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When I was younger, my left-wing friends said conservatives unfairly attacked them for being unpatriotic and anti-American simply because they disagreed on how to deal with the Soviet Union.

Now the shoe is on the other foot.

Last decade, a Treasury Department official accused me of being disloyal to America because I defended the fiscal sovereignty of low-tax jurisdictions.

And just today, in a story in the Washington Post about the Center for Freedom and Prosperity (I’m Chairman of the Center’s Board of Directors), former Senator Carl Levin has accused me and others of “trading with the enemy” because of our work to protect and promote tax competition.

Here’s the relevant passage.

Former senator Carl Levin (D-Mich.)…said in a recent interview that the center’s activities run counter to America’s values and undermine the nation’s ability to raise revenue. “It’s like trading with the enemy,” said Levin, whose staff on a powerful panel investigating tax havens regularly faced public challenges from the center. “I consider tax havens the enemy. They’re the enemy of American taxpayers and the things we try to do with our revenues — infrastructure, roads, bridges, education, defense. They help to starve us of resources that we need for all the things we do. And this center is out there helping them to accomplish that.”

Before even getting into the issue of tax competition and tax havens and whether it’s disloyal to want limits on the power of governments, I can’t resist addressing the “starve us of resources” comment by Levin.

He was in office from 1979-2015. During that time, federal tax receipts soared from $463 billion to $3.2 trillion. Even if you only count the time the Center for Freedom and Prosperity has existed (created in late 2000), tax revenues have jumped from $2 trillion to $3.2 trillion.

At the risk of understatement, Senator Levin has never been on a fiscal diet. And he wasn’t bashful about spending all that revenue. He received an “F” rating from the National Taxpayers Union every single year starting in 1993.

Let’s now address the main implication of the Washington Post story, which is that it’s somehow wrong or improper for there to be an organization that defends tax competition and fiscal sovereignty, particularly if some of its funding comes from people in low-tax jurisdictions.

The Post offer[s] an inside look at how a little-known nonprofit, listing its address as a post office box in Alexandria, became a persistent opponent of U.S. and global efforts to regulate the offshore world. …the center met again and again with government officials and members of the offshore industry around the world… Quinlan and Mitchell launched the center in October 2000. …The center had two stated goals. Overseas, the center set out to persuade countries on the blacklist not to cooperate with the OECD, which it derided as a “global tax cartel.” In Washington, the center lobbied the Bush administration to withdraw its support for the OECD and also worked to block anti-tax haven legislation on Capitol Hill. To spread the word, the center testified before Congress, published reports and opinion pieces in leading financial publications, and drafted letters to lawmakers and administration officials. Representatives of the center crisscrossed the globe and sponsored discussions in 2000 and 2001, traveling to London, Paris, the Cayman Islands, the Bahamas, Panama, Barbados and the British Virgin Islands.

To Senator Levin and other folks on the left, I guess this is the fiscal equivalent of “trading with the enemy.”

In reality, this is a fight over whether there should be any limits on the fiscal power of governments. On one side are high-tax governments and international bureaucracies like the OECD, along with their ideological allies. They want to impose a one-size-fits-all model based on the extra-territorial double-taxation of income that is saved and invested, even if it means blacklisting and threatening low-tax jurisdictions (the so-called tax havens).

On the other side are proponents of good tax policy (including many Nobel Prize-winning economists), who believe that income should not be taxed more than one time and that the power to tax should be constrained by national borders.

And, yes, that means we sometimes side with Switzerland or Panama rather than the Treasury Department. Our patriotism is to the ideals of the Founding Fathers, not to the bad tax policy of the U.S. government.

In any event, I’m proud to say that the Center’s efforts have been semi-successful.

In May 2001, the center claimed a key victory. In a dramatic departure from the Clinton administration, Paul O’Neill, the incoming Treasury Secretary appointed by Bush, announced that the United States would back away from the reforms pushed by the OECD. …fewer than half of the nations on the OECD blacklist pledged to become more transparent in their tax systems, a victory for anti-tax forces such as the center.

Even the other side says the Center is effective.

…said Elise Bean, former staff director and chief counsel of Levin’s Homeland Security Permanent Subcommittee on Investigations, which started investigating tax havens in 2001. “They travel all around the world and they have had a tremendous impact.” …“They were very effective at painting the OECD’s work as end-times are here for tax competition, and we’re going to have European tax rates imposed upon the whole world if the OECD’s work continued,” said Will Davis, the former head of OECD public affairs in Washington.

What’s most impressive is that all this was accomplished with very little funding.

Tax returns for the center and a foundation set up in its name reported receiving at least $1.4 million in revenue from 2003 to 2010.

In other words, the Center and its affiliated Foundation managed to thwart some of the world’s biggest and most powerful governments with a very modest budget averaging about $175,000 per year. And I don’t even get compensation from the Center, even though I’m the one who almost got thrown in a Mexican jail for opposing the OECD!

So while Senator Levin had decades of experience spending other people’s money in a promiscuous fashion, I work for an organization, the Cato Institute, that is ranked as the most cost-effective major think tank, and I’m on the Board of a small non-profit that has a track record of achieving a lot with very little money.

Yet another example of why we should be thankful that tax competition makes it more difficult for politicians to extract more revenue from the economy’s productive sector.

P.S. I mentioned to the Post reporters that the world’s biggest tax haven is the United States, but that important bit of information was omitted from the article. Which is a shame since it would have given me a chance to laud Senator Rand Paul for blocking a very dangerous agreement that would undermine America’s attractive tax laws for overseas investors.

P.P.S. If politicians really want to hurt tax havens, they should adopt a flat tax. That would dramatically boost tax compliance.

P.P.P.S. All things considered, I think the reporters who put together the story were reasonably fair, though there was a bit of editorializing such as referring to one low-tax jurisdiction as a “notorious tax haven.” When they write about France, do they ever refer to it as a “notorious tax hell”?

Also, when writing about trips the Center arranged for congressional staff to low-tax jurisdictions, the article stated, “The staffers reported receiving from $900 to $2,360 for the trips”, which makes it sound as if the staffers got paid. That’s wrong. The sentence should have read, “The staffers reported that the Center’s travel and lodging expenses ranged from $900 to $2,360 for the trips.”

Today Cato senior fellow Nat Hentoff turns 91.  Happy Birthday Nat!

Nat has opposed communism since he was 15 years old, but because he had a column with the Village Voice, people would sometimes assume he had communist sympathies.  In this video, Nat explains that that mistaken assumption is how he was able to get into a meeting with Fidel Castro’s deputy, Che Guevara, and challenge him about the dictatorial nature of the Castro regime.  He finds it puzzling why so many people fawn over Castro and Che.

 

According to a conventional narrative, tropical islands are eroding away due to rising seas and increasingly devastating storms. Not really, according to the recent work of Ford and Kench (2016).

Writing as background for their study, the two researchers state that low-lying reef islands are “considered highly vulnerable to the impacts of climate change,” where an “increased frequency and intensification of cyclones and eustatic sea-level rise [via global warming] are expected to accelerate shoreline erosion and destabilize reef islands.” However, they note that much remains to be learned about the drivers of shoreline dynamics on both short- and long-term time scales in order to properly project future changes in low-lying island development. And seeking to provide some of that knowledge, the pair of New Zealand researchers set out to examine historical changes in 87 islands found within the Jaluit Atoll (~6°N, 169.6°E), Republic of the Marshall Islands, over the period 1945-2010. During this time, the islands were subjected to ongoing sea level rise and the passage of a notable typhoon (Ophelia, in 1958), the latter of which caused severe damage with its >100 knot winds and abnormal wave heights.

So what did their examination reveal?

Analyses of aerial photographs and high-resolution satellite imagery indicated that the passage of Typhoon Ophelia caused a decrease in total island land area of approximately five percent, yet Ford and Kench write that “despite [this] significant typhoon-driven erosion and a relaxation period coincident with local sea-level rise, [the] islands have persisted and grown.” Between 1976 and 2006, for example, 73 out of the 87 islands increased in size, and by 2010, the total landmass of the islands had exceeded the pre-typhoon area by nearly 4 percent.

