Yelp! to find a romantic coffee shop or trendy bar that—you guessed it—accepts bitcoin. They are sending remittances to family members around the world at a fraction of the usual cost. They are donating to support art, open source projects, and foundations. A better question would be: what aren’t they doing with bitcoin?

Contrary to popular opinion, bitcoin is not basically for criminals. It is barely for criminals. In that respect, it resembles ordinary cash—that is, Federal Reserve notes. As a matter of fact, the case is probably stronger for eliminating cash than bitcoin. Harvard economist Ken Rogoff has claimed more than half of all cash in circulation is used to hide transactions from tax or law enforcement authorities. More formal estimates by Edgar Feige suggest roughly 48 percent of cash held by the public is employed in the domestic underground economy. For those interested in transacting outside the law, cash—not bitcoin—is king.

In short, most bitcoin users seem to be a lot like you and me, if perhaps a bit more tech savvy. They want to purchase legal goods and services and remit funds as cheaply and conveniently as possible. To the extent that bitcoin is more effective than traditional payment mechanisms for making some transactions, it lowers transaction costs, encouraging production and exchange.

In other words, Thaler is wrong: bitcoin has a positive social value.

[Cross-posted from Alt-M.org]

Is pre-kindergarten part of elementary and secondary education? By definition, no. But according to preliminary reports about what is in a compromise to reauthorize the No Child Left Behind Act – really, the latest iteration of the Elementary and Secondary Education Act (ESEA) – a preschool “competitive grant” program will be added to the law. And that’s just one of several troubling items that will reportedly be in the final legislation.

One hallmark of good lawmaking are laws that are easily understood by the people, and larding on lots of items not germane to the topic of a law is one way to move away from that democratic ideal. Adding pre-k to the ESEA lards on, though as I’ll discuss in a moment, apparently the preschool addition isn’t all that will heavily complicate the legislation.

The bigger problem with expanding federal funding and reach on preschool is that the evidence is preschool has few if any lasting benefits, at least that have been rigorously documented for any large, modern efforts. Infamously, that includes Head Start and Early Head Start, which the federal government’s own studies have found to be largely impotent, and in the case of Early Head Start, potentially detrimental to some groups. The compromise would apparently also keep the 21st Century Community Learning Centers program, which federal research has also shown to be impotent of even counterproductive, but at least it is k-12.

The second major strike against this compromise, assuming the early reporting is correct, is that it will apparently be very complex. This is a big problem: Not only is complicated legislation inaccessible to the public, it can enable ambitious executives to exploit impenetrability and essentially write law through regulation. And if we have learned any lesson from the Obama administration’s NCLB waivers – and the wisdom of the Founders – it is that presidents will tend to use whatever power they are allowed.

Third, the compromise apparently would require states to intervene in the bottom five percent of schools based on test-score performance; schools with less than two-thirds of kids graduating; and schools where various achievement gaps aren’t closing. That sounds like NCLB-lite: not as many schools and districts directly subject to state and federal control, but still quite a few.

Finally – at least until more information comes out – there is no evidence that the compromise eschews the back-door veto over state plans that both the House and Senate bills would give the Secretary of Education. This would continue to keep great power in the hands of the executive branch, albeit more shadowy by requiring that the Secretary keep saying “no” to things he doesn’t like rather than just saying what he wants. But that’s what telephones and visits to states are for, right?

Oh, one more thing: This is all unconstitutional.

The U.S. Department of Education spends tens of billions of dollars a year on subsidies for higher education. Federal Pell grants are more than $30 billion a year, federal student loans are about $100 billion a year, and grants to colleges and universities are $2.5 billion a year.

College aid is growing rapidly, which is imposing a rising burden on taxpayers. And the subsidies create numerous harmful effects, as Neal McCluskey and I discuss in our new study posted at Downsizing Government.

A key concern is that government money comes with government control. There is increasing pressure to top-down plan America’s higher education system from Washington. As we’ve seen with health care, K-12 schools, disaster aid, transportation, school lunches, and many other activities, federal subsidies invariable end up being the vehicle for central planning.  

This is a big threat to the future of higher education, as our study explains. When the subsidies start flowing, the do-gooders in Washington just can’t keep their hands off. Regulatory manipulation is just too tempting for the politicians and bureaucrats, who hide their big-government impulses behind conservative-sounding phrases such as “standards” and “accountability.”

