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You Ought to Have a Look is a regular feature from the Center for the Study of Science.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

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Last week in this space, we highlighted a couple of areas where burdensome carbon dioxide policies exist that we hoped were not being overlooked by the Trump transition and planning teams in their push to reverse the more prominent Obama Administration actions like the Paris Climate Accord and the Clean Power Plan.

We want to draw a bit more attention to one of these—overturning federal regulations that were handed down on greenhouse gas regulations offered by the Department of Energy (DOE) and the EPA.

Wayne Crews, vice president for policy at the Competitive Enterprise Institute has a couple of great articles (see here and here) describing how this can be done through elements of the Congressional Review Act (CRA), which was passed in 1996. The beauty of using the CRA is that it only requires a simple majority vote (i.e., no worries of a filibuster) in Congress. To date, the CRA has been pretty ineffective at overturning “midnight rules” (in this case rules finalized since about mid-May) because the incoming president would veto them. But with Trump’s ascendency, this should not be the case. Crews has compiled, and is maintaining, a running list that is currently 140+ items strong (and growing) of “Significant Federal Rules Containing Potential Candidates for Trump Administration Congressional Review Act Resolutions of Disapproval.” There are many among them that either directly regulate greenhouse gas emissions or include (improperly in our estimate) the so-called “social cost of carbon” on the benefits side of the cost/benefit analyses that are used to support greenhouse gas reductions. These misguided and ill-informed should be prime targets for Congressional undoing.

We also want to highlight a couple of other pieces that get into the technical (or legal) details of how Trump may go about disassembling elements of Obama’s Climate Action Plan. These include analysis by:

Andrew Grossman: (Cato podcast) “Undoing Executive Action in a Trump Presidency

David Bookbinder and David Bailey: “Does Trump Spell Climate Doom?”

Greenwire’s Amanda Reilly: “Clean Power Plan: Rule’s demise looms, but how Trump will ax it remains unclear

Climatewire’s Jean Chemnick: “Paris Agreement: Here’s what could happen under Trump

And a good overview by Greenwire’s Robin Bravender: “Can Trump deliver and immense energy, climate promises?

It worth reading through these if you want to familiarize yourself with the myriad ways that the Trump Administration may clearing the climate policy slate.

And finally, the hard environmental left continues to fret about what is going to come to pass under the new Trump Administration. Much of the fretting is about whether or not Trump decides that “turnabout is fair play” when it comes to matters like research funding, research direction, respect of opposing views, personal attacks on scientists, etc. The new Administration’s approach, in fact, may offer refreshing new directions in both science and policy that were actively oppressed under the Obama Administration. A couple of commentaries over the past week cautiously embrace such possibilities. While we may not agree with everything that is being expressed in these articles, we highlight them because their authors were not afraid to offer at least a glimmer of (cautious) optimism for opportunity. They include essays by:

Dan Sarowitz: “Science and innovation policies for Donald Trump

Pat Michaels: “Trump Should Shine Spotlight on Shrouded Climate ‘Science’

And those ideas expressed by Judy Curry in this article “Climate scientists brace for funding battles under Trump

You ought to have a look!

The Internal Revenue Service has filed a “John Doe” summons seeking to require U.S. Bitcoin exchange Coinbase to turn over records about every transaction of every user from 2013 to 2015. That demand is shocking in sweep, and it includes: “complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date.” And every single transaction:

All records of account/wallet/vault activity including transaction logs or other records identifying the date, amount, and type of transaction (purchase/sale/exchange), the post transaction balance, the names or other identifiers of counterparties to the transaction; requests or instructions to send or receive bitcoin; and, where counterparties transact through their own Coinbase accounts/wallets/vaults, all available information identifying the users of such accounts and their contact information.

The demand is not limited to owners of large amounts of Bitcoin or to those who have transacted in large amounts. Everything about everyone.

Equally shocking is the weak foundation for making this demand. In a declaration submitted to the court, an IRS agent recounts having learned of tax evasion on the part of one Bitcoin user and two companies. On this basis, he and the IRS claim “a reasonable basis for believing” that all U.S. Coinbase users “may fail or may have failed to comply” with the internal revenue laws.

If that evidence is enough to create a reasonable basis to believe that all Bitcoin users evade taxes, the IRS is entitled to access the records of everyone who uses paper money.

Anecdotes and online bragodaccio about tax avoidance are not a reasonable basis to believe that all Coinbase users are tax cheats whose financial lives should be opened to IRS investigators and the hackers looking over their shoulders. There must be some specific information about particular users, or else the IRS is seeking a general warrant, which the Fourth Amendment denies it the power to do.

Speaking of the Fourth Amendment, that rock-bottom “reasonable basis” standard is probably insufficient. Americans should and probably do have Fourth Amendment rights in information they entrust to financial services providers required by contract to keep it confidential. Observers of Fourth Amendment law know full-well that the “third-party doctrine,” which cancels Fourth Amendment interests in shared information, is in retreat.

The IRS’s effort to strip away the privacy of all Coinbase users is more broad than the government’s effort in recent cases dealing with cell site location information. In the CSLI cases, the government has sought data about particular suspects, using a standard below the probable cause standard required by the Fourth Amendment (“specific and articulable facts showing that there are reasonable grounds to believe”).

In United States v. Benbow, we argued to the D.C. Circuit that people retain a property right in information they share with service providers under contractual privacy obligations. This information is a “paper or effect” for purposes of the Fourth Amendment. Accordingly, a probable cause standard should apply to accessing that data.

Again, the government in the CSLI cases sought information about the cell phone use of particular suspects, and that is controversial enough given the low standard of the Stored Communications Act. Here, the IRS is seeking data about every user of Bitcoin, using a standard that’s even lower.

Coinbase’s privacy policy only permits it to share user information with law enforcement when it is “compelled to do so.” That implies putting up a reasonable fight for the interests of its users. Given the low standard and the vastly overbroad demand, Coinbase seems obligated to put up that fight.

During the post-World War II period, opposition to U.S. militarism and involvement in dubious military conflicts has usually been stronger on the political left than the right.  Left-wing, anti-war sentiment reached its peak during the Vietnam War, when groups opposed to that conflict could sometimes mobilize tens of thousands of demonstrators.  Opposition to subsequent U.S. military crusades was less robust, but even as late as the Iraq War, there were sizable anti-war demonstrations in the streets.

There have been warning signs for some time, though, that opposition to unnecessary armed conflicts has lost its appeal to much of the political left.  For one thing, there was always a partisan bias to anti-war movements.  Even during the heyday of resistance to the Vietnam War, the criticism became more intense after Republican Richard Nixon took over the White House than it had been when Democrat Lyndon Johnson occupied the Oval Office.  The bias was even more apparent in later decades.  There was far more criticism of Republican George H.W. Bush’s Persian Gulf War than there was of Democrat Bill Clinton’s wars in Bosnia and Kosovo.  Indeed, a distressing number of prominent liberals found reasons to praise Clinton’s military crusades in the Balkans.

The partisan factor has grown even more intense in the twenty-first century.  Left-wing groups mounted a fairly serious effort to thwart Republican George W. Bush’s invasion of Iraq.  But when Democrat Barack Obama greatly escalated U.S. military involvement in Afghanistan and led a NATO assault to remove Libya’s Muammar Qaddafi from power, the reaction was very different.  Except for a few hard-left organizations, such as Code Pink, the sounds coming from the usual supposed anti-war liberal quarters were those of crickets.  Likewise, there has been little push-back to Obama’s gradual return of the U.S. military presence in Iraq or the entanglement of the U.S. military in Syria.