Such observations, in the words of Ford and Kench, suggest an “alternative trajectory” for future reef island development, and that trajectory is one of “continued island expansion rather than one of island withering.” And such expansion is not just limited to Jaluit Atoll, for according to Ford and Kench, “the observations of reef island growth on Jaluit coincident with sea level rise are broadly consistent with observations of reef islands made elsewhere in the Marshall Islands and Pacific (McLean and Kench, 2015).” Given as much, it would thus appear that low-lying islands are not as vulnerable to climate change as previously thought.

 

Reference

Ford, M.R. and Kench, P.S. 2016. Spatiotemporal variability of typhoon impacts and relaxation intervals on Jaluit Atoll, Marshall Islands. Geology 44: 159-162.

McLean, R.F. and Kench, P.S. 2015. Destruction or persistence of coral atoll islands in the face of 20th and 21st century sea level rise? WIRES Climate Change 6: 445-463.

Could the U.S.-Japan alliance flounder as a result of alcohol? Apparently. At least, that’s the implication of the U.S. Navy’s ban on drinking by personnel stationed on the Japanese island of Okinawa.

It would be far better to phase out America’s military presence on Okinawa, turning U.S. bases back to the Japanese government. More than seven decades after the end of World War II, Tokyo should take over responsibility for Japan’s defense.

Washington currently bases and personnel on the island of Okinawa, with just .6 percent of Japan’s land mass. Local anger exploded in 1995 after three American service members raped a 12-year-old girl. The Japanese government sought to placate islanders with financial transfers and plans to move Futenma airbase and relocate Marines to Guam. These schemes failed to satisfy, however.

Base opponents, bolstered by the 2014 gubernatorial victory of Takeshi Onaga, continued to resist. Fueling popular anger has been a seeming spate of high-profile offenses committed by U.S. military personnel (who, in fact, have a lower crime rate than locals). Last month a sailor pled guilty to rape. Also last month a contractor and former Marine was detained in a murder case.

Then an apparently intoxicated sailor crashed, injuring two Okinawans. The navy confined all personnel to base except for essential travel and banned drinking on or off U.S. facilities.

Prime Minister Shinzo Abe largely ignored the Okinawa question as he sought to bolster Tokyo’s military capabilities. But he has made little progress against strong public opposition.

Japan’s “peace constitution” forbidding a military remains unchanged, so Abe simply interprets the law as he wishes it had been written. Military outlays have risen only modestly since Abe took power, up just two percent in 2015. Japan then devoted about $41 billion to defense, compared to roughly $180 billion by China, Tokyo’s main potential nemesis.

Although last year his government adjusted the military’s defense guidelines, Tokyo’s international activities will remain non-combat and do little to reduce America’s military duties.

Moreover, the revised standards merely allow Japan to better defend Japan, not assist the U.S. Now a Japanese ship on patrol with an American vessel can assist if the latter is attacked—so long the Japanese vessel too is threatened. And Japanese analysts warn against expecting Tokyo to allow such situations to occur.

Worse, the new guidelines appear to envision an even stronger U.S. guarantee for Japan and deployment of additional weapons. Under the “bilateral” treaty Washington’s obligations apparently only increase.

The U.S. has an obvious interest in Japan’s continued independence, but Japan’s commitment to its own security should be even greater. Tokyo should do more to defend itself.

In fact, no one expects a Chinese armada to show up in Tokyo Bay. If conflict erupts, it likely will be over disputed Senkaku/Diaoyu Islands. Of course, Beijing is not justified in using force there or elsewhere, but nothing at stake there is worth war, at least for America.

A serious Japanese military build-up is opposed by some of Tokyo’s neighbors, but no one seriously suggests that Japan is about to embark upon a new round of imperial conquests. More than seven decades after World War II Japan should finally act like a normal country—defending itself, guarding its region, and ending its dependence on America.

The U.S. should turn its security guarantee to Japan into a framework for future cooperation. That should include potential assistance if a genuine hegemonic threat arises in Asia. But Tokyo should take the lead in confronting day-to-day security challenges.

As I wrote in Forbes: “Japan should decide its own defense and foreign policies. As American forces returned home Okinawa’s bases would empty. What came next would be up to the Japanese. And American military personnel could continue to enjoy a drink … back home in their own country.”

 

Last week I criticized President Obama for his failure to sell the Trans-Pacific Partnership to the public and to Congress.  Ratification of trade agreements has always relied on consistent and unequivocal advocacy from the White House.

Well, the president heard me loud and clear and decided to take my advice.  Here’s his pitch to the American people via Jimmy Fallon (TPP lyrics begin around 4:50, but the whole thing is pretty darn funny).

 

The U.S. International Trade Commission (ITC) is required by the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 to prepare estimates of the economic effects of trade agreements.  In specific:

“Not later than 105 calendar days after the President enters into a trade agreement under section 103(B), the Commission shall submit to the President and Congress a report assessing the likely impact of the agreement on the United States economy as a whole and on specific industry sectors, including the impact the agreement will have on the gross domestic product, exports and imports, aggregate employment and employment opportunities, the production, employment, and competitive position of industries likely to be significantly affected by the agreement, and the interests of United States consumers.”

This statutory language guided the ITC’s analysis of the twelve-nation Trans-Pacific Partnership (TPP).  The ITC study was released on May 18, 2016. 

It had been several years since the United States concluded a free trade agreement.  The previous one with South Korea (Korea-U.S. Free Trade Agreement, or KORUS) dates from 2007.  I served as chairman of the ITC at the time and am quite familiar with the KORUS study.  The econometric modeling used a “comparative static” analysis.  A comparative static approach can be likened to taking two snapshots of the economy.  The first photo was of the known baseline economy as it existed in 2007. The second photo also used the 2007 baseline, but this time it was “shocked” by incorporating all provisions of KORUS as if they had been fully implemented.  This allowed a conceptually sound – albeit counterfactual – assessment of the likely economic effects of KORUS by analyzing how those reforms would have influenced the 2007 economy.  (These issues are explained in this Free Trade Bulletin.) Static modeling has been used in all the ITC’s analyses of trade agreements prior to TPP." title="<--break-->" class="mceItem">

One of the great strengths of the comparative static approach is that it makes no attempt to project the economy into the future.  There is no need to speculate on whether a recession will curb trade flows, or whether technological change will make some industries obsolete while spurring new ones into existence.  Precisely predicting the future requires a degree of clairvoyance not possessed by economists or anyone else.  A comparative static analysis deals with that reality by instead looking backward.  It imposes new policy reforms on an old – but well-known – economy.  And it allows economists to avoid trying to make forward-looking projections of economic activity that inevitably turn out not to be correct.

However, comparative static modeling is not the only tool in the econometrician’s toolbox.  For its analysis of the economic effects of TPP, the ITC has chosen to use a dynamic computable general equilibrium (CGE) model.  The Global Trade Analysis Project (GTAP) model “is an appropriate tool for analyzing the effects of trade agreements because it consists of a database with international trade flows and other macroeconomic information, social accounting matrixes that show how different segments of the economy are interlinked, and national income accounts data.”  Using a dynamic version of the GTAP model has allowed the ITC to estimate changes in various economic measures (real GDP, employment, exports, imports, etc.) up to 30 years in the future.  Most of the analysis focuses on the 15-year period beginning in 2017 and ending in 2032.

In order to evaluate how TPP might influence the economy in the future, it first was necessary to create a baseline projection of what the economy would be like in the years ahead without TPP.  The ITC has done this by incorporating projections made by the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) regarding growth rates in many countries for labor, population, and GDP.  Once the 30-year baseline was established, the model was shocked by adding TPP’s annual policy changes.  (TPP gradually phases in many reductions in trade restrictions year by year.)  The economic effects of TPP then were measured as differences between the original baseline and the baseline following the shocks from TPP.  The dynamic GTAP model provides a mathematically sound means to estimate future economic variances caused by policy changes. 

The real questions regarding forward-looking estimates have to do with the baseline itself.  The IMF and OECD are quite capable when it comes to analyzing historic trends.  Generally it’s not unreasonable to project well-established trends a short distance into the future.  If global GDP has grown at an average rate of 3 percent over the past ten years, for instance, it may be quite sensible to estimate that growth in the coming year also will be around 3 percent.  The problems come as we look further into the future.  Life’s inherent uncertainties make it relatively likely that a future projection of U.S. exports or imports of cheese, for instance, will turn out not to be precisely accurate.  How much confidence should we have in projections five years into the future?  Fifteen years?  Thirty?