Even with its problems, the American postsecondary education system is the best in the world. Driven by consumer choice and competition between independent institutions, it has an unmatched vibrancy. However, increasing federal control and subsidization from Washington is creating a serious threat.

Efforts by the current and prior administrations to micromanage accreditation and other aspects of higher education threaten to undermine the system’s diversity and flexibility. The waste and bureaucracy of top-down federal control is exemplified by the regulatory juggernaut of education’s Title IX, the gender discrimination rules.

As we conclude in our study, the best way to avert rising central planning is to cut, and ultimately end, federal subsidies for higher education.

Jeremy Dear, an Albuquerque police officer, has been reinstated despite the fact that his body camera was not on when he shot and killed 19-year-old Mary Hawkes, a suspected car thief who allegedly pointed a gun at Dear during a foot chase in April last year. Dear’s reinstatement is a reminder that officers who do not have their body cameras on when they are supposed to should face harsh disciplinary consequences.

In June 2013 Dear, who was the subject of numerous complaints, was ordered to have his body camera on for every interaction with the public. According to reporting from the Albuquerque Journal, Personnel Board documents show that Dear didn’t have this body camera on for about half of the calls he responded to. Dear’s failure to record his encounters with citizens prompted Albuquerque police chief Chief Gorden Eden to fire him last December.

At the time of the Hawkes shooting Dear was equipped with TASER’s Axon Flex camera. Below are illustrations from the instruction manual for the camera, showing how the camera is attached to the collar and connected to the controller.

Dear claims that his camera was accidentally unplugged from the controller when he killed Hawkes. Dear’s camera was sent to TASER for analysis. TASER’s report on Dear’s camera states that it was shut down and activated a number of times on the day of the Hawkes shooting and that the camera would not have shut down because of low battery power.

TASER’s report also stated that the connector cable on Dear’s camera was damaged at both ends and that the cable retention clip on the controller was missing, thereby making the removal of the cable from the controller “easy with minimal force.”

The report went on the say that “Stress was placed on the cable by twisting and pulling it but without disconnecting it from the system. This stress did not result in a powering down of the system.”

TASER’s report doesn’t contradict Dear’s claim that his camera’s cord was unintentionally detached from the controller. But it is worth remembering that his camera did activate and power down normally numerous times on the day of the shooting.

Dear’s case raises questions about what the repercussions should be for officers who fail to have their cameras activated when they should. I and the ACLU’s Jay Stanley think that in such circumstances there ought to be “Direct disciplinary action against the individual officer.”

Phaeodactylum tricornutum is a marine diatom that is also a potential alternative energy source due to its high growth rates and lipid (fat) content, the latter of which – according to Wikipedia  – constitutes about 20 to 30 percent of total dry cell weight under standard culture conditions. Given as much, this species is of interest to scientists, such as the seven-member research team of Wu et al. (2015), who recently conducted an experiment to determine how this potential biofuel responds to different levels of atmospheric CO2. More specifically, the group of Chinese researchers studied the response of P. tricornutum to three levels of CO2 (150, 350 and 1500 parts per million (ppm)) over a period of seven days. 

For comparative purposes, a CO2 concentration of 150ppm is around the threshold value required to sustain plant growth on this earth. We came perilously close to this at the nadir of the last ice age. 350ppm is the concentration from a quarter-century ago (we’re around 400ppm now) and 1500ppm is quite a bit higher than even the most optimistic forecasts can get it to around 2100.

And what did they learn? As shown in the figure below, diatom growth rates rose with the level of CO2 treatment. The growth at 350 and 1500 ppm treatments were approximately 70 and 192 percent greater than that observed in the lowest CO2 treatment (150 ppm). And those values may be conservative, given that growth rates at the two higher CO2 concentrations appear to still be rising at the end of the experiment on day 7 (i.e., the green and red lines have not peaked). Similar trends were seen in culture dry weights, where the mean dry weight values reported for the medium and high CO2 treatments were 31 percent and 195 percent greater than in the low CO2 treatment. Lastly, lipid content, expressed as a percent of dry cell weight, amounted to 33, 36 and 54 percent in the 150, 350 and 1500 ppm treatments, respectively.