Some on the left hoped that the campaign of Senator Bernie Sanders for the Democratic Party’s presidential nomination signaled a revitalization of opposition to the warfare state among progressives.  That did not prove to be the case.  Foreign policy in general, and opposition to Washington’s wars in particular, was a secondary and anemic theme in his campaign against Hillary Clinton.

And Sanders may now have sounded the death knell for the liberal anti-war movement.  Just days after Donald Trump’s upset victory in the 2016 presidential election, Sanders published a high-profile article in the New York Times outlining the policy agenda for progressives going forward.  The piece contained the usual laundry list of identity politics and spending proposals that left-wing types have been pushing for decades.  What was striking, though, is that the article contained not a single word—not a single word—about foreign policy.  The United States is mired in the longest war in its history in Afghanistan, it has returned to the scene of its last major interventionist disaster in Iraq, and it is already entangled to a dangerous degree in Syria.  The president-elect has indicated that he may tear up the agreement with Iran, wants to adopt a confrontational trade policy toward China, and wants to pour even more money into the Pentagon.

Yet the most visible and prominent political figure on the left apparently deems all of this unworthy of a comment in America’s most prestigious newspaper.  That omission suggests that Sanders may believe his followers do not consider foreign policy very important.  That would be worrisome.  The other possibility is even worse: that he believes they have accommodated themselves to the warfare state—that as long as they can get the funding for their pet domestic programs, they are willing to back even more generous funding of the Pentagon and other elements of the national security apparatus.  Such an assumption would also suggest that they would remain largely mute as Washington embarks on future military crusades. 

If the latter scenario proves true, we are witnessing the demise of anti-war liberals.  It would then be up to libertarians and limited government conservatives to redouble their efforts to wage campaigns for peace, despite knowing that we may have few, if any allies, on our left flank.

A lot of well-intentioned people think it is not enough for families to be able to choose schools. They have to choose “good” schools. Those people often do not think private school choice programs that give parents a lot of control over which schools they select are up to par. Fine. But just because you don’t like something doesn’t make it a “clear flop.”

Writing at The 74, Richard Whitmire warns that we should beware Trumps bearing school choice gifts. He argues that President-elect Trump’s proposal to spend $20 billion on school choice could be dangerous not because of, say, federal rules that might be attached to unconstitutional largesse, but because the money might not be restricted to “great” schools. “Great,” presumably, should be defined by legislators or bureaucrats. After all, you don’t want to replicate the Milwaukee voucher program:

Those in the school reform movement learned the hard way that choice alone does not produce more seats in great schools. If that were the case, we’d all be praising the early voucher program in Milwaukee and the widespread charters in Ohio and Michigan. But in all those cases, choice alone produced nothing.

In Milwaukee, for example, which I visited repeatedly while researching my book On the Rocketship, about the creation of one best-in-class charter network, the more-than-two-decade-old voucher experiment proved to be a clear flop. (Note that I didn’t say unpopular. Who objects to free tuition for their kid’s parochial schools?)

Set aside the first evidence that Milwaukee’s program isn’t a “clear flop”: It is popular, indicating that the people it is supposed to serve are at least getting something they want. What about other important measures, including test scores, graduation rates, competitive effects, and costs? According to researchers at the University of Arkansas’ School Choice Demonstration Project, who intensively studied Milwaukee:

Our main findings included that the program had a positive effect on a student’s likelihood of graduating from high school and enrolling and persisting in a 4-year college. We found little evidence that the Choice program increased the test scores of participating students, though our final analysis revealed a positive effect of the program on reading scores when combined with high stakes testing. There was no evidence of program effects on math scores. Competition from the Choice program appears to have boosted the test scores of students who remained in Milwaukee Public Schools (MPS), but those systemic effects of the program were modest in size. Because the maximum value of the voucher…is substantially less than what the government pays to educate students in MPS, the state saves over $50 million per year from the operation of the program. 

Is the choice program transformative? No. But a flop? It appears to have produced somewhat better outcomes at much lower taxpayer expense than the public schools. It is also nowhere near a free market, with regulations constraining admissions policies, hours of instruction, and testing. And freedom is the key to unleashing competitive pressures, specialization, and innovation.

The Milwaukee voucher program is not a flop, and making policy based on the idea it is would be a mistake.

This week Kris Kobach, Kansas Secretary of State and Trump transition team adviser, told Reuters that Trump’s team had discussed his plan to restore a registry of immigrants from predominantly Arab and Muslim counties. The registry, which was part of the National Security Entry-Exit Registration System (NSEERS), operated from 2002 until 2011. The Obama administration suspended it, citing efficiency issues. Although NSEERS was suspended it could very easily be resuscitated and made worse. This is by design. A 2012 Department of Homeland Security Office of Inspect General (OIG) report reveals that the Department of Homeland Security (DHS) rejected a recommendation to terminate the NSEERS program, saying that the system would allow DHS to register “a category of aliens” in the future.

In the wake of 9/11 the Department of Justice (DOJ) built NSEERS. DHS took control of the program after it was established in 2003. Under NSEERS, nonimmigrant aliens from 25 countries were fingerprinted, interviewed, photographed, and required to check in with officials at regular intervals. Twenty-four of these 25 countries were majority-Arab and Muslim (North Korea was the other country).

Although in place for almost a decade, NSEERS was ineffective as an anti-terrorism tool. Because of the inscrutable rules associated with NSEERS, thousands of men and boys were deported while the system was up and running.

It shouldn’t come as a surprise, then, that in February 2012 a DHS OIG report found that, “The NSEERS program for special registration of certain categories of aliens from predominantly Arab and Muslim countries, and the database that supports this program, is obsolete and should be terminated.”

Note that the argument being made here for termination is based on the NSEESR program being obsolete. While the OIG reported was being put together DHS announced that it was removing all 25 countries from the NSEERS program. In that announcement DHS also highlighted that technology improvements, not concerns for civil liberties, motivated them to make the change:

Over the past six years, the Department of Homeland Security (DHS) has implemented several new automated systems that capture arrival and exit information on nonimmigrant travelers to the United States, and DHS has determined that recapturing this data manually when a nonimmigrant is seeking admission to the United States is redundant and no longer provides any increase in security.

But the DHS only suspended rather than eliminated NSEERS. When responding to the OIG report’s recommendation that NSEERS be fully terminated DHS’ assistant secretary for policy wrote the following (emphasis mine):

The Secretary’s authority, as exercised under the NSEERS regulations, is broader than the information collection program based on country designation described in the Office of Inspector General’s draft report. The Secretary has chosen to retain this regulatory framework to enable prompt action to require registration of a category or categories of aliens, if necessary, through rapid publication of a Federal Register Notice. The retention of this regulatory framework has no direct cost to the Department while a formal rulemaking to rescind the regulations would be costly and time consuming now, with the possibility that another costly and time consuming rulemaking would be necessary if specific registration was needed in the future. Indeed, in light of the legally required time to promulgate new regulations, it might not be possible to reestablish a categorical registration regime in time fully to protect the United States from a future, perhaps imminent threat. The regulation is being kept in place to ensure that the Secretary retains a legal discretionary regulatory framework in case it is needed in the future.

Almost identical points were made in a May 2011 DHS newsletter:

Because the Secretary of Homeland Security’s authority under the NSEERS regulations is broader than the manual information flow based on country designation that has now ended, the underlying NSEERS regulation will remain in place in the event a special registration program is again needed.

Clearly, Kobach and other Trump supporters seem to think that a registration program similar to NSEERS is needed. Without swift action before Trump’s inauguration his team will walk into the White House in January with a system in place for the establishment of a “Muslim registry” that could target immigrants from more than 25 countries.   