Making estimates that turn out to be different than actual future outcomes is not a problem to economists and statisticians schooled in economic modeling.  They understand well that the ITC’s estimates were made using the best available information and up-to-date econometric techniques, and that the real world economy simply diverged from what had been projected in the baseline.  Unfortunately, not everyone interested in trade policy has such depth of knowledge and understanding.  My concern is not with the integrity of the modeling, but rather the challenges that trade supporters may face in defending the results of the analysis against criticism.

Even with comparative static modeling, opponents of expanded international trade have been inclined to misinterpret the analysis.  There are claims, for example, that the ITC did a poor job with its KORUS study because the U.S. trade deficit with South Korea has gone up since the agreement went into effect.  The KORUS study didn’t say anything about what might happen to the trade deficit in the future.  However, it did indicate a likely decrease in the deficit in the hypothetical situation in which all provisions of KORUS were somehow implemented during the static 2007 baseline period.

Now that the ITC’s TPP study has used a dynamic CGE approach that actually does make estimates about future trade flows, critics of trade agreements no doubt will be happy to point out how the ITC “got things all wrong.”  (In fact, the ITC’s estimates are seldom likely to be “right.”)  Trade skeptics are unlikely to bother explaining that the real source of the estimated “errors” is that the underlying economy evolved differently than the IMF and OECD had projected.  Most anti-trade NGOs have little interest in raising the quality of the trade policy debate.  Rather, they may be inclined to argue that all economic analysis showing positive effects for the United States from trade agreements is suspect and can’t be trusted.

Supporters of trade liberalization will do their best to counter such misinformation by explaining the details of dynamic CGE modeling.  But the criticism of the ITC’s estimates will take only a few words; setting the record straight will require several sentences or paragraphs.  Protectionist rhetoric may prove to have a greater influence on public opinion than do the substantive explanations. 

It will be interesting to see whether analyzing trade agreements via dynamic CGE modeling leads to a more informed public discussion than has been the case for the comparative static technique.  With a comparative static approach, the ITC was never wrong, but often misunderstood.  With dynamic modeling, the ITC will almost never be right, while still being misunderstood. 

 

Daniel R. Pearson is a senior fellow in the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, and is a former chairman of the U.S. International Trade Commission.

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

There is a new paper generating some press attention (e.g. Chris Mooney at the Washington Post) that strongly suggests global warming is leading to specific changes in the atmospheric circulation over the Northern Hemisphere that is causing an enhancement of surface melting across Greenland—and of course, that this mechanism will make things even worse than expected into the future.

We are here to strongly suggest this is not the case.

The new paper is by a team of authors led by Marco Tedesco from Columbia University’s Lamont-Doherty Earth Observatory. The main gist of the paper is that Arctic sea ice loss as a result of human-caused global warming is causing the jet stream to slow down and become wigglier—with deeper north-south excursions that hang around longer.  This type of behavior is referred to as atmospheric “blocking.”

If this sounds familiar, it’s the same theoretical argument that is made to try to link wintertime “polar vortex” events (i.e., cold outbreaks) and blizzards to global warming. This argument which has been pretty well debunked, time and time again.

Well, at least it has as it concerns wintertime climate.

The twist of the new Tedesco and colleagues’ paper is that they’ve applied it to the summertime climate over Greenland. They argue that global warming is leading to an increase in blocking events over Greenland in the summer and that is causing warm air to be “locked” in place leading to enhanced surface melting there. Chris Mooney, who likes to promote climate alarm buzzwords, refers to this behavior as “weird.” And he describes the worrysome implications:

The key issue, then, is whether 2015 is a harbinger of a future in which the jet stream keeps sending Greenland atmospheric systems that drive major melt — and in turn, whether the Arctic amplification of climate change is driving this. If so, that could be a factor, not currently included in many climate change simulations, that would worsen the ice sheet’s melt, drive additional sea level rise and perhaps upend ocean currents due to large influxes of fresh water.

As proof that things were weird over Greenland in recent summers, Tedesco’s team offers up this figure in their paper:

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This chart (part of a multipanel figure) shows the time history of the North Atlantic Oscillation (NAO—a pattern of atmospheric variation over the North Atlantic) as red bars and something called the Greenland Blocking Index (GBI) as the black line, for the month of July during the period 1950-2015. The chart is meant to show that in recent years, the NAO has been very low with 2015 being “a new record low of -1.23 (since 1899),” and the GBI has been very high with the authors noting that “[c]oncurrently, the GBI also set a new record for the month of July [2015].” Clearly the evidence is showing that atmospheric blocking increasing over Greenland which fits nicely into the global warming/sea ice loss/wiggly jet stream theory.

So what’s our beef?

A couple of months ago, some of the same authors of the Tedesco paper (notably Ed Hanna) published a paper showing the history of the monthly GBI going back to 1851 (as opposed to 1950 as depicted in the Tedesco paper).

Here’s their GBI plotted for the month of July from 1851 to 2015:

This picture tells a completely different story. Instead of a long-term trend that could be related to anthropogenic global warming, what we see is large annual and multidecadal variability, with the end of the record not looking much different than say a period around 1880 and with the highest GBI occurring in 1918 (with 1919 coming in 2nd place). While this doesn’t conclusively demonstrate that the current rise in GBI is not related to jet stream changes induced by sea ice loss, it most certainly does demonstrate that global-warming induced sea ice loss is not a requirement for blocking events to occur over Greenland and that recent events are not  at all “weird.”  An equally plausible, if not much more plausible, expectation of future behavior is that this GBI highstand is part of multidecadal natural variability and will soon relax back towards normal values.  But such an explanation isn’t Post-worthy.

Another big problem with all the new hype is that history shows the current goings-on in Greenland to be irrelevant, because humans just can’t make it warm enough up there to melt all that much ice. For example, in 2013, Dorthe Dahl-Jensen and her colleagues published a paper in Nature detailing the history of the ice in Northwest Greenland during the beginning of the last interglacial, which included a 6,000 year period in which her ice core data showed averaged a whopping 6⁰C warmer in summer than the 20th century average. Greenland only lost around 30% of its ice with a heat load of (6 X 6000) 36,000 degree-summers. The best humans could ever hope to do with greenhouse gases is—very liberally—about 5 degrees for 500 summers, or (5 X 500) 2,500 degree-summers. In other words, the best we can do is 500/6000 times 30%, or a 2.5% of the ice, resulting in a grand total of seven inches of sea level rise over 500 years. That’s pretty much the death of the Greenland disaster story, despite every lame press release and hyped “news” article on it.

While you won’t find this kind of analysis elsewhere, we’re happy to do it here at Cato. 

References:

Dahl-Jensen, D., et al., 2013.  Eemian interglacial reconstructed from a Greenland folded ice core.  Nature 489, doi: 10.1038/nature11789.

Hanna, E., et al., 2016. Greenland Blocking Index 1851-2015: a regional climate change signal. International Journal of Climatology, doi: 10.1002/joc.4673.

Tedesco, M., et al., 2016. Arctic cut-off high drives the poleward shift of a new Greenland melting record. Nature Communications, DOI: 10.1038/ncomms11723, http://www.nature.com/ncomms/2016/160609/ncomms11723/full/ncomms11723.html

North Korea’s ruling elite appears to be getting along fine despite international sanctions. Washington needs to find a new approach toward the North.

The so-called Democratic People’s Republic of Korea poses one of the most vexing challenges to American policy. For more than 20 years U.S. presidents have insisted that the DPRK cannot be allowed to develop nuclear weapons. Yet it apparently is preparing for a fifth nuclear test.

A military strike, as proposed by Ashton Carter before he was appointed Defense Secretary, would risk engulfing the peninsula in war. So the U.S. has relied on sanctions. Every time Pyongyang misbehaves—especially tests a nuclear weapon or launches a missile—American officials impose tougher domestic economic penalties and press for harsher UN sanctions.

 After the North’s latest nuclear test earlier this year, China agreed to a new round of restrictions. The increased penalties had no impact of North Korean policy. To the contrary, in early May the Kim regime used the party congress to highlight Pyongyang’s nuclear program.