In discussing their findings, Wu et al. note their results are “consistent with numerous previous studies that higher levels of CO2 support higher growth rates.” And, they further demonstrate the possible viability of using P. tricornutum as a biofuel, which many persons today consider an added benefit.



Wu, S., Huang, A., Zhang, B., Huan, L., Zhao, P., Lin, A. and Wang, G. 2015. Enzyme activity highlights the importance of the oxidative pentose phosphate pathway in lipid accumulation and growth of Phaeodactylum tricornutum under CO2 concentration. Biotechnology for Biofuels 8: 78, DOI 10.1186/s13068-015-0262-7.

The Daily Caller has an excellent article recounting that it wasn’t just opponents who saw trouble ahead for ObamaCare’s health-insurance cooperatives, of which more than a dozen have now collapsed. 

Susan L. Donegan was commissioner for Vermont’s Division of Insurance in 2013 when she refused to issue a license to the proposed Vermont Health CO-OP, saying it failed to meet state standards. Her action barred the Obamacare non-profit from selling health insurance in the state…

Today, she looks like a prescient state official who likely saved thousands of Vermonters from buying their health insurance from a doomed insurer.

That’s because 13 of the 24 co-ops set up under Obamacare have collapsed, costing the federal treasury $1.3 billion. More than 800,000 co-op customers now find themselves without health insurance coverage and are scrambling to find new policies due to the co-op failures. 

Turns out that some of the biggest problems she identified two years ago in her state also doomed co-ops across the country…

Denying a license to the health co-op was not an easy decision for Donegan, who first joined Democratic Gov. Peter Shumlin’s administration as a deputy insurance commissioner in 2010.

First, she already knew when the co-op’s application arrived at her her office that federal officials in Washington, D.C., had pre-approved the co-op’s plan and allocated to it $33 million in taxpayer funds.

Second, she knew the co-ops were an important part of President Obama’s signature health reform effort. Obama is extremely popular in Vermont, having garnered 67 percent of the vote in his 2008 and 2012 campaigns…

Donegan sensed trouble as soon as she read the co-op’s application. There were optimistic and questionable forecasts, a board filled with friends, sweetheart deals, high salaries, deep conflicts of interest and a staff with little business expertise.

The failure of more than a dozen other ObamaCare co-ops suggests these problems were not limited to Vermont’s proposed co-op. Yet regulators in those states, not to mention CMS, nevertheless approved them.

One might even say the rule is that government regulators either were unable to spot these co-ops’ looming insolvency, or worse, allowed political considerations to trump their judgment; and Vermont is the exception, where regulators both identified the problem and had the courage to pay the political cost of denying that carrier a license. Something to keep in mind when contemplating the costs and benefits of government regulation of insurance-carrier solvency.

Any count of failed ObamaCare co-ops should be sure to include Vermont’s.

H/T: Greg Scandlen.

Republican presidential candidates Ted Cruz and Marco Rubio both impressed audiences in the last debate.  Senator Rubio’s positions on immigration are discussed frequently, but Senator Cruz is normally viewed as an immigration restrictionist – an unfair characterization.  It’s more important to look at Senator Cruz’s actions when he offered amendments to the 2013 “Gang of Eight” comprehensive immigration reform bill (S. 744) than it is to cherry-pick a few quotes.  Senator Cruz did end up voting against S. 744, but only after he offered many amendments.   

Senator Ted Cruz was a tremendous supporter of skilled immigration and supported massively expanding the size of those programs, even beyond what was proposed in S. 744.  He offered four amendments (1324, 1326, 1586, 1587), to expand the number of employment based green cards to over a million annually.  Senator Cruz offered two amendments (1325 and 1585) to increase the number of H-1B visas issued annually to 325,000 while S. 744 allowed an upward bound of 180,000 annually (with some upward adjustments possible).  In other words, Senator Cruz’s amendment intended to practically double the number of H-1B visas over that which was proposed in the Senate’s 2013 comprehensive immigration reform bill.  Amendment 1587 also increased the number of H-1B visas and employment based green cards.  Senator Cruz’s amendments would have also allowed the spouses of all H-1B visa holders to work legally – going beyond President Obama’s actions to increase work eligibly for those spouses.  Expanding the number of green cards and H-1B visas for skilled workers would have been a tremendous boost to the U.S. economy.   