House Speaker Paul Ryan (R-Wis) held a press conference a few days ago where he said that GOP control of the Congress and White House afforded his party the opportunity “to go big, to go bold.”  There has been talk of rolling back regulations and Obamacare.  That’s good news, but Ryan should consider a bigger and bolder move: End federal income tax withholding. 

The “political establishment” has created a situation where the U.S. is trillions of dollars in debt.  How will the new Congress address that?  The fiscal scandal is too abstract for many voters to grasp so too many of them don’t think twice about supporting new spending measures, such as free college tuition or what have you.  To build the necessary political support for otherwise unpopular spending cuts, Ryan should quickly move to end federal income tax withholding.  If American households would stop viewing their tax refund checks as happy windfalls from politicians and instead better understood how much big government is costing them every year, one would expect to see louder demands to bring runaway spending under control and to downsize the scope of federal programs and operations.  The GOP honeymoon will be over in a few months.  Ending federal withholding will help build support for spending cuts over the next few years and perhaps beyond.

Ironically, it was the late, great Milton Friedman who helped devise the modern income tax withholding system when he worked in the Treasury Department during World War II.  He was fixated on tax collection efficiency at that time, not limiting the size of government.  Late in his life, Friedman said that he wished “there were some way of abolishing withholding now.”  Former congressman Dick Armey (R-Tex) proposed ending withholding when the GOP took control of the House in 1994, but Bill Clinton was never going to sign that measure into law.  Now that the GOP has both the Congress and the White House, it has a real opportunity to go big and bold.  Grant Friedman his wish and get our fiscal house in order.

For related Cato scholarship, go here.

“Trump has heaped scorn upon those Republicans who have worshiped at the alter of unfettered free trade.”  - Joe Scarborough, May 22, 2016

“I wouldn’t say that you know this free trade obsession is something that can’t get looked at in regard to making things more fair.” – Incoming White House Chief of Staff Reince Priebus, November 14, 2016

One of the most pervasive themes of the last year is the notion that America’s populist uprising, and the success of President-elect Donald Trump, has in large part been a direct response to the United States’ – and in particular the Republican Party’s – libertarian obsession with “unfettered” free trade.  MSNBC’s “Morning Joe” Scarborough, quoted above, has been a big cheerleader of this argument, which has been treated on his show and elsewhere in the media as obvious truth.  And now we see one of the few official members of the future Trump administration, Reince Priebus, repeating the notion, signaling to the country that America’s great free trade moment might be ending.  Clearly, the idea is prevalent and persuasive. 

But it is also dead wrong.

First, although the United States maintains a relatively low average import tariff of around 3 percent, it also applies high tariffs on a wide array of “politically-sensitive” (read: highly lobbied) products: 131.8% on peanuts; 35% on tuna; 20% on various dairy products; 25% on light trucks; 16% on wool sweaters, just to name a few.  (Agriculture is particularly bad in this regard.)  We also maintain a long list of restrictive quotas on products like sugar, cheese, canned tuna, brooms, cotton, and baby formula.  And although the U.S. has 14 free trade agreements (FTAs) with 20 different countries and is a longstanding member of the World Trade Organization (WTO), many of these same “sensitive” products have been exempted from the agreements’ trade liberalization commitments.  Free trade for thee, but not for me.

Second, while America’s tariffs and other “formal” trade barriers have indeed been declining for decades, they are only a small part of the overall story.  U.S. non-tariff barriers – export subsidies, discriminatory regulations, “buy local” rules, “fair trade” duties, etc. – have exploded in recent years.  In fact, according to a recent analysis by Credit Suisse, when you add up all forms of trade barriers imposed between 1990 and 2013, the biggest protectionist in the world isn’t China or Mexico but none other than… the United States:

A look at U.S. “trade defense” measures (what we call “trade remedies” – anti-dumping, countervailing duty and safeguards measures) is revealing in this regard.  According to the U.S. International Trade Commission, the United States as of October 31 imposes 373 special protective duties on a wide range of products, more than 90 of which came in the last three years alone (i.e., since chart above on U.S. protectionism was produced):

AD/CVD Orders as of Oct. 31, 2016

Product Group

Total

Agricultural, forest,  and processed food products

22

Chemicals and pharmaceuticals

47

Iron & steel:  Mill products

101

Iron & steel:  Other products & castings

44

Iron & steel:  Pipe products

46

Metals and minerals

24

Miscellaneous manufactured products

64

Plastics, rubber, stone, and glass products

19

Transportation

3

Textiles and apparel

3

Total

373

 

Chinese imports face 140 of these special duties, which can often be as high as 100%, and one sector in particular has benefited from the import protection: iron & steel.  Incredibly, the U.S. industry that benefits from over half of all anti-dumping and countervailing duty (AD/CVD) orders on imports is also the same sector that has been constantly cited by President-elect Trump and his political and media cheerleaders as the biggest victim of America’s supposed religious devotion to “unfettered” free trade:

Other sectors supposedly crushed by the scourge of libertarian trade policy, such as chemicals and agricultural products, also disproportionately benefit from trade remedies protection. 

These facts demonstrate quite clearly that American manufacturing and agribusiness, as well their workers, are, in fact, a far cry from being the “unprotected” victims of “unfettered” free trade.  They also should indicate that the commercial failures of U.S. steel or textiles or other sectors, as well the suffering of America’s working class, have not resulted from a lack of trade protectionism.  There is plenty of protection available, and many U.S. industries take full advantage. 

If this is “free trade,” then I shudder to think of what’s coming next.

For the steel industry, at least, things are looking up: they have a true champion, former Nucor CEO Dan DiMicco, in charge of picking the next U.S. Trade Representative – a move that, you’ll be shocked to learn, has been cheered by Leo Gerard, the president of the U.S. steelworkers union.  Finally, these poor, unprotected saps will get the fair shake in the global economy that they, and President-elect Trump, think they deserve.

Unfortunately, American consumers, including the millions of workers employed in steel-consuming industries, will be stuck with the bill.

A US Park Police officer stands at the Vietnam Veterans Memorial Wall during Veterans day celebrations on November 11, 2016 in Washington, DC. / AFP / Olivier Douliery (Photo credit should read OLIVIER DOULIERY/AFP/Getty Images)

Another Veterans Day brought another round of lamentations about the Department of Veterans Affairs and promises to fix it.

President-elect Donald Trump promised to do so throughout the campaign. Paul Rieckhoff, founder and CEO of Iraq and Afghanistan Veterans of America, is skeptical. Veterans are “used to big promises and disappointing results,” he says. “Fixing the VA might be one of the biggest challenges for President Trump. Every president says they’re going to do it, yet we’ve still got a VA with backlogs and massive problems.”

If Trump tries to fix the VA the same way other presidents have, he will fail. But there is a way he can succeed.

Trump’s predecessors failed because they tried to work within a model of top-down, centralized economic planning. The Veterans Health Administration is America’s only purely government-run health system. Its closest analogue is probably the United Kingdom’s National Health Service. The VHA even produces the same results as the NHS: chronic shortages and long waits for care alongside idle and wasted resources, instances of horrific care, and often good care, you know, if you can get it.

Presidents can and have fixed such problems temporarily by moving resources from here to there, or investing in some new system. It never lasts, though. The VHA is a socialist enterprise. Unlike a market system, it has no price mechanism or competitive pressures that automatically fix such problems when they re-emerge. And not only do they always re-emerge, Congress usually takes forever to get off its duff. If Trump retains the VA’s basic structure, he will join a long line of presidents who have failed our nation’s veterans.

How to Privatize the VA 

Trump can distinguish himself from other presidents by working with Congress to create a system of veterans benefits that fixes problems automatically. Here’s how.