Sanctions have had an impact. The People’s Republic of China has been losing patience and appears to be more tightly regulating cross-border commerce. Some North Korean representatives of blacklisted agencies moved from China to Southeast Asian nations. The regime has resorted to smuggling to bring in banned products. Moreover, Pyongyang appears to be having more difficulty selling weapons abroad.

Nevertheless, Beijing continues to moderate the impact of sanctions. Illicit goods still cross the border and some observers expect the PRC commitment to fade as Western attention moves elsewhere. Beijing more fears chaos on its border than a North Korea with nuclear weapons. President Xi Jinping recently declared: “As a close neighbor of the peninsula, we will absolutely not permit war or chaos on the peninsula.”

The Xi government so far refuses to halt energy and food shipments, the only step that would apply bone-crunching pressure to the Kim regime. Even then, Pyongyang might refuse to comply. The regime already is blaming the West, preparing its people for what it calls an “arduous march.”

During the late 1990s the regime survived the virtual collapse of the economy and starvation death of a half million or more North Koreans. The Kim dynasty might survive similar hardship in the future.

Unfortunately, the uniform experience of sanctions is that they hurt those with the least resources and influence. That appears to be the case in North Korea.

So far the powerful have prospered, despite penalties directed against luxury imports. The Washington Post recently reported on “Pyonghattan,” home to North Korea’s privileged elite. In contrast, argued Andrei Lankov of Kookmin University, “the average North Korean will also bear the brunt of the sanctions.”

The latest round of sanctions has increased hardship. Choi Ha-young, chairman of the Love North Korean Children Charity, complained: “Currently, due to the UN sanctions, people in the lowest class are really impacted.”

As I point out in National Interest: “Washington seems to have only one response to the North: increase sanctions. However, this policy is a dead-end. The U.S. and its allies must find a new strategy toward Pyongyang.”

A victory for property rights and individual liberty came via the unanimous Supreme Court decision earlier this month against EPA’s ability to control the “environment” on private property—though their use of wetlands “jurisdictional determinations” under the Clean Water Act. The high court’s opinion states that land owners are now able to challenge government agencies that attempt to assert control over the environment of private property before any permitting process by the owner begins—versus after the owners expenditure of time, effort and expense to obtain a permit. Furthermore, this court’s decision will limit the government’s ability to restrict land owners activities through the application of EPA’s “Waters of the United States” (WOTUS) rule issued last year.

This is the second major SCOTUS decision this year to go against the EPA—the other being the stay issued in February against EPA’s Clean Power Plan. Compared to previous administrations, this EPA appears to be spending way too much time in court defending its actions, and not nearly enough time effectively protecting the nation’s environment. Some of the agency’s actions, or inactions, have resulted in environmental damage. Two glaring examples are last year’s contamination of Colorado’s Animas River drinking water supply, and the ongoing lead contamination of drinking water in Flint, Michigan.

Then there is the fallout from EPA’s regulatory agenda—particularly the Clean Power Plan—their crown jewel of carbon emissions rulemaking. Although the CPP was stayed, EPA officials are not deterred and are now moving ahead with key components of the plan, particularly in those 17 states lead by democrat governors. The EPA may be flagrantly violating the law by ignoring the Supreme Court ruling on the CPP. According to the electric utility industry, 30 states, and their state agencies, all of whom are suing to eliminate the plan—EPA is absolutely in violation. 

There is also demonstrated collusion between EPA employees and outside environmental interests. FOIA requests and legal depositions have revealed a pattern of illicit email trails and phone calls between EPA officials and radical environmental groups. In some cases the outside groups have actually “co-authored” EPA regulations—creating a circus out of federal agency rulemaking—which is supposed to be based on transparent public participation and not “insider trading” by the environmental movement.

For example, a considerable amount of collusion with outsiders is known to have occurred while EPA was crafting the Clean Power Plan. The evidence includes a tranche of emails discovered on a private email account that indicate outside environmental interests heavily influenced EPA policy on regulating coal-fired power plants. Other EPA collaboration with outsiders include its former Administrator, Lisa Jackson, who in 2010 resigned after being caught using a private email account to correspond with environmental activists about EPA activities.

Other email trails indicate that EPA, for several years, had been colluding with environmentalists opposed to the Pebble Partnership developing a major copper-gold deposit in southwest Alaska. During verbal discovery in March in the Pebble case, an EPA employee, Mr. Phil North, freely admitted that he was providing outside environmental groups unprecedented access to the EPA decision making process involving the Pebble lease—which is on state, not federal land. Not surprisingly, the agency’s regional administrator for Alaska testified to a congressional committee that he had not read the deposition and was not willing to look into the matter further. Nevertheless, the U.S. is now facing the possibility of a lawsuit because Pebble’s parent company, Northern Alliance is Canadian and is protected under the North American Free Trade Agreement (NAFTA).

Then there is the destruction of federal-state partnerships that have been built up over the years, caused by states lack of confidence in EPA actions. For example, strident EPA rulemaking has resulted in more states going to court to stop promulgation of blanket federal regulations that are of questionable benefit to states. These regulations include hydraulic fracturing, methane emissions, and mandated ozone levels related to energy development, manufacturing and industrial activity—all above and beyond the Clean Power Plan.

Other legal challenges to EPA include the 27 states that have sued to block the EPA’s Waters of the United States (WOTUS) rule, which dramatically expands Federal authority over local construction activities, including energy projects, nationwide. In the East, 21 states sued EPA over its Chesapeake Bay cleanup plan, asserting that the plan represents “…the culmination of EPA’s decade-long attempt to control exactly how states achieve federal water quality requirements (under the Clean Water Act), and marks the beginning of the end of meaningful state participation in water pollution regulation.” In the West, Utah, Colorado, and New Mexico will see EPA in court over the agency’s disastrous accidental heavy metal sludge contamination of the Animas River that has affected the drinking water of three states and the Navajo Indian Reservation. 

Clearly, this EPA has continued unabated to exert unprecedented “environmental control” over the air, land, and water of the U.S. using numerous unpopular rules and regulations. The continued overregulation and outside collusion require ever greater amounts of EPA’s time in court to answer for their actions—ostensibly leaving less time for environmental protection responsibilities—if they were ever so inclined. In short, their actions are threatening to unravel the long-established, important, and legitimate fabric of environmental protection developed since the agency’s founding almost 50 years ago. What greater irony is there when the environmental stewardship of the several states needs to be legally protected from the federal Environmental Protection Agency.

China’s economic rise over the past decades has been meteoric, during which time the volume of rhetoric about the “China threat” has also grown at historic rates. In the early 1990s the Pentagon needed a new superpower rival to justify Cold War-sized defense budgets. But displays of American military power in the first Gulf War and the 1995-96 crisis in the Taiwan Strait also prompted China to develop a military strategy designed to keep American forces out of its neighborhood. Now, with counterterrorism missions in Iraq and Afghanistan down from their peak and China’s military posture maturing significantly, the U.S. military has been devoting more time and resources to figuring out ways to counter China’s new strategy.

Beyond the military, political hawks have been quick to draw attention to the China threat. During last weekend’s Shangri La Dialogue in Singapore, Senator John McCain (R-AZ) said that China has a choice between peaceful cooperation and engaging in a “zero-sum game for regional power and influence.” Even academics have gotten in on the game, with many arguing that China’s rise will not be peaceful.

Though China’s saber rattling in East Asia and the South China Sea hasn’t made a big splash in the 2016 presidential campaign so far, the question of how the United States should respond to China’s rising military and economic power is one of the most important foreign policy challenges the next president will face.

Both candidates have staked out aggressive positions on China. Trump has promised to impose steep tariffs on Chinese imports, suggested that South Korea and Japan should acquire nuclear weapons, and has called for a strong military presence in Asia to discourage “Chinese adventurism.” Clinton, for her part, was a lead architect of the “pivot to Asia” as Secretary of State, redirecting U.S. military and diplomatic efforts from the Middle East to Asia to confront China’s rise.

A close look at public opinion, however, reveals that although complex, the American public’s attitudes towards China are more sanguine than those of its fearful leaders.

To be sure, most Americans have always harbored concerns about the Communist nation and its intentions, and during difficult times Americans worry about the challenge China poses to their economic fortunes. But despite China’s aggressive campaign to modernize its military, and despite two decades of one-sided debate about the China threat, most Americans correctly continue to identify the United States as the stronger military power, and fewer than half view China’s military power as a serious threat (even fewer rate it a “critical threat.”)