Senator Cruz also introduced two amendments (1322 and 1583) to guarantee that immigrants legalized under S. 744 could never naturalize.  Importantly, he did not attempt to bar their ability to legalize their status, he just attempted to block their ability to naturalize – a position similar to that taken by Jeb Bush in his 2013 book Immigration Wars.  Senator Cruz’s staff has claimed that these actions were intended as poison pills to kill S. 744.  If they were poison pills, why did Senator Cruz seek to massively expand the highly skilled immigration system too?   

Senator Cruz introduced six amendments (1482, 1584, 1582, 1580, 1323, 1321) to permanently restrict any legalized immigrant who had unlawful status, at any time, from accessing means tested welfare benefits or Obamacare benefits. He introduced as many amendments to bar their access to welfare and Obamacare as he did to increase the number of highly skilled immigrants.  He also introduced two amendments to limit Obamacare funding until the unlawful immigrants have all left registered provisional immigrant status (1580 and 1482).

He introduced two amendments (1581 and 1295) to guarantee that states have the power to require proof of citizenship before letting an individual vote.

Lastly, Senator Cruz introduced two amendments (1320 and 1579) to create border security benchmarks that must be met before unlawful immigrants can begin to legalize.  Included are punishments for government employees who do not meet their requirements and mandates for how border security resources are allocated. 

Senator Cruz’s amendments support increasing skilled immigration, restricting welfare access to legalized immigrants who used to be unlawful, allowing for the legalization of unlawful immigrants but blocking their path to citizenship, guaranteeing that states can still check for proof of citizenship before allowing people to vote, and creating border security benchmarks that trigger the legalization program once they are met.  His record on immigration is mixed, but he is far from a restrictionist.  Here is a chart of the amendments Senator Cruz introduced, a brief summary of them, and link to the text.   


Date Introduced Amendment Number Action Link 6/18/13 1321 Bars access to all means tested welfare benefits and the ACA for immigrants who were, at anytime, unlawfully present in the United States.  This would apply even if the immigrant gains legal status at some future point. https://www.congress.gov/amendment/113th-congress/senate-amendment/1321 6/18/13 1322 Unlawful immigrants who are legalized under this act or who receive a blue card are permanently ineligible for citizenship. https://www.congress.gov/amendment/113th-congress/senate-amendment/1322 6/18/13 1323 Strengthens the bars against legalized immigrant access to welfare benefits or the ACA at the state, local, and national levels. https://www.congress.gov/amendment/113th-congress/senate-amendment/1323 6/18/13 1324 Increases number of employment-based green cards to a maximum of 1,012,500 annually, eliminates diversity visa program, restricts family-based immigration in ways similar to original version of S. 744, and mandates creation of an online portal to each visa application process. https://www.congress.gov/amendment/113th-congress/senate-amendment/1324 6/18/13 1325 Increases number of H-1B workers to 325,000 annually and allows all spouses of H-1B workers to be employed. https://www.congress.gov/amendment/113th-congress/senate-amendment/1325 6/18/13 1326 Combines 1324 and 1325 with some slight changes. https://www.congress.gov/amendment/113th-congress/senate-amendment/1326 6/17/13 1295 Nothing in this bill shall be construed to limit state authority to require proof of citizenship for voting. https://www.congress.gov/amendment/113th-congress/senate-amendment/1295 6/18/13 1320 Requires that certain border security requirements be met before DHS can start processing legalizations of unauthorized immigrants. https://www.congress.gov/amendment/113th-congress/senate-amendment/1320 6/24/13 1579 Requires that certain border security requirements be met before DHS can start processing legalizations of unauthorized immigrants. Further allows for salary reductions for government employees if border security benchmarks aren’t met and allocates DHS funding for border security. https://www.congress.gov/amendment/113th-congress/senate-amendment/1579 6/24/13 1580 Funding limitations for the ACA and other federal health benefits. https://www.congress.gov/amendment/113th-congress/senate-amendment/1580 6/24/13 1581 Nothing in this bill shall be construed to limit state authority to require proof of citizenship for voting. https://www.congress.gov/amendment/113th-congress/senate-amendment/1581/… 6/24/13 1582 Bars access to all means tested welfare benefits and the ACA for immigrants who were, at anytime, unlawfully present in the United States.  This would apply even if the immigrant gains legal status at some future point. https://www.congress.gov/amendment/113th-congress/senate-amendment/1582 6/24/13 1583 Unlawful immigrants who are legalized under this act or who receive a blue card are permanently ineligible for citizenship. https://www.congress.gov/amendment/113th-congress/senate-amendment/1583 6/24/13 1584 Bars access to all means tested welfare benefits and the ACA for immigrants who were, at anytime, unlawfully present in the United States.  This would apply even if the immigrant gains legal status at some future point. https://www.congress.gov/amendment/113th-congress/senate-amendment/1584 6/24/13 1585 Increases number of H-1B workers to 325,000 annually and allows all spouses of H-1B workers to be employed. https://www.congress.gov/amendment/113th-congress/senate-amendment/1585 6/24/13 1586 Increases number of employment-based green cards to a maximum of 1,012,500 annually and restricts family-based immigration in ways similar to original version of S. 744, and mandates creation of an online portal to each visa application process. https://www.congress.gov/amendment/113th-congress/senate-amendment/1586 6/24/13 1587 Increases number of employment-based green cards to a maximum of 1,012,500 annually, eliminates diversity visa program, restricts family-based immigration in ways similar to original version of S. 744, and mandates creation of an online portal to each visa application process. https://www.congress.gov/amendment/113th-congress/senate-amendment/1587 6/20/13 1482 Funding limitations for the ACA and other federal health benefits. https://www.congress.gov/amendment/113th-congress/senate-amendment/1482