First, the federal government should increase military pay sufficient to enable workers to purchase–from private insurers at actuarially fair rates–a package of life, disability, and health benefits equivalent to what the VA provides. Benefits would kick in as soon as they leave active duty and cover veterans’ service-related disabilities or illnesses for life.

Second, having privatized the insurance component of veterans benefits, the federal government should then privatize the delivery component. It should incorporate the VHA as a private company and issue shares to active-duty personnel and veterans based on length of service or other criteria.

You read that right. Military personnel and veterans would literally own the VHA, including its many hospitals and other facilities. Privatizing the VA would both increase the pay of active-duty personnel, and create a massive wealth transfer to active-duty personnel and veterans. Veterans would be able to receive medical care from health systems owned and operated by veterans, for veterans.

Third, the federal government should give current veterans vouchers to purchase insurance and medical care from the insurers and health systems of their choice, including the new veteran-owned and -operated systems.

Privatization Means Better Benefits for Veterans 

Privatization would improve the quality of veterans’ benefits immeasurably.

The federal government promises veterans’ benefits to military personnel once they leave active duty. Only it’s not an explicit promise. And Congress doesn’t fund it. As a result, Congress can–and does–renege on that commitment.

A system run by veterans, for veterans would keep those commitments and focus on quality in a way the VA cannot, in part because it would eliminate the VHA’s monopoly. Competing insurers and health systems would know their customers have options. If they provide service as lousy as the VA does, veterans would fire them and active-duty personnel would avoid them.

But that’s not even the best part. As Radley Balko wrote five Veterans Days ago, “The best way to honor our war veterans is to stop producing more of them.”

NEW YORK, NY - NOVEMBER 11: A Veteran lights a cigar during the annual Veterans Day Parade on November 11, 2016 in New York City. Known as ‘America’s Parade’ it features over 20,000 participants, including veterans of numerous eras, military units, businesses and high school bands and civic and youth groups. (Photo by Michael Loccisano/Getty Images)

Privatizing the VA Can Prevent Unnecessary Wars

The greatest benefit of this system is that it could help prevent unnecessary wars.

Veterans benefits are one of the largest financial costs of any armed conflict. Yet Congress does not pre-fund those obligations. It only funds them once they come due. That allows Congress and the president to pretend these costs do not exist when they are making the decision about whether to send troops off to war.

The increase in military pay I describe here would effectively pre-fund veterans benefits. Congress would have to fund each soldier’s and sailor’s veterans benefits from the moment she joins the military until she leaves. Importantly, since the added pay would reflect the cost of purchasing veterans benefits at actuarially fair premiums, the added pay would rise when the United States is at war or when war is imminent. The added risk of deaths and injuries would cause premiums to rise, which would increase the amount of added pay Congress must provide each service member.

The result is that future Congresses and presidents would have to confront this enormous cost of war at the moment they decide to send U.S. troops off to war, and every day they decide to keep them there. Privatizing the VA would help future Congresses and presidents avoid unnecessary wars by making them confront more of the costs of war.

There are still further benefits to this approach. Read about them here and here.

Follow me on Twitter at @mfcannon.

Each time the government defines the characteristics of an acceptable product, some competition in the market is lost. The New York Times published an article on Wednesday that illustrates this perfectly.

The 1990 Organic Foods Production Act instructs the Department of Agriculture to set up a process for certifying food as organic. As part of that certification, organic farmers develop organic plans that “contain provisions designed to foster soil fertility, primarily through the management of the organic content of the soil through proper tillage, crop rotation and manuring.”

Should plants grown hydroponically be allowed under an organic plan? Hydroponic farming does not use soil, but instead uses nutrient-rich water. The futuristic technique is intended to be environmentally friendly and healthful—the same intention as organic farming. Yet in 2010 the National Organic Standards Board recommended to the secretary of agriculture that hydroponically grown plants be ruled ineligible for organic designation. The secretary of agriculture never acted on the recommendation.

David Chapman, an organic farmer in Vermont who has been a leader of the opposition to certifying produce from the hydroponic systems, said he would be driven out of business if the Department of Agriculture declared hydroponically grown tomatoes could be certified as organic. “Most people have no idea that the organic tomatoes and peppers they’re buying are hydroponically grown,” Chapman said. “I think most consumers believe those things are grown in the soil, and that farmers like me are taking care of the soil as they grow them.”

Colin Archipley, a hydroponic farmer in San Diego, is frustrated that there is even a debate over whether his produce is organic. “The reason this has become such a big deal is that systems like ours are becoming more popular because they’re more efficient, which means farmers are more sustainable and profitable,” he said. “That’s put competition on farmers, specifically in Vermont, and so what this really is about is market protection.”

The founders of our country understood that government should not arbitrate the struggles among competing religions and certify one rather than the others as state-sanctioned. Such insight applies not just to divine matters, but to profane ones like whether hydroponically grown food is or isn’t organic. Let consumers decide in the marketplace whether they think hydroponics is a good thing, rather than government decide through regulation.

In an interview this weekend, Donald Trump officially dumped plans to deport all unauthorized immigrants, stating that he would focus only on criminals. Trump didn’t specify how he would handle non-criminals, but he shouldn’t hold back on advocating full legalization for fear of losing his backers. His earlier attempts at softening show he can maintain their support; in fact, Trump’s supporters appear more interested in border security than deportation anyway.

During the early part of his campaign, Trump secured a huge amount of support among primary voters who opposed legalization. He then spent the remainder of his campaign trying to convince other Republicans that mass deportation was the way to go.

But it never worked. In fact, Pew Research Center polls show that more Republicans supported legalization after his campaign than before it—rising from 56 percent to 59 percent from March 2015 to March 2016. By the time of the election, 60 percent of self-described Trump voters told Pew that they favored legalization. Trump simply failed to win the argument.

In late August, it seemed like Trump realized that his case was falling on deaf ears, so he toyed with a pivot. During an interview on Fox, he polled a very large audience of supporters. When he asked if they favored mass deportation, the room remained mostly quiet. When he asked about a plan to let non-criminal unauthorized immigrants “stay in some form,” the crowd cheered. He promised that “we’ll work with them,” saying it was “tough to throw them out.”

The crowd’s reaction was in tune with most major Trump backers. While Rep. Steve King (R-IA) warned Trump to back away from his softening, he was pretty much alone in doing so. Sen. Jeff Sessions (R-AL), Trump’s top immigration advisor and Rep. King’s longtime Senate ally on immigration, insisted that he would continue to support Trump. He told Fox News he would “be supportive of” a plan that dealt with “people who have been here a long time.”

Trump surrogate Rep. Tom Marino (R-PA) said somewhat vaguely that he saw the posture as “a tweak” to accommodate “the fair, humane, human side of dealing with this.” Rep. Larry Bucshon (R-IN) said that Trump didn’t “change what his principles are,” arguing that the goal was always securing the border. While the congressman still supported “enforcing the law,” he said he also considered himself a “humanitarian” and would be open to Trump’s new ideas.

Rep. Chris Collins (R-NY), one of the first members of Congress to back Trump, agreed, telling CNN that “there’s just no logical way to deport 12 million people.” Instead, he called for a “rhetorical deportation,” where immigrants would “go into a room as illegal immigrants” and emerge “with work papers and Social Security numbers.”

Other members of Congress were more direct. Rep. Kevin Cramer (R-ND), another Trump backer, said he was open to a plan to give legal status to those here illegally. Rep. Glenn Grothman (R-WI) went further, saying that he never believed Trump would really carry out 11 million deportations. “You have to use common sense,” he told the Wall Street Journal.

But after consulting further with his team, Trump reversed course, reading a speech a week later that said, “For those here today illegally who are seeking legal status, they will have one route and only one route: to return home.” But this plan is unrealistic, and many of his most committed supporters know it. Even Trump himself apparently now thinks it’s impractical. The only alternative to this plan is legalization, something Trump’s supporters already back.