Moreover, the prolonged fear mongering has failed to move the needle when it comes to how Americans feel about China. Gallup polls show a slight increase in China’s favorability rating among Americans between 1990 and 2016. And in 2014 the Chicago Council on Global Affairs found that just 48% of the public views China as primarily a rival and 49% see it primarily as a partner.

Most importantly, though, Americans overwhelming support a cooperative approach to dealing with China rather than a confrontational one. Sixty-seven percent responded to the 2014 CCGA poll that the best way to handle the rise of Chinese power is to “undertake friendly cooperation and engagement,” compared to 29% who said the United States should “actively work to limit the growth of China’s power.” And when it comes to the prospect of military conflict with China the public is truly not interested. Just 26% believe the United States should send troops to help if China invades Taiwan.

These figures provide fair warning to the next president to think twice about how to deal with China. An aggressive military posture like the one in place today (and promoted by both candidates) not only runs contrary to public preferences, it also increases the prospects for direct conflict between the United States and China. 

In this commentary, I will analyze the concept of sound money and its relevance today.  The concept evolved in the 19th century as many countries adopted the gold standard.  It became associated with commodity money or “hard currency.”  For example, Mises (1966: 782) stated:

The principle of soundness meant that the standard coins — i.e., those to which unlimited legal tender power was assigned by the laws — should be properly assayed and stamped bars of bullion coined in such a way as to make the detection of clipping, abrasion, and counterfeiting easy.  To the government’s stamp no function was attributed other than to certify the weight and fineness of the metal contained.

There was no requirement that “standard coins” be the exclusive or even preponderant means of payment in day-to-day transactions.  So long as banks of issue (private or central banks) maintained convertibility, then the monetary system had the characteristics of sound money.  As Mises suggested, government’s role was minimal.

As a matter of history, sound money is associated with commodity money.  Mises’ characterization assumes commodity money.  Can there be sound fiat currency?

Most 19th century writers on money assumed a system of commodity money with allowance for temporary suspensions during wartime and a return to the standard in peacetime.  The suspension of specie payments by the Bank of England during the Napoleonic Wars prompted banker Henry Thornton to author in 1802 a treatise on managing a paper currency: An Enquiry Into the Nature and Effects of the Paper Credit of Great Britain.  Thornton was a successful banker with an economist’s understanding of banking, finance, and the real economy.  He pioneered analytical distinctions that would not be rediscovered for almost another century: the distinction between real and nominal interest rates, and the concept of an equilibrium or natural rate of interest.

The volume should have become a standard reference work.  But it came to be forgotten because the Bank of England re-established convertibility, and other countries gradually adopted the gold standard over the course of the 19th century.  How to manage a fiat money system (paper credit) ceased to be a practical issue.

When the Federal Reserve System was created at the end of 1913, the United States was on the gold standard along with most of the rest of the world.  The Federal Reserve was not created to manage money in the modern sense, but to provide a national currency as part of a gold standard.  No one was thinking of managing a fiat currency on the eve of World War One.  That was all soon to change with the requirements of wartime finance.

After World War One, the world returned to a global, pseudo gold standard that was chronically short of gold reserves.  The currencies of many countries were overvalued relative to gold.  When the system collapsed in the 1930s, countries were thrust into a fiat currency world without a playbook.  For a time, there were efforts to restore the global gold standard but they came to naught.  World War Two interrupted any effort to craft a new international monetary system.

The post-War, Bretton Woods system constituted the new global monetary order.  Volumes have been written on it.  I do not share the nostalgia of some for it.  It was even less of a gold standard than existed in the interwar period.  In truth, it was a dollar standard.  The dollar was pegged to gold and other currencies pegged to the dollar.  There were numerous exchange-rate adjustments.  The system contained inner contradictions.  Inevitably, the producer of the dominant currency was bound to abuse its “exorbitant privilege” and the United States did so.  The system collapsed and the world was then on a fiat standard.

There was no accepted theory of managing money in a fiat money world.  This was not Henry Thornton’s world in which fiat money was a temporary expedient with an expectation of a return to specie conversion.  It was not the world of the classical quantity theory, which was constructed in a commodity-standard world.  The quantity theory demonstrated the limits of monetary expansion (or changes in the demand for money) before prices would begin to rise sufficiently to threaten convertibility.  In a classical gold standard, the supply of money is endogenous and the price level fixed in the long run.

Milton Friedman and the monetarists offered a restatement of the quantity theory and a model of monetary control for a fiat currency.  Friedman, his students and colleagues believed they had discovered stable empirical relationships among the monetary base, broader measures of money (especially M2), and the demand for money (Friedman 1956 and Friedman and Schwartz 1956).  When monetary targeting was finally implemented by the Volcker Federal Reserve in the 1980s, the posited empirical relationships broke down.  The Fed abandoned monetary targeting.

What followed was a period that John Taylor dubbed the Great Moderation, in which the Fed and other central banks seemed to get it right.  There was enhanced macroeconomic stability (as measured by decreased variance in prices and output).  Taylor discerned that the Fed was following a tacit rule, which others called the Taylor Rule.  But the Fed and then other central banks began to deviate from the rule by lowering interest rates in response to the Dotcom bust.  Taylor (2009) argued the housing bust was the consequence of the boom created by the policy of low interest rates.  “No boom, no bust.”  Central banks have not returned to a monetary rule.  Instead, they have engaged in monetary improvisation.

Money in the 21st century is proving immune to control by central bankers.  The relationship between monetary reserves and various monetary aggregates (the money multiplier) has broken down.  More precisely, central banks appear to have lost the ability to control inflation.  In the United States, Europe and Japan, inflation rates have remained chronically below central bank targets over the course of the economic recovery from the Great Recession.  (The growth of real GDP has also been subpar.)  Economists as diverse as Jerry Jordan (2016) and James Bullard (2016) have questioned whether our textbook models of money creation and inflation control are any longer valid.  That is not to say that future inflation rates will not rise to two percent or beyond.  If they do so, however, it will likely not be the consequence of any central bank policy actions (Jordan 2016).

To reiterate, I question whether we ever had a practical theory of how to manage money in a fiat money world.  The proponents of monetary rules believe they have such a theory. One class of such rules involves NGDP targeting.

The specific question I pose for advocates of NGDP targeting is how today will anything the Federal Reserve does to its balance sheet alter the growth rate of NGDP in a predictable fashion?  The answer to such a question could be that the central bank should do more.  How much more?  And what, then, becomes of the rule?  It sounds like a recipe for discretion.  In any case, central banks have been unable to get either component of NGDP to grow in a normal or predictable manner.

Monetary institutions and policies vary among the major central banks.  For instance, both the European Central Bank and the Bank of Japan have instituted negative interest rates on commercial bank deposits at the central bank.  Meanwhile, the Fed has been paying interest on bank reserves for some time.  The institutions and policies differ, are even opposed to each other, but the policy failures are common.  (The policies have failed on their own terms, regardless of whether one agrees with them.)

Let me return to the classical idea of sound money.  Sound money is a rule, but of a different kind than modern monetary rules such as the Taylor Rule or NGDP targeting.  Sound Money was not a rule based on empirical relationships among economic variables.  It was not invented, but discovered.  It is more analogous to the rule of law.  Mises (1971: 414) made this point clearly. “Ideologically it [sound money] belongs in the same class with political constitutions and bills of rights.  The demand for constitutional guarantees and bills of rights was a reaction against arbitrary rule and non-observance of old customs by kings.”

The argument for sound money is not merely a technical economic argument, but a political economy and even constitutional argument.  When classical economists contended that commodity standards were a bulwark against inflation, they did not suggest that there would be no variability of inflation under a gold standard.  Their own experience told them otherwise.  Rather, they recognized that a gold standard was protection against arbitrary actions by sovereigns to depreciate the currency.  Protection against arbitrary and capricious governmental actions is what constitutions are meant to provide.

Is there a way to avoid arbitrariness in monetary matters in a fiat money system?  Can a monetary rule of some type today provide the protections that existed in the classical, pre-World War One gold standard?  These questions are central to the debate over monetary rules.  They apart from the technical ones I raised above.  Both sets of questions need to be addressed in debates over monetary policy.

References

Bullard, J. (2016) “Permazero.” Cato Journal. 36 (Spring/Summer): 415-29.

