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In these days when liberalism is again under attack from some of its old enemies in new guises, one way to counter authoritarian threats is to educate ourselves on the fundamental ideas of liberalism. The Encyclopedia of Libertarianism, now available online, offers a wealth of information on the ideas, people, and history of liberalism and libertarianism. Historian David M. Hart, director of the Online Library of Liberty, says that the Encyclopedia “provides an excellent survey of the key movements, individuals, and events in the evolution of the classical liberal movement.” And on his own website he outlines a course of study in classical liberalism that includes a curated list of articles in the Encyclopedia for someone who wants to learn about the ideas, movements, and people of liberalism.

Begin, he says, with the survey article by Steve Davies, “General Introduction” (pp. xxv-xxxvii in the print version). Then read any of the following articles. Or, for a logical and chronological course of study, read these articles in this order:

Key Ideas in the Classical Liberal Tradition

Basic Principles:

Grounds for Belief:

Processes for Creating a Free Society:

Political and Legal Freedoms:

Economic Freedoms:

Social Freedoms:

  • Equality under the Law - “Equality” (of rights)
  • Toleration of different Ideas and Behaviour (see Freedom of Speech & Religion above)
  • Acts between Consenting Adults - “Presumption of Liberty”
Key Movements and People in the Classical Liberal Tradition

 

I might add that Chapter 2 of The Libertarian Mind, “The Roots of Libertarianism,” is a very short guide to many of these movements and people. And The Libertarian Reader collects and curates many of the key texts of liberalism and libertarianism.

Disasters seem just about the worst possible time to discuss economic concepts. Ask Forbes columnist Tim Worstall, whose column on “price gouging” in the aftermath of Hurricane Harvey has purportedly been removed from their site.

At times of human suffering, a host of people apparently consider it crude to discuss the best response, if that response incorporates the functioning of a market economy. Yet for those of us who worry about outcomes rather than platitudes, it is incumbent to denounce bad ideas, and seek to propose better ones. Natural disasters such as Hurricane Harvey reap enough destruction, emotional and physical, without compounding it with policies that make things worse.

CNBC reported yesterday that Texas Attorney General Ken Paxton has said 500 complaints about so-called “price gouging” have been made following the storm:

That includes reports of up to $99 for a case of water, hotels that are tripling or quadrupling their prices and fuel going for $4 to $10 a gallon.

Such price increases in emergency situations can lead to significant fines under current Texas law. The traditional justification is that raising prices in emergencies reflects greedy profiteering. Indeed, in reaction to natural disasters and terrorist attacks worldwide it is common for companies to be denounced for heartlessness (here’s something I wrote about criticism of Uber after the Manhattan bomb attack).

The real question we should be concerned with though is surely not moralizing, but whether “price gouging” laws improve outcomes and responses or worsen the situation?

Natural disasters such as hurricanes often lead to shortages of certain products, many of which might be considered essential. Fresh water might be the obvious example. If water supplies get cut off, the demand for bottled water will surge, and if there is uncertainty about how long until those supplies will be back online, some consumers may seek to stockpile. The knockout of transportation routes will likely restrict new supply too. At the moment the storm hits supply will therefore be relatively inelastic, meaning that increases in demand feed through almost exclusively into rising prices.

Opponents of price gouging seem to believe that these price increases reflect sellers using their market power to unfairly profit from the disaster. In most cases, however, prices are merely messengers letting us know the relative scarcity of the good.

Laws which, in effect, fix prices below market-clearing levels are therefore akin to hijacking the messenger and forcing him to tell a comforting lie. A maintained low price of water in effect tells users “everything is fine, buy as much as you like.”

This can have perverse consequences. It encourages the over-purchase of water by certain consumers and therefore can lead to water ending up away from those who value it most. Similarly, holding the price down discourages other suppliers from seeking to supply their goods to market. This can be particularly important when, as likely with Houston, those transporting new supplies of water may have to make difficult and expensive journeys, including having to rent or utilize boats to get to certain locations. A rise in the market price would have changed the economic calculation, making it profitable to make such journeys in some cases.

The result of price gouging laws is therefore an exacerbation of the cause of the surge in the first place – a greater gap between the supply and customer demand arising because new suppliers are not incentivized to meet wants and need. Though well-intended, price gouging laws hurt more than they help.

Two economic objections tend to be held up against this operation of market forces.

The first relates to the allocation of the goods. If prices rise too much, then people worry that those on lower incomes will simply not be able to afford them. This is an argument made in an LA Times op-ed by Michael Hiltzik, who explains that in times of crisis, it is understandable that people consider a first-come-first-served approach to be fairer and more reflective of need than a “most-money-best-served advantage.”

For sure there are those desperately in need, and civil society, charities and, in some cases, government, may have a role to play to ensure they are catered for. And civil society does respond – see how sports teams and celebrities have already founded support funds.