Trump has proven that he can get away with advocating for real immigration reform—if he wants to. There is no reason to wait any longer to endorse a realistic path forward on the issue.

With both major party platforms calling for a return to some version of Glass-Steagall, it was a given that, whoever won the Presidential election, the issue would return to the public debate. However, we still need to do considerable work ending bailouts, and a return to Glass-Steagall would most likely divert us from that goal.

In order to help clarify this debate, the Cato Institute is proud to today offer a new paper on the topic, The Repeal of the Glass-Steagall Act: Myth and Reality by Oonagh McDonald, CBE. Dr. McDonald is an international financial regulatory expert, having held senior positions in several U.K. financial regulatory agencies. She was also a member of the British Parliament from 1976–87. Her most recent book details the failure of Lehman Brothers.

The new paper lays out a legislative history of Glass-Steagall, pointing out that of the provisions relating to the separation of commercial and investment banking (sections 16, 20, 21, and 32) only two of those four (sections 20 and 32) were repealed in 1999 by the Gramm-Leach-Bliley Act. Two remain current law today. Dr. McDonald further demonstrates how the two repealed provisions had already been largely eliminated by court and regulatory decisions long before 1999.

Dr. McDonald also reviews the economic literature, concluding that Glass-Steagall was not even the appropriate response to the banking problems of the 1920s and 1930s in the first place. What’s more, had Glass-Steagall remained fully in force after 1999, the financial crisis of 2008 would have largely looked the same. As I’ve written elsewhere, Glass-Steagall has essentially become a symbolic lens—a “Rorschach Test” that reflects one’s views on the power of big banks. However, if we truly wish to end bailouts, we need to get the history, law and economics right. Dr. McDonald’s paper makes an important contribution in that direction.

Ben Schreckinger at POLITICO has a story out today that every American concerned about the current political climate in our country should read. With the lede of “Trump Protesters Plan to Build ‘Tea Party’ of the Left,” Schreckinger quotes several progressive activists, including former Occupy Wall Street veteran Micah White. It’s worth quoting White in full, because his comments will absolutely draw the attention of officials at the FBI and DHS:

American activists are finally starting to understand that protest is broken. The people cannot attain sovereignty over their governments by collective protest in the streets. There are only two ways to achieve sovereignty in this world: Win elections or win wars. Now that street protest is not an option, we will see the Trump resistance split into these two fronts. Some will pursue the strategy of using social movements to [win] elections while others go down the dark path of ’70s guerrilla insurrection. I advocate winning elections.

Without question, the Founders would agree with much of what White says. American colonists spent over a decade trying to get Crown authorities to understand that every new tax or regulation imposed on them without their consent was creating resentments and opposition to British rule that, if not resolved peacefully, would lead to armed conflict.

Some in Parliament understood the dangers and sympathized with Americans—but not enough. It’s worth remembering that the Continental Congress was formed almost a full year before the Declaration of Independence was issued. The warning signs were there, but George III doubled-down on repression rather than negotiate with the colonists. The rest, as they say, is history. The question raised by White’s comments and the rest of Schreckinger’s piece is whether that history is about to repeat itself, this time with the federal government in the lead role of political oppressor.

Earlier this year, Cato launched American Big Brother: A Century of Political Surveillance and Represssion. The project is an effort to chronicle the over 100-year history of federal government efforts to suppress—and sometimes destroy—political movements and ideologies deemed a threat to the prevailing political and economic order. While some of the federal government’s domestic surveillance and political subversion activities have been aimed at individuals or groups on the right side of the political spectrum, most of the documented cases we have involved assaults on leftist groups or activists—including White’s Occupy Wall Street movement.

White’s allusion to “70s guerilla insurrection” is probably a reference to the Weather Underground and related movements, all of which were targeted and ultimately destroyed by the FBI, in coordination with state and local law enforcement entities. But as noted in the American Big Brother timeline, you don’t have to be a bomb maker or Molotov cocktail thrower to become the target of FBI surveillance. Simply speaking out during public marches or other protests is more than enough.

As journalist Cora Currier of The Intercept noted the day before Trump was elected:

In recent years, the FBI has ramped up its domestic intelligence-gathering apparatus, growing the ranks of informants and mapping neighborhoods in order to identify potential sources. The FBI has sent informants into mosques and targeted Muslim student associations, political groups, and protestors. And there have been widespread reports of the FBI using immigration status as leverage to push people to work with the government.

If the incoming Trump administration ramps up deportations of undocumented immigrants, intensifies and further securitizes “countering violent extremism” programs aimed at Arab- and Muslim-Americans, and continues the conflict between federal authorities and Black Lives Matter activists, White’s prediction of a bifurcated resistance movement—part political, part violent and insurrectionary—may well come to pass. But without joining hands with those on the right who also oppose such political repression in a broader political coalition, White and other activists on the left will only play into the hands of National Security State hawks, who will capitalize on the divisions among their opponents to destroy or silence them, one by one.

Just as it took more than one political faction to create this country, it will take more than one political faction to confront and eradicate our National Security State and free all Americans from the threat of domestic surveillance and political repression.

The Securities and Exchange Commission (SEC) is poised to have the majority of its seats filled by Trump nominees.  Earlier this week SEC chair Mary Jo White announced she would be stepping down at the end of President Obama’s term. This is not in itself surprising.  The chair serves at the will of the president and it’s customary for the current chair to step aside and let an incoming president install a chair of his or her choosing.  What is remarkable however is the number of vacancies that leaves president-elect Trump to fill. 

The five member commission has had two empty seats for over a year and a half now, following Republican Dan Gallagher’s resignation in May 2015 and the expiration of Democrat Luis Aguilar’s term the same month. Although President Obama nominated two candidates to fill those seats, Republican Hester Peirce and Democrat Lisa Fairfax, their confirmations have been stalled in congress.  (Like many similar commissions, the SEC must be politically balanced with no more than three seats filled by members of the same party.)  White’s resignation will therefore leave only two commissioners in office, Republican Michael Piwowar and Democrat Kara Stein. Until a new chair can be confirmed, it is likely that president-elect Trump will name Piwowar acting chair.  In the meantime, however, with only two commissioners, it is unlikely that the SEC will pursue any kind of ambitious agenda.

Looking forward to what the SEC might look like with its new members in place, it would be reasonable to hope for a less aggressive and more market-friendly agency than we have had under White’s direction.  Trump has sounded a decidedly deregulatory tone both in the course of the campaign, vowing to dismantle Dodd-Frank, and in the days since the election.  His pick of Paul Atkins, a former SEC commissioner known for his strong free-market bent, to head up part of his transition team also signals a commitment to paring back the voluminous regulations that have plagued the financial sector in recent years. 

As far as concrete agenda items for a new chair, there are a number of regulations ripe for reform.  The U.S. capital markets have seen a marked decrease in the number of initial public offerings (IPOs) in recent years, which many have attributed to the Sarbanes-Oxley Act of 2002 and its onerous reporting and internal controls requirements for public companies.  Under new direction, the SEC would be able to investigate what has been depressing interest in IPOs and to pursue strategies to reduce the regulatory burden as necessary.  Dodd-Frank imposed several disclosure requirements unrelated to companies’ profitability, a tactic former commissioner Gallagher has called “hijacking” the SEC’s disclosure regime. 