Friedman, M., ed. (1956) Studies in the Quantity Theory of Money. Chicago: The University of Chicago Press.

Friedman, M. and A. J. Schwartz (1963) A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.

Jordan, J. L. (2016) “The New Monetary Framework.” Cato Journal 36 (Spring/Summer): 367-83.

Mises, L. v. (1971 [1952]) The Theory of Money and Credit. Irvington-on-Hudson: The Foundation for Economic Education.

________ (1966) Human Action, 3d ed. Chicago: Henry Regnery.

Taylor, J. B. (2009) Getting Off Track. Stanford: The Hoover Institution Press.

[Cross-posted from Alt-M.org]

American businesses have become leaner in recent decades, with fewer layers of management. By contrast, New York University’s Paul Light has found that the number of management layers in federal government agencies has increased substantially.

Light argues that today’s “over-layered chain of command” in the federal government is a major source of failure. Overlaying stifles information flow, slows decisionmaking, and makes it harder to hold people accountable for failures.

The Washington Post looks at a failure in the Department of Homeland Security (DHS) that will have you shaking your head. Reporter Joe Davidson describes DHS efforts after the December 2 attacks in San Bernardino, California. The acronyms are all bureaus within the DHS.

The day after the attack that left 14 dead and 22 wounded, ICE learned that Enrique Marquez, who authorities say purchased the weapons used by shooters Syed Farook and Tashfeen Malik, might be at a USCIS office in San Bernardino. The office was protected by private security guards under contract to FPS.

Five HSI agents, decked out in tactical gear, rushed to the office to prevent any further attacks and to detain Marquez and his wife for questioning.

Yet despite the urgency, coming less than 24 hours after the attack, “the FPS guards advised the HSI agents that they had to stay in the lobby until the Field Office Director approved their entry.”

At first, the guards couldn’t find the director because she didn’t answer her phone. Once located, she didn’t want to allow the agents into the building. In true bureaucratic fashion, the field office director said she had to check with her boss, the district director in Los Angeles, who then checked with a higher boss, the regional director in Laguna Niguel, Calif.

The district director instructed the field office director to allow the agents into the building “to determine what they wanted.” Then they waited.

“[T]he agents were confined to the lobby for approximately 15 to 20 minutes,” they told the inspector general’s office. More than enough time for any suspect to get away.

Imagine five cops anxious to take down a terrorist waiting in the lobby for permission to go further into the building before they could search for him.

After the initial wait, “the agents were escorted to a USCIS conference room by FPS guards, where they met with the Field Office Director,” the inspector general’s report said. “According to the HSI agents’ accounts, they waited approximately 10 additional minutes in the conference room before the Field Office Director met with them. The agents told her they were looking for Marquez because he was connected to the shootings and there was concern that he could be in the building.”

The field office director’s response?

[Inspector General John] Roth said “the Field Office Director told the agents they were not allowed to arrest, detain, or interview anyone in the building based on USCIS policy, and that she would need to obtain guidance from her superior before allowing them access.”

The field office director again called the district director who notified the regional director, who notified an associate director in Washington, who met with USCIS lawyers.

Meanwhile, the field office staff determined that neither Marquez nor his wife was at the office.

The agents then asked for information about Marquez from the USCIS file, but the field office director refused. She did provide a photo.

At some point, the associate director determined that the agents could have the file. That information was relayed back down the chain, to the regional director, then to the district director, then to the field office director. More than an hour after arriving, an agent hand-copied information from the file and the law enforcement officers left.

This is how the federal government operates. Why anyone (like current presidential candidates) would want to give this dysfunctional institution more power and control over our lives is beyond me—whether more power over security, health care, housing, education, transportation, trade, or anything else.

Over a vast range of activities, the federal government fails repeatedly for basic structural reasons. The government is a monopoly. It functions through coercion, not voluntary relations. It has a guaranteed source of funds, and thus has little reason to serve the interests of the public. It is controlled by self-interested politicians. It receives no market signals and little feedback to guide its decisionmaking. It is 100 times larger than the average-sized state government, and thus far too large to manage with any decent level of efficiency or quality.

The nation would be better off if the DHS superstructure were abolished and the overall government cut in size.

You can read more about the causes of federal failure here, here, here, and here.

Yesterday the D.C. City Council unanimously approved a measure that would gradually raise the $10.50 minimum wage to $15.00 by 2020, and then index future increases to changes in the Consumer Price Index. These new scheduled increases will come on the heels of an already significant 39 percent increase currently being phased in. With the passage of this bill, D.C follows California and  in passing substantial minimum wage hikes beyond the scope of past experience in the U.S. The related adverse disemployment effects will primarily impact younger workers and people with limited job skills or educational attainment, putting the important first rung of the job ladder out of reach for many of them.

While proponents of an increase tend to focus on families, roughly half of minimum wage workers are between 16 and 24, and a more than one-fifth are teenagers. People lacking a high school diploma are more likely to be in minimum wage jobs, and even with some recent incremental improvements, the 4-year adjusted cohort graduation rate for D.C. public schools is only 64.4 percent and for African-American students it is less than 62 percent. While the aggregate unemployment rate for the District might not seem alarmingly high at 6.4 percent in April, there is a lot of variation between the eight wards, with the unemployment rate as high as 9.9 percent in Ward 7 and 12 percent in Ward 8.  One survey found that almost half of responding businesses had already reduced staff or hours to cope with the first raft of minimum wage increases. Younger workers and people with limited educational attainment will find it increasingly difficult to find employment as labor costs continue to surge.

These minimum wage jobs often play an important role in helping people develop the skills they need to eventually move on to more lucrative and promising jobs, far from being a dead-end where these workers get stuck forever. The majority of minimum wage workers that stick with it get a raise within a year. An earlier study looking at data from 1979 to 2002 found that almost two-thirds of minimum wage employees who continue working earned higher than the minimum wage within a year. More recently, 72 percent of minimum wage earners got a raise between 2014 and 2015. About a fifth of these people saw their earnings rise due to mandated minimum wage increases, but 57.5 percent of people working continuously got a raise or moved into a higher-paying job outside of those effects, and this share could have been even higher in the absence of those legislated minimum wage increases. Far from stagnating in these entry-level jobs, most of the people in these positions use these opportunities as a springboard to better things.

Supporters of the new bill may say that they want to ensure that hard work is rewarded and that people can support their families, but D.C.’s substantial minimum wage increases will make it much harder for many people, especially younger workers and people with limited job skills, to find any work at all.

Following up on my comments Monday about Donald Trump “changing his tone,” I note that this week prominent Republicans are offering different timetables for Trump beginning to act like a leader instead of an angry score-settler.

Senate majority leader Mitch McConnell said Tuesday, “My advice to our nominee would be to start talking about the issues that the American people care about and to start doing it now. In addition to that, it’s time to quit attacking various people that you competed with or with various minority groups in the country and get on message. This election is eminently winnable.”

Note that, as I pointed out Monday, McConnell is not hoping for the 69-year-old Trump to change his actual character or his vast ignorance about public policy, just to “get on message” and listen to his campaign consultants. But he wants it done now.

Senate Foreign Relations Committee chairman Bob Corker is a bit more lenient: “He’s got this defining period that’s over the next two or three weeks where he could pivot, can pivot, hopefully will pivot to a place where he becomes a true general election candidate.” Corker also refuses to say whether the candidate he supports is fit to be president.

Former speaker Newt Gingrich, perhaps remembering his own verbal stumbles, offers a much longer leash: “I am confident the Trump campaign, from the convention on, will be remarkably inclusive and will do much better with minorities than [Mitt] Romney did in 2012.”

So Gingrich gives Trump a full six weeks to start presenting himself as a serious, civil presidential candidate not focused on personal slights and ethnic insults. That’s very generous.

But as I wrote Monday, 

When Republicans say that Trump must change his tone, they are saying that they want him to conceal his character for the duration of the election. But he’s a scorpion, and they knew that when they picked him up.

Perhaps along with changing his tone, Trump could change his policy positions: Support free trade, not trade war; sensible immigration reform, not walls around America; religious liberty, not Muslim immigration bans and spying on mosques; fiscal responsibility, not more money for the military and for transfer programs. Now that would be an attractive pivot.