But in such extreme cases it is equally likely that those with few resources would not have the means or ability to access the water in the first place (think the vehicles or boats needed, for example). It is not entirely clear why the ability to queue or travel long distances is a more efficient form of rationing than the use of the price mechanism in reflecting real need.

More importantly though, the artificially low price might encourage hoarding (and the development of a black market anyway), whilst discouraging other suppliers from entering the market and ordinary truckers from attempting to make their usual deliveries.

A more sophisticated critique of those who oppose anti-price gouging laws comes from the economist Jeff Ely. He argues that when natural disasters have happened, supply by-and-large cannot respond, so policymakers should simply seek to maximize the “consumer surplus” and not worry about the “producer surplus.” If the disaster has no effect on production decisions, then the benefits to consumers from keeping prices low can exceed the benefits associated with allocating the goods to those who value them most.

But the key assumption here is that supply is fixed. In fact, the mere existence of price gouging laws affects supplier expectations about how they should respond when they know a crisis will hit, making them less likely to prepare some of what Tyler Cowen calls “option ready supply.” (As an example: if an Uber driver knew surge pricing was banned, they would not be as likely to head out to an area where they knew a concert was just about to finish). Walmart, for example, already operates an emergency operations center, which plans and coordinates responses to these disasters, as evidenced in New Orleans after Katrina - clearly supply is not fixed.

A high price is also likely again to change the decision of many small potential suppliers, who might otherwise have just hoarded the product. If I had 10 packages of water stored in a warehouse, a higher price may make more likely to venture to obtain and supply them.

Hurricanes and natural disasters are destructive and lead to no good outcomes overall. But that does not mean we should throw out the price mechanism, which has important benefits in crises in terms of allocating scarce resources to those who value them most, and encouraging others to bring their goods to market.

When Attorney General Jeff Sessions announced yesterday the Trump Administration’s repeal an Obama-era rule limiting the distribution of certain military equipment (such as tracked vehicles, camouflage uniforms, high-powered rifles, bayonets, and grenade launchers), he dismissed concerns about police militarization as “superficial.”  The evidence suggests otherwise: militarization makes police more violent.

Earlier this year, a study conducted by researchers from Harvard, Stanford, Cincinnati, and Gardner-Webb concluded that the Pentagon’s 1033 weapons transfer program made participating departments more likely to engage in deadly violence.  After receiving 1033 gear, departments were more likely to kill civilians as well as dogs.  The researchers included the number of dog killings by police (which, according to the Department of Justice, number around 10,000 a year) in order to control for possible variations in human behavior during the period of the study.

The study found:

1033 receipts are associated with both an increase in the number of observed police killings in a given year as well as the change in the number of police killings from year to year, controlling for a battery of possible confounding variables including county wealth, racial makeup, civilian drug use, and violent crime.

[…]

[D]ue to concerns of endogeneity, we re–estimate our regressions using an alternative dependent variable independent of the process by which LEAs request and receive military goods: the number of dogs killed by LEAs. We find 1033 receipts are associated with an increase in the number of civilian dogs killed by police. Combined, our analyses provide support for the argument that 1033 receipts lead to more LEA violence.

The researchers pointed to four areas of militarization that drive the increase in violence:

[W]e argue that increasing LEA access to military equipment will lead to higher levels of aggregate LEA violence. The effect occurs because the equipment leads to a culture of militarization over four dimensions: material; cultural; organizational; and operational. As militarization seeps into their cultures, LEAs rely more on violence to solve problems.

It turns out that having a hammer really does make everything look more like a nail.

But what if that increased violence is justified by increased police readiness to deal with emergency situations? 

When asked to justify the push for militarization, many law enforcement agencies are quick to point to terrorist attacks and mass murders as a justification for the equipment. Indeed we can imagine situations in which the police might legitimately need grenade launchers or .50 caliber rifles (though the thousands of bayonets local cops have taken from the federal government may be tougher to explain).

But such events are exceedingly rare, while history proves that the police deployment of militarized weapons and tactics will not be. Police routinely cite rare hypothetical emergencies to justify tactics and policies that end up becoming far more routine and abusive.

SWAT teams were originally designed to handle hostage situations and active shooters. Today they often function as hyper-violent warrant servers, as the number of SWAT raids has ballooned from hundreds per year to tens of thousands and responding to hostage situations has given way to serving search and drug warrants.

Police defend civil asset forfeiture with appeals to “taking the profit out” of terrorist organizations and drug cartels, but black market drug profits remains strong as thousands of regular Americans have their property taken without charge or trial.

Law enforcement agencies purchase military-grade surveillance devices such as Stingray cell phone trackers with terrorism grant money, and justify the outrageous secrecy that shrouds them on national security grounds, but they’re virtually never used for terrorism investigations, instead being deployed thousands of times for routine law enforcement investigations as an end-around the warrant requirement.

In other words, military weapons and tactics are inevitably used far more often in everyday policework than in the rare situations that supposedly justify them.

Contrary to Attorney General Sessions’ dismissal, the damage done by these government policies is not “superficial.” It’s not superficial when a SWAT