While many of these disclosure requirements cannot be repealed without an act of congress, the new SEC chair would have the authority to push back against any additional issue-of-the-day disclosures.  Senator Warren and others on the left have agitated for a requirement that companies disclose information about political spending; it is unlikely that an SEC chair picked by Trump or his team would pursue such a rule.  Finally, a highly technical rule known as Regulation NMS has long plagued the securities exchanges, even some have argued spawning the trading strategy known as “high frequency trading.”  A new chair would be well-positioned to reopen that regulation and to evaluate its potential unintended consequences.

In the week since election night, foreign policy watchers (myself included) have rushed to speculate about the effects that President Trump’s administration will have on the world. The most dramatic effect is the potential upending of the international order that the United States built after World War II. Of course, at this point it is impossible to determine whether or not such a consequence will come to pass, but it deserves consideration.

Baked into the idea that Trump will tear down the international order is the assumption that Hillary Clinton would have maintained the order if she was president. Jeffrey A. Stacey argued as much in Foreign Affairs when he wrote, “The world’s challenges require a determined use of U.S. leadership, not isolationism. And in the areas where Obama’s restraint has failed, the more activist Hillary Clinton Doctrine…could likely prevail.” However, the idea that the United States can influence events through “leadership” ignores the fact that in foreign policy the enemy gets a vote. In other words, the growing relative power of America’s adversaries will still pose a challenge to the international order, regardless of what actions the United States takes or who sits in the Oval Office.

America’s ability to rein in the bad behavior of other states has diminished, not because the United States is in decline, but rather because the power of our adversaries has grown. In East Asia, for example, the two most important challenges to the security status quo are North Korea’s nuclear weapons program and China’s improving conventional military capabilities. Both developments threaten the regional order in East Asia, and resist American attempts to stop them. Multilateral and bilateral sanctions efforts have failed to stop North Korea’s nuclear weapons program, which has come a long way with minimal external assistance.

China’s growing military power enables more assertive behavior in the South and East China Seas, despite displays of resolve by the United States and its allies. While many have criticized the Obama administration for not doing more against China, the simple fact is that as its military grows strong it becomes harder to deter China from using it. Beyond East Asia, after years of neglect following the Cold War, the Russian military is fielding new capabilities and pushing back against NATO expansion to countries along its border.

The growing relative power of America’s adversaries does not make the president obsolete, but the individual behind the Resolute desk is not omnipotent. They cannot always prevent changes in the balance of power or maintain the international order by dialing up the “leadership” they demonstrate. We don’t know what impact Donald Trump will have on the world, but the threats America faces would exist regardless of who won the election. The assumption that Hillary Clinton would be able to prevent negative outcomes through greater leadership on the international stage disregards the growing power and agency of America’s challengers. 

I’m a big fan of the Baltic nations of Estonia, Latvia, and Lithuania.

These three countries emerged from the collapse of the Soviet Empire and they have taken advantage of their independence to become successful market-driven economies.

One key to their relative success is tax policy. All three nations have flat taxes. Estonia’s system is so good (particularly its approach to business taxation) that the Tax Foundation ranks it as the best in the OECD.

And the Baltic nations all deserve great praise for cutting the burden of government spending in response to the global financial crisis/great recession (an approach that produced much better results than the Keynesian policies and/or tax hikes that were imposed in many other countries).

But good policy in the past is no guarantee of good policy in the future, so it is with great dismay that I share some very worrisome news from two of the three Baltic countries.

First, we have a grim update from Estonia, which may be my favorite Baltic nation if for no other reason than the humiliation it caused for Paul Krugman. But now Estonia may cause sadness for me. The coalition government in Estonia has broken down and two of the political parties that want to lead a new government are hostile to the flat tax.

Estonia’s government collapsed Wednesday after Prime Minister Taavi Roivas lost a confidence vote in Parliament, following months of Cabinet squabbling mainly over economic policies. …Conflicting views over taxation and improving the state of Estonia’s economy, which the two junior coalition partners claim is stagnant, is the main cause for the breakup. …The core of those policies is a flat 20 percent tax on income. The Social Democrats say the wide income gaps separating Estonia’s different social groups would best be narrowed by introducing Nordic-style progressive taxation. The two parties said Wednesday that they will immediately start talks on forming a coalition with the Center Party, Estonia’s second-largest party, which is favored by the country’s sizable ethnic-Russian majority and supports a progressive income tax.

And Lithuanians just held an election and the outcome does not bode well for that nation’s flat tax.

After the weekend run-off vote, which followed a first round on October 9, the centrist Lithuanian Peasants and Green Union party LGPU) ended up with 54 seats in the 141-member parliament. …The conservative Homeland Union, which had been tipped to win, scored a distant second with 31 seats, while the governing Social Democrats were, as expected, relegated to the opposition, with just 17 seats. …The LPGU wants to change a controversial new labour code that makes it easier to hire and fire employees, impose a state monopoly on alcohol sales, cut bureaucracy, and above all boost economic growth to halt mass emigration. …Promises by Social Democratic Prime Minister Butkevicius of a further hike in the minimum wage and public sector salaries fell flat with voters.

The Social Democrats sound like they had some bad idea, but the new LGPU government has a more extreme agenda. It already has proposed to create a special 4-percentage point surtax on taxpayers earning more than €12,000 annually (the government also wants to expand double taxation, which also is contrary to the tax-income-only-once principle of a pure flat tax).

So the bad news is that the flat tax could soon disappear in Estonia and Lithuania.

But the good news, based on my discussions with people in these two nations, is that the battle isn’t lost. At least not yet.

In both cases, policy can’t be changed unless all parties in the coalition government agree. Fortunately, they haven’t reached that point.

And hopefully that point will never be reached if Estonia and Lithuania want long-run success.

All of the Baltic nations get reasonably good scores from Economic Freedom of the World. Ditching the flat tax will cause their scores to decline.

Given that fiscal policy is only 20 percent of a nation’s grade, adopting some bad tax policy may not seem like the end of the world.

But the flat tax isn’t just good policy. It also has symbolic value, telling both domestic entrepreneurs and global investors that a country has a commitment to a system that won’t impose extra punishment just because a person contributes more to national economic output.

By the way, the LPGU Party is very correct to worry about emigration. The Baltic nations (like most countries in Eastern Europe) face a very large demographic problem. And every time a young person leaves for better opportunities elsewhere (even if that better opportunity is a big welfare check), that makes the long-run outlook even more challenging.

But imposing a more punitive tax system is exactly the opposite of what should happen if the goal is faster growth so that people don’t leave the nation.

Let’s close with a famous quote from John Ramsay McCulloch, a Scottish economist from the 1800s.

To be sure, progressive taxation didn’t lead to total catastrophe, so McCulloch’s warning may seem overwrought by today’s standards.

But the so-called progressive income tax did lead to the modern welfare state. And the modern welfare state, when combined with demographic change, is threatening immense economic and societal damage in many nations.

So what he wrote in 1863 may turn out to be very prescient for historians in 2063 who wonder why the western world collapsed.

P.S. If Estonia and Lithuania move in the wrong direction, Latvia could be a big winner. That nation already has received some positive attention for being fiscally responsible, and it also has withstood pressure from the IMF to impose bad tax policy. So Latvia is well positioned to reap the benefits if Estonia and Lithuania shoot themselves in the foot.

Just over a month ago, another Department of Homeland Security deadline for state compliance with the provisions of the REAL ID Act passed. It was but the most recent in a series of deadlines DHS has improvised since the statutory May 2008 compliance date passed without a single state participating in the national ID program.

Time and again, when faced with resistance from the states, DHS has backed down. But the agency has had more success goading states toward compliance since it stopped issuing deadline extensions in the Federal Register and took the process offline to deal directly with individual states. Divide and conquer works.