Yesterday, the House GOP released a report called A Better Way: Our Vision for a Confident America. Alas, at least in education, only if you think doing basically the same thing we’re doing right now is a “better way” could this report please you. And there is little to suggest what we’re doing now is working.

Start with pre-k education. While acknowledging the undeniable—“gold-standard” research commissioned by the feds themselves has shown federal Head Start has no discernable, lasting benefits—the report does not call for even decreasing Head Start spending, much less eliminating the program. No, it proclaims that early-childhood programs are very important and what Washington should do—again, with no talk about actually decreasing funding—is “streamline” duplicative programs and fund more research into “what works.” Because states, or local governments, or philanthropists, could never fund such research!

That’s not a better way. That is a way, maybe, to mute attacks that Republicans “don’t care” about little children or the poor. So maybe it’s a politically better way. But it isn’t a better way on policy.

At the elementary and secondary level, the report says nice things about choice, including the DC voucher program, which is all well and good. It also touts the Every Student Succeeds Act—the replacement for No Child Left Behind—before, frankly, we know what it is going to look like in practice. More and more, it seems the law may have given too much power to the U.S. Secretary of Education, which the report warns against in only the broadest terms.

A better way? We’ll see.

Perhaps the biggest disappointment is the report’s higher education discussion. Basically, the better way is—of course—to “streamline” stuff, including federal regulations, while failing to even mention the mountain of evidence that federal student aid—all $161 billion of it—fuels rampant price inflation and student debt; encourages massive noncompletion; finances credential inflation; and abets demand for on-campus water parks and other extreme amenities.

While we’re on the subject, the report falls all over itself to tout Pell Grants, but it would sure be refreshing if someone, in looking for a better way for everyone—taxpayers included—were to at least note how fundamentally unfair Pell Grants are. A huge benefit of completing college is to greatly increase one’s lifetime earnings—to use a term some people find distasteful, to profit—and what Pell says is you should be able to make that profit with other people’s money and no obligation to pay them back. How’s that fair?

There is one more omission from the report: any mention of the Constitution, and whether it gives the federal government authority to do any of these things. But if whether the programs work doesn’t matter, probably no one is going to care about a minor, abstract thing like the rule of law.

The “better way” on all these issues would be to be frank about the effects of federal policies, what the federal government is constitutionally permitted to do, and act accordingly. But that seems to be asking way too much.

I’ve written a few things here and elsewhere about the need to close military bases, about how we should go about closing them, and about the possible civilian reuses for these sites. Later this month, I’ll be discussing some examples around the world, drawing from cases in a new book, Sustainable Regeneration of Former Military Sites published by Routledge.

I wrote a chapter covering two cases in Philadelphia – the Frankford Arsenal and the Philadelphia Navy Yard – and co-wrote another on the Brooklyn Navy Yard. Other places featured in the book include the Brunswick Naval Air Station in Maine, and an arts community in Marfa, Texas, once home to Fort Russell, a German POW camp in World War II. My friend and former colleague Connor Ryan wrote about the Base Realignment and Closure (BRAC) process. But the volume mostly addresses non-U.S. cases, including former defense sites in the UK, Croatia, the Netherlands, Finland, Sweden, China, and Taiwan. The experiences are as varied as the sites themselves, but common challenges include environmental cleanup, jurisdictional disputes (i.e. who controls the process, and who benefits), and local resistance to change. Eventually, these former military facilities do find other uses that provide clear benefits for their surrounding communities. And some recover quite quickly.

I’ll be speaking at the Association of Defense Communities’ National Summit here in DC, in the morning on Tuesday, June 21st. Then, on the afternoon of Wednesday, June 22nd, I’m traveling to New York City for an official book launch with the co-editors Celia Clark and Samer Bagaeen at historic Governors Island. A flyer with more details about that event, and the book, is featured below.

Something unsurprising but very interesting is happening in Austin, Texas. Last month, voters in Austin voted against Proposition 1, which would have repealed regulations mandating that wannabe rideshare drivers include fingerprints as part of their applications. Uber and Lyft left the city in the wake of the vote. Predictably, drivers and passengers have turned to social media to keep ridesharing going in a city without Uber and Lyft. While it’s nice to see drivers and passengers trying to adapt to Uber and Lyft leaving Austin, the approach does pose some privacy and safety concerns.

Austin residents looking for a ride need not resort to taxis. Rather, they can join the Facebook group “Arcade City Austin/Request a Ride.” Members of the group can request rides. These requests includes arrival and pickup locations as well as preferred times. Drivers in the group interested in driving the passenger can comment on the request with a phone number, fare, and “brochure” showing that Uber and Lyft had approved them to drive.

As Arcade City notes, their approach removes “corporations” (read: Uber) and other institutions that act as middlemen in popular ridesharing services. There is no Uber or Lyft connecting passengers with drivers, the two parties voluntarily submit information to one-another in order to make each other better off.

As great as it is to see so-called micro-entrepreneurs in Austin working around poorly-considered local regulations, the Facebook group isn’t without concerns.

The “brochures” put on display by drivers could be faked without too much difficulty. A driver found via the Facebook page could be dangerous person who knows how to use Photoshop. Passengers do not know for sure that their potential driver was cleared by Uber or Lyft. In fact, they don’t even know if the driver has a valid license or insurance.

Speaking of insurance, drivers could end up in trouble if they are in an accident while driving a passenger using this Facebook group. Absent clarifying legislation personal auto insurance will be of little help if you’re involved in an accident while driving someone in exchange for money.

There are additional safety concerns associated with Arcade City’s Facebook page. It doesn’t seem difficult to be added to the Facebook group. In fact, I was promptly added to the group after I sent in my request, despite the fact that I work in Washington, D.C. and live in Virginia. It’s not hard to see how this page could be used by stalkers or would-be assailants to identify or track targets. As the screenshot below shows, passengers using the page can reveal specific addresses and telephone numbers.

Arcade City, which has yet to release its app, claims that their platform will allow drivers to create a profile that can embed a social media account, which will enable them to list their safety qualification, as TechCrunch explained:

Arcade City is confident they have a solution that will protect riders, while still remaining decentralized.

The startup explained that each driver will have a profile that can embed a Facebook or Twitter profile, background check, FBI check, driver’s license, proof of physical address, and more. Each driver can attach as few or as many of these verification options as they like, and the app will use these to compile a score that summarizes trustworthiness for each driver. Essentially, since riders will always be able to pick their driver, drivers who choose not to verify should be weeded out of the platform.

However, while this approach may work to provide some safety reassurance, it remains the case that the current Facebook page doesn’t provide rides as safe as Uber or Lyft rides.

Ironically, Uber and Lyft leaving Austin over a safety regulation has left residents with a ridesharing platform more dangerous than the services offered by Uber and Lyft.

 

Venezuela no longer can feed or care for its people. Yet many Americans have forgotten what socialism really is. Sen. Bernie Sanders campaigns as if Karl Marx was just another Santa Claus.

Real socialism largely disappeared decades ago. The collapse of the Soviet Union and its Eastern European satellites effectively ended the age of collectivism.

Nevertheless, oil-rich Venezuela since became a flamboyant exponent of socialism. Its travails should remind us how America’s power is built upon a prosperous economy. Prodigal spending at home and promiscuous intervention abroad are undermining our nation’s economic foundation.

Like most Latin American nations, Venezuela never enjoyed a genuine market economy. After years of misrule, Lt. Col. Hugo Chavez attempted a coup in 1992. He failed, but six years later frustrated Venezuelans elected him president, leading to his “Bolivarian Revolution.” Before his death in 2013 he nationalized industries, provided bountiful social benefits, spent wildly on domestic and foreign ventures, turned the state oil company into a fount of political patronage, and imposed price controls.

Chavez’s successor, Vice President Nicolas Madura, is no more competent but less charismatic. Today the economy is in virtual collapse. With oil revenues declining the regime no longer can mask its many failures.

Yet Madura’s government only blames others—political opponents and private businessmen—for everything from pervasive shortages to hyper-inflation. Madura recently seized private factories and jailed their owners for not producing goods at a loss. People can’t even cry in their beer, since Venezuela lacks the barley and hops necessary to brew any.

In May Madura declared a 60-day state of emergency “to tend to our country and more importantly to prepare to denounce, neutralize and overcome the external and foreign aggressions against our country.” He said his government’s problems are “made in the U.S.A.”