Today, Customs and Border Protection Commissioner Gil Kerlikowske announced that the agency would spend three additional months studying whether body-worn cameras (BWCs) are suitable for deployment by CBP. The agency has been studying BWC deployment since 2014, and the effort comes after years of intense pressure by non-governmental organizations over a pattern of lethal use-of-force incidents since 2010.

The draft feasibility report released by CBP appears to give federal employee unions virtual veto power over the deployment of the cameras, stating “Successful union negotiations are required prior to implementation.”

The report also makes clear that the cameras are being sold to CBP agents as a shield against public complaints, and less as an officer accountability tool:

Officers and agents must be willing to wear and operate their BWCs, without fear of reprisal. Officers and agents must have the confidence of knowing that the primary purpose of BWCs is to corroborate their sworn testimony, not create frivolous punishments. They also must be assured their privacy will be protected from unnecessary review and release.

In addition, the report outlines a number of factors that “may adversely affect CBP officers/agents, operations, and mission (sic).” However, upon closer examination many of these factors are easily addressed and need not impede the deployment of body cameras.

For instance, the working group writes:

The BWCs increase the cognitive load experienced by officer/agents, causing them to redirect their attention towards the operation of the camera versus allowing them to focus on the encounter. BWCs may also cause an officer/agent to second-guess a course of action.

Body cameras may take some getting used to, but the fact that some officers find operating the cameras difficult or distracting should not prevent the CBP from deploying body cameras. After all, dash cameras also presumably increased officers’ “cognitive load” and caused some officers to second-guess their actions. And yet, dash cameras as now considered perfectly normal law enforcement tools. During a press call on November 12, CBP officials conceded that it was a mistake on their part not to have conducted a dash camera review as part of the initial BWC evaluation process, an oversight that will allegedly be corrected during the upcoming follow on evaluation process.

The working group also states:

BWCs cannot capture the physiological (sic) and psychological phenomena that an officer/agent experiences during a high stress situation. Consequently, the footage may not accurately convey the same sense of threat that is experienced by an officer/agent.

But no one is claiming that body cameras will capture everything an officer feels during an encounter or that body camera footage should be the only piece of evidence presented to investigators. Body camera footage should of course only be part of any misconduct investigation.

The draft goes on to state that the CBP’s “diverse operational environments” make its use of body cameras “less conducive than its application within the traditional law enforcement environment.”

The CBP ought to perhaps seek advice from other federal agencies such as FEMA and the Department of Defense if it believes that body cameras cannot be used in “diverse” environments.

Another concern that can be adequately addressed relates to intelligence gathering. The working group is concerned that body cameras

…may negatively impact intelligence gathering, such that the public may be less likely to divulge information if they know they are being recorded.