A new series of deadlines assigns different states to one of three dates—January 30th, June 6th, and October 16th, 2017—depending on where they are in the compliance process. If the states in each category have not sufficiently answered to DHS by the relevant date, DHS will judge them non-compliant. As it has so many times before, DHS says their residents will then be at risk of having their state-issued IDs refused for federal purposes.

Because so much of this is happening behind the scenes, it is hard to gauge how DHS is choosing which states to play hardball with and which states to treat with kid gloves. But the staggered compliance deadlines have the feel of meting out punishment to states that have been the most vocal in their resistance to REAL ID. It does not have the feel of an agency neutrally enforcing a generally applicable law.

Consider the earliest group, which has a January 30th, 2017 deadline. It consists of Kentucky, Maine, Montana, Oklahoma, Pennsylvania, and South Carolina (as well as the U.S. territories of Guam and the Virgin Islands). DHS already considers Minnesota, Missouri, and Washington State “non-compliant” with REAL ID.

Each of these states has pushed back against REAL ID and, in doing so, seems to have incurred the wrath of DHS’s bureaucrat-enforcers. Kentucky’s governor recently vetoed a compliance law. Maine, Montana, and South Carolina have had anti-REAL ID legislation on the books for nearly a decade (and show few signs of changing their stance), while Pennsylvania rejected compliance in 2012. Oklahoma and Missouri have had long running and vocal battles in their state legislatures over compliance. Minnesota and Washington State have been prioritizing their residents’ privacy by refusing to amend state law for REAL ID, which will ultimately feed drivers’ private data into a national database system.

The second group, with the June deadline, consists of Alaska, California, Oregon, and Virginia. All four states have resisted REAL ID compliance somewhat, but not to the same extent or with the same level outspokenness of the first group.

The final group of fourteen states consists of states that seem further along in meeting DHS’s improvised standards (implemented with the barest arguable authority to do so in the terms of the law, by the way). These range from states that are actively working towards compliance, such as Arkansas and Texas, to Rhode Island, which has shown little sign of active compliance but already has in place strict, state-written requirements that dovetail with DHS’s REAL ID requirements.

Based on how the groups are ordered, it’s easy to see the first group as a “punishment group” singled out for active resistance to the national ID law. The chance of them meeting DHS’s compliance requirements within three months is nil, so the deadline must be meant simply to engender panic among state officials and opinion leaders.

The January deadline is going to come and go like all of the previous deadlines. But DHS seems to be executing on a political strategy to punish recalcitrant states rather than enforcing federal law in an even-handed way.

The REAL ID law was called unworkable by the chairman of the Senate Homeland Security and Governmental Affairs Committee when it passed. DHS is gamely trying to press states toward compliance anyway. Its inventiveness in rewriting the law and improvising deadlines draws into question whether the agency is acting with dispassion or with vindictiveness toward states that it sees as opportune victims of federal punishment.

On the campaign trail, Donald Trump promised to spend twice as much on infrastructure as whatever Hillary Clinton was proposing, which at the time was $275 billion. Doubling down again in a speech after winning the election, Trump now proposes to spend a trillion dollars on infrastructure over the next ten years.

President Obama had proposed to fix infrastructure with an infrastructure bank, though just where the bank would get its money was never clear (actually, it was perfectly clear: the taxpayers). Trump’s alternative plan is for the private sector, not taxpayers, to spend the money, and to encourage them he proposes to offer tax credits for infrastructure projects. He says this would be “revenue neutral” because the taxes paid by people working on the infrastructure would offset the tax breaks. In short, Trump is proposing tax credits in lieu of an infrastructure bank as a form of economic stimulus.

America’s infrastructure needs are not nearly as serious as Trump thinks. Throwing a trillion dollars at infrastructure, no matter how it is funded, guarantees that a lot will be spent on unnecessary things. As Harvard economist Edward Glaeser recently pointed out in an article that should be required reading for Trump’s transition team, just calling something “infrastructure” doesn’t mean it is worth doing or that it will stimulate economic growth.

Infrastructure more or less falls into three categories, and Trump’s one-size-fits-all plan doesn’t work very well for any of them. First is infrastructure that pays for itself, such as the electrical grid. Private companies and public agencies are already taking care of this kind, so if Trump’s plan applied to them, they would get tax credits for spending money they would have spent anyway. That’s not revenue neutral.

The second kind of infrastructure doesn’t pay for itself. Rail transit is a good example, and this tends to be the infrastructure that is in the worst shape. It won’t suddenly become profitable just because someone gets a tax credit, so under Trump’s plan it will continue to crumble.

The third kind of infrastructure consists of facilities that could pay for themselves but don’t because they are government owned and politicians are too afraid of asking users to pay. Local roads fit into this category. Simply creating tax credits doesn’t solve that problem either.

Trump may think that local governments and transportation agencies will jump at the chance to borrow money from private investors to fix infrastructure, and then repay that money out of whatever tax sources they use to fund that infrastructure. But those government agencies can already sell tax-free bonds at very low interest rates. It isn’t clear how taxable bonds issued by private investors who get tax credits are going to be any more economical.

Most public-private partnerships for projects that have no revenue stream are entered into by the public party to get around some borrowing limitation. If the infrastructure spending is really necessary, it makes more sense to simply raise that borrowing limit than to create a byzantine financial structure that, Trump imagines, will have the same effect.

In short, whether funded by municipal tax-free bonds or taxable private bonds, those bonds will ultimately have to be repaid by taxpayers. We know from long experience that politicians are more likely to ask taxpayers to pay for new projects than maintenance of existing projects, and Trump’s plan will do nothing to change that.

The problem with a top-down solution such as Trump’s proposal is that one size doesn’t fit all. Different kinds of infrastructure have different kinds of needs, and the financial solution will be different for each one. Trump’s plan is more likely to result in new construction of pointless projects than whatever maintenance is needed for existing infrastructure.

Fortunately, a lot of people know this, so there is already criticism of Trump’s plan, including from conservatives in Congress. No doubt Trump’s plans will get refined between now and when he actually takes office. The question is whether Trump will realize that bottom-up solutions work better than ones that are top down.

The incoming Trump administration has indicated that it will make reforms to the federal workforce. Here are a few places where the administration may focus its efforts:

  • Freezing Hiring: Trump’s Contract with the American Voter promised “a hiring freeze on all federal employees to reduce federal workforce through attrition (exempting military, public safety, and public health).” As a goodwill gesture, Trump should also shrink the army of almost 4,000 political appointees in his administration in order to speed agency decisionmaking.
  • Increasing Firing: Trump is famous for firing people on his TV show, and he will likely support reforms to increase federal firing. On the campaign trail, Trump talked about firing VA executives, and his advisors Chris Christie and Newt Gingrich talked about the importance of civil service reforms to increase firing. Reforms are needed: federal civilian workers are fired at just one-sixth the rate that private-sector workers are. Members of the federal senior executive service are fired at just one-twentieth the rate that corporate CEOs are.
  • Reducing Retirement Benefits. Federal wages and benefits are higher, on average, than in the private sector, but it is on benefits that federal compensation really stands out. The WaPo has discussed various GOP proposals to reduce federal benefits. My favored reform is to repeal the old-fashioned defined-benefit pension plan. That would leave federal workers with a generous defined-contribution plan, which is the standard in the private sector.  
  • Reforming Federal Unions. One reform was mentioned in the Republican platform: “union representatives should not be allowed to engage in union-related activities while on the public’s time.” Republicans on the Hill have been investigating the use and abuse of such “official time” in federal agencies.

My essays “Bureaucratic Failure in the Federal Government” and “Reducing the Costs of Federal Worker Pay and Benefits” should provide useful information to the Trump team in assembling its workforce reform agenda.