In December legislative elections delivered a two-thirds parliamentary majority to the divided opposition, which is organizing a recall campaign against Madura. Seven of ten Venezuelans say they want him gone.

The Obama administration declared the Chavista regime to be a national security threat and imposed sanctions on top Venezuelan officials. Washington often inflates foreign threats to justify intervention, but Venezuela is a danger only to its own people. The Obama administration should stay out of the worsening chaos.

In fact, as I wrote in Forbes: “there’s little good that Washington can do. Attempts at isolation, especially economic sanctions which have become America’s weapon of choice, tend to hurt those people most aligned with the U.S.”

In Venezuela Washington’s support for a failed coup in 2002 spurred nationalist support for Chavez. Only the Venezuelan people can rid themselves of the Chavistas.

As they must do. Hugo Chavez said he created “21st century socialism.” Alas, it didn’t work any better than 19th century socialism. Bernie Sanders, call your office. America can’t afford to import a system that continues to fail around the world.

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

Currently, details are few, but apparently the results of a major scientific study on the effects of anthropogenic aerosols on clouds are going to have large implications for climate change projections—substantially lowering future temperature rise expectations.

In a blog post from the Department of Meteorology of the University of Reading, Dr. Nicolas Bellouin describes some preliminary results from a research study he leads investigating the influence of aerosols on cloud properties.  The behavior of clouds, including how they are formed, how long they last, how bright they are, etc., plays a very large role in the earth’s climate system, and is considered the weakest part of global climate models. The climate model cloud deficiency results from a combination of scientific uncertainty about cloud behavior, as well as the modeling challenges that come from simulating the small spatial and temporal scales over which the important processes take place.

When it comes to the influence of human aerosol emissions on cloud properties, the scientific mainstream view is that aerosols modify clouds in such a way as to result in an enhanced cooling of the earth’s surface—a cooling influence which has acted to offset some portion of the warming influence resulting from human emissions of greenhouse gases (primarily from the burning of fossil fuels, like coal, oil, and natural gas to produce energy).  In the absence of this presumed aerosol cooling effect, climate models predict that the earth should warm at a much faster rate than has been observed.  A large cooling effect from aerosols was thus introduced in the early 1990s as a way to “fix” the climate models and bring them closer in line with the modest pace of observed warming. Despite that “fix,” climate models continue to overpredict the observed warming rate—which is bad enough news for climate models already.

But the new results, reported by Bellouin, make things much worse for them. His team’s investigations show that the anthropogenic cooling impact from clouds is much less than “assessed” by the U.N.’s Intergovernmental Panel on Climate Change (IPCC) and also much less than employed by climate models.  Less enhanced cloud cooling means that greenhouse gases have produced less warming than the climate models have determined. Another way to put it is that this new finding implies that the earth’s climate sensitivity—how much the earth’s surface will warm from a doubling of the pre-industrial atmospheric carbon dioxide concentration—is much below that of the average climate model (3.2°C) and near the low end of the IPCC’s 1.5°C to 4.5°C assessed range. This result comports with the concept of “lukewarming” (which you can read more about here).

Bellouin summarizes his findings:

Radiative forcing is a measure of the imbalance in the Earth’s energy budget caused by perturbations external to the natural climate system, such as the emission of aerosols into the atmosphere by human activities. Our preliminary [research] estimate of radiative forcing due to aerosol-cloud interactions, based on satellite observations of aerosol amounts and cloud reflectivity, is –0.6 W m−2. The negative sign indicates a loss of energy for the climate system. The estimate of climate models for the same radiative forcing is stronger, typically larger than –1 W m−2. What causes that discrepancy? Over the past few months, I have discussed with experts in aerosol-cloud interactions, and there are reasons to expect that aerosol-cloud interactions are weaker than simulated by climate models – and perhaps even weaker than the preliminary [research] estimate.

Bellouin promises a more formal and detailed release of his team’s findings in August.

As they stand, the results of this new study seem to confirm the results of an analysis published last year by Bjorn Stevens of the Max-Planck Institute for Meteorology which also showed a much smaller anthropogenic enhancement of the cooling property of clouds.

When the Stevens results were incorporated into a determination of the earth’s climate sensitivity made by Nic Lewis, the result was a best estimate of the earth’s climate sensitivity of 1.5°C with a narrow range of 1.2°C to 1.8°C. This is a significant lowering and narrowing of the IPCC’s assessed range (again, 1.5°C to 4.5°C). The lower the climate sensitivity, the less future warming will result from our greenhouse gas emissions, the smaller any resultant impact, and the less the “need” to “do something” about it. Also, Lewis’ narrow range of uncertainty increases our confidence that climate change will not be catastrophic—that is, will not proceed at a rate that exceeds our ability to keep up.

At the time, we wrote

If this Stevens/Lewis result holds up, it is the death blow to global warming hysteria.

The findings being reported by Nicolas Bellouin show, in fact, the Stevens/Lewis result to be holding up quite nicely.

Distrusted by most Americans and generating little enthusiasm even among supporters, Hillary Clinton has fallen behind Donald Trump in the polls. Last week she launched a brutal attack on his foreign policy views.

Clinton is the Democratic neoconservative who backed every major conflict fought by the U.S. over the last quarter century. Her needless foreign adventures consistently created new crises and consequent demands for more intervention and war.

Nevertheless, her basic message was that Donald Trump is “temperamentally unfit” for the presidency. True, but common sense still occasionally surfaces in the Trump world view. It rarely makes an appearance as Clinton backs Washington’s attempted domination of the globe.

Ultimately, she is most appalled that Trump appears to oppose the conventional wisdom that Washington is destined to micro-manage the globe. For instance, she began by posing “a choice between a fearful America that’s less secure and less engaged with the world, and strong, confident America that leads to keep our country safe and our economy growing.” However, Clinton-backed military interventions have left America poorer and less secure.

In her speech she imagined Trump “leading us into war just because somebody got under his very thin skin.” He could. But she doesn’t require even that much justification for going to war. She has backed U.S. involvement in virtually every unnecessary conflict.

She pushed her husband to remake the Balkans. She strongly supported the Iraq invasion, one of America’s worst foreign policy blunders.

She backed doubling down in nation-building in Afghanistan. She orchestrated the campaign in Libya, which resulted in a vacuum filled by ISIS. She advocates that the U.S. get more involved militarily in Syria, a multi-sided civil war in which America has no vital interest and for which Washington has no answer.

Yet she believes this list of mistakes entitles her to the presidency: “I’m proud to run on my record.”

In her speech she said “we need to stick with our allies,” which make “us exceptional.” Yet America is not exceptional because dozens of whiny dependents expect the U.S. to subsidize, reassure, and defend them. Actually, nations all over the world are begging Washington to do so.

Allies should make the U.S. stronger. America should not protect those who can protect themselves.

The Europeans are not only wealthier and more populous than Russia, their only serious potential antagonist, but also America, which does most of the heavy lifting in defending the continent. South Korea has more than 40 times the GDP and twice the population of North Korea.

These alliances are a source of conflict, not strength. Washington has no cause to risk war over the Baltic States, Japan’s claims to the Senkaku Islands, or who controls the Korean peninsula.

Clinton endorsed diplomacy and specifically the Iran nuclear accord. She’s right, but though Trump has been inconsistent on Iran, he appears to be more open to diplomacy elsewhere, especially in dealing with the PRC and Russia.

She advocated being “firm but wise with our rivals.” Clinton rightly criticized Trump’s sometimes bizarre praise of foreign dictators, but she supports confrontation with Russia over Ukraine even though the latter is not in NATO and is of far greater interest to the Europeans.

She also argued that “We need a real plan for confronting terrorism,” but, as I point out in Forbes, she “failed to mention the most obvious point. Stop creating enemies around the globe. Terrorism is evil and awful, but it almost always is a political act directed against outsiders, in this case, unfortunately, Americans.”

Clinton advocated that Americans “stay true to our values.” Her criticisms of Trump’s grotesque behavior struck home.

Yet her public values are worse: a belief in global social engineering, a willingness to go to war for frivolous reasons, a willingness to wreck entire nations while pursuing failed policies. Clinton, too, is not qualified to be commander-in-chief.

Clinton made a case against herself as well as Trump. Whatever happens in November is likely to leave Americans in greater danger.

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