This is a concern taken seriously by civil libertarians and law enforcement officials. Work published by the Cato Institute addresses the issue of informants and undercover agents, recommending that police officers not be required to have body cameras on during interactions with sensitive intelligence sources. During the 2012 body camera experiment in Rialto, California officers were told not to have body cameras on during interactions with informants.

No one wants to see body camera deployments resulting in the compromising of confidential sources. Thankfully, this issue can be addressed by a policy allowing officers to turn cameras off when they are meeting with an informant or undercover agent.

In the November 12 press call, CBP officials stated that they had not asked for supplemental funding for the proposed BWC rollout for FY16 but that funding is being requested for FY17. Because CBP has yet to decide exactly how many cameras will be deployed and how much storage for the video footage will cost, CBP officials will only say they expect the final program to cost “in the tens of millions” of dollars. One way to pay for it would be to end DHS’s failed surveillance drone program and reprogram the funds for the BWC effort, but CBP officials have thus far not asked for such authority and have shown no interest in giving up the drone program.

It is crucial that the CBP gets its body camera policy right. While many Americans may think of the CBP as an agency that only operates on our nation’s borders its officers can search the roughly two thirds of Americans who live within 100 miles thanks to its internal checkpoints. Many of the use-of-force incidents that have caused the agency so much public grief have occurred at these checkpoints.

It is our hope that when CBP officers misbehave that it is captured by body camera and not by a cell phone in the hands of a conscientious member of the public, as was the case when Jessica Cooke was stopped at an internal checkpoint in New York.

Many of the CBP’s concerns related to body cameras can be addressed, as we have seen through the effective deployment of BWCs by other law enforcement agencies across the country. What is lacking is a clear sense of urgency to do so on the part of CBP leadership. The CBP’s “go slow” approach is extremely unwise given the number of lethal use-of-force incidents to date and the clear public safety benefits—for officers and the public–of a speedier BWC deployment.

My blog on a federal computer project that went six times overbudget prompted an expert on information technology (IT) to send me an interesting email.

In this study on government failure and this study on cost overruns, I discussed some of the reasons why $100 million projects end up costing $200 million.

Bob Charette, who is a contributing editor to IEEE Spectrum, has related views based on his decades of federal and private technology experience. He pointed me to some very useful articles he wrote on costly IT projects, including federal projects. He’s also penned numerous articles on chronic problems in the military acquisition system.

In an email, Bob provided some thoughts on why we often see delays and cost overruns on federal technology projects. If I am summarizing accurately, he observed:

  • Government IT projects are often harder than commercial projects, so government projects may have more opportunities to fail than commercial ones.
  • It is much, much harder to get an IT project approved in government because of all the hoops and stakeholders involved. So once it is, keeping the program alive is “Job One” for everyone involved. That also helps motivate vendors to not only bid low, but also government acquisition folks to accept unrealistic low bids, as well as put out unrealistic requirements because they believe shortcomings can always be fixed later.
  • Part of the problem is “Hubble Psychology,” which the NASA IG defined as an “expectation among NASA personnel that projects that fail to meet cost and schedule goals will receive additional funding and that subsequent scientific and technological success will overshadow any budgetary and schedule problems.”
  • For federal employees, to proactively identify risks (i.e., potential problems) is the kiss of death not only for individuals, but for the projects themselves. You don’t want to publicly admit there is uncertainty associated with your project without getting hammered by Congress and much of the press. So risks are actively hidden until not only do they become problems, but full-blown crises.
  • Another issue is that success in government IT projects is often amorphous. In the private sector, profit and loss are binary and easy to measure. But in government, success is measured against one or more (sometimes competing) values that are rarely objectively measureable.
  • Since government IT projects are typically long-lived, objectives morph so it is not uncommon for no one to remember what the project was originally supposed to actually do, or the original sponsors to even be around.
  • Folks on Capitol Hill like to play chief software designer/architect and specify government IT systems that are difficult, if not impossible, for the dollars and time allocated (e.g., Real ID was a real doozy in this regard).  
  • Research has found that if an IT project encounters a cost overrun of, say, 20 percent halfway through the schedule, then the cost overrun at the project’s end won’t just be double (40 percent), but far more than that.

In June, the Government Accountability Office reported on the government’s $80 billion annual investment in IT, and found, “investments frequently fail, incur cost overruns and schedule slippages, or contribute little to mission-related outcomes.”

Bob’s observations point to some reasons why that is the case.