Proponents of more restrictions on immigration—legal and illegal—talk a big game, suggesting more penalties for lawbreakers, more assets for the border, and more surveillance for the workforce. These, restrictionists say, will restore the rule of law. Yet while occupying the White House is new for them, the fact is that restrictionists largely dictated U.S. policy until recently. Not only have their ideas failed on their terms, they have backfired, creating more lawlessness than before.

Creating the Problem

Before the 1920s, America had no numerical restriction on the number of immigrants, so legal immigrants poured in. As a share of the population, total annual immigration flows were four times as great then as they are today. Restrictionists—members of the progressive wings of both parties—won the election of 1920 and immediately imposed a numerical cap. This reduced legal immigration by 80 percent, barring immigrants regardless of their health, wealth, or skills.

This fateful decision spawned all of the problems that restrictionists have blamed on their opponents ever since. “While legal immigration has been curbed to the extent that advocates of the new policy expected, that of the illegal—the ‘bootlegging’—kind has probably increased greatly,” the New York Times reported in 1925. “Some officials estimate that immigrants have been coming in clandestinely at a rate of at least 100 a day.”

Border patrols and deportations were increased to stop the flow of unauthorized immigrants, but they had little effect. “I’ve no doubt whatever that the man finally deported is back here,” the Assistant Secretary of Labor told the Times. “Easily 50 per cent of them return.” In July 1929, Congress gave in and provided “amnesty” or citizenship to the undocumented immigrants. Then, the Great Depression dried up demand for workers, temporarily resolving the issue.

When the economy finally picked up again following World War II, illegal immigration returned. This time, Congress opted for a different approach: admit more workers legally. Under the Bracero guest worker program, illegal immigration almost vanished as the number of Braceros soared to almost a half a million in the early 1960s (Figure 1). Apprehended Mexicans were directed to border stations to receive cards to enter legally.

Figure 1: Aliens Apprehended at the Border and Low-Skilled Guest Workers (Braceros & H-2s)

Sources: Border Patrol; INS

But the restrictionists wouldn’t allow the fix to last. Over the vigorous objections from the Border Patrol, they cancelled the program under the guise of protecting U.S. workers. Over the next decade, the entire legal flow (and then some) was replaced with immigrants entering illegally. By the 1980s, over a million people were crossing the border each year. 

A Parade of Phony Solutions 

Restrictionists refused to accept responsibility for this chaos and demanded a new law to restrict the flow and fine employers who failed to check workers’ IDs. In 1986, President Ronald Reagan, who believed in more open legal immigration, signed the law, while extracting a legalization concession for unauthorized immigrants.

But the law backfired. Before 1986, workers—first as legal guests or later as illegal migrants—would return home at the end of each harvest, and as Figure 2 shows, the total illegal population in the country grew only very slowly throughout the decade. (The drop after 1986 occurred due to the legalization.) But with more border guards, it became too risky and costly to circulate each year. Instead of not coming at all, immigrants came and built their lives here. “If enforcement efforts had remained at pre-1986 levels,” concluded Princeton University’s Douglas Massey, “there would have been 5.3 million fewer net undocumented entries.”

Figure 2: Unauthorized Immigrant Population and Number of Border Patrol Agents

Sources: Warren and Passel (1980); Census Bureau (14 and up only, 1983); Congerssional Research Service (1986-1988); Pew Research Center (1990-2006); Border Patrol

The illegal population rose as fast as the number of border agents—both tripled between 1986 and 2000 (Figure 2). Not acknowledging their failure, restrictionists tried again, doubling the border agents over the next decade, which brought the level to ten times the amount in 1985. Immigrants continued to enter by the millions and the shadow population hit 12.2 million in 2007. As the cost of each crossing rose, cartels swooped in to capture the smuggling profits.

At the same time, the requirement that employers check IDs only created another black market in fake documents. Ignoring past failure, restrictionists doubled down in 2008, demanding a border fence and pressuring employers to use E-Verify, an employment verification system that checks Social Security numbers against federal databases. Rather than expunging the black market in jobs and documents, E-Verify has only ballooned yet another black market in identities.

Illegal immigration finally nosedived after the housing bubble burst, and the illegal populationshrunk from 2007 to 2014. Meanwhile, ignoring the restrictionists, the Bush and Obama administration quietly resumed issuing many more work visas to Mexican workers. The result has been that just as many people were entering from Mexico in 2016 as in 2006, but most of them were doing so legally.

The Trump administration might want to undo this progress. With each new failure, restrictionists have never admitted that their core policy—restricting legal immigration—was the cause of all the others. Never mind that the Obama administration set records for deportations, it was never enough. Enforcement is the only tool in the restrictionist shed. Their many botched attempts to clean up their own mistakes is proof that they simply cannot fix the problem today.

In 1993, Bill Clinton swept into office with a Democratic majority in both the House and Senate. His attempt to pass a controversial health-care bill failed but generated enough of a backlash that the Republicans took over both houses of Congress in 1995.

In 2001, George H.W. Bush entered the White House with Republicans in control of both houses. The events of 9/11 muted criticism of Bush for a time, but by 2007 Democrats had taken over Congress.

In 2009, Barack Obama became president and Democrats held both houses of Congress. He succeeded where Clinton failed in passing a health-care bill, but Republicans took over the House in 2011 and the Senate in 2015.

Pundits say that Americans like to have different parties controlling the White House and Congress. However, Americans are often angry at the gridlock that results. So why do they vote that way?

The answer is that the party that takes over both branches often overreaches, which has the effect of polarizing the other side. The party in power would be better off taking small steps that lead to genuine results rather than try to take large steps that either can’t be achieved (Hillarycare) or that create more problems than they solve (Obamacare).

A case in point is the Department of the Interior, a highly visible agency that has proven to be a lightning rod for both sides. Ronald Reagan’s appointment of James Watt as Secretary of the Interior helped build the environmental movement in the 1980s because environmental groups used Watt as their leading fundraising tool. They in turn used those funds to stymie just about everything Watt wanted to do with the public lands.

Now rumor has it that Trump is considering Sarah Palin for Secretary of the Interior, though an oil company executive named Forrest Lucas seems a bit more likely (Lucas contributed $50,000 to Mike Pence’s gubernatorial campaigns). What a great way for environmental groups to rebuild their memberships!

As Secretary, either Palin or Lucas would be likely to try to open up the Arctic National Wildlife Refuge to oil exploration and extraction. Bush tried this in 2001 and the environmentalists successfully prevented it. Instead of going after the most controversial piece of ground in the nation, Bush should have–and Trump should–start with opening less controversial areas to show that oil development is compatible with wildlife and other resources.

In the same way, instead of controversial figures like Palin or Lucas, Trump could ask Gary Johnson to be Secretary of the Interior. As a former western governor, Johnson is more familiar with public lands than Lucas. As a dedicated free marketeer, Johnson won’t be committed to one resource over all others; instead, he will try to find ways to maximize the value of all of them together.

Johnson’s Libertarian candidacy shouldn’t make him unacceptable, but if it does, how about current Arizona Governor Doug Ducey? As former CEO of Cold Stone Creamery, Ducey isn’t identified with one natural resource or another. As a fiscally conservative Republican, Ducey should fit right in with Trump’s agenda.

Whoever is picked should focus on maximizing the value of public lands, partly by maximizing returns they produce for the Treasury. This will mean convincing Congress to give public land agencies, including the Forest Service, the authority to charge more user fees. It will mean more oil & gas drilling, but instead of focusing on controversial areas, the new secretary should start with some demonstration projects to show it can make resource extraction compatible with conservation. If Audubon allows oil wells on one of its wildlife refuges and the Nature Conservancy allows timber cutting on its conservation lands, the United States should be able to do similar demonstration projects on public lands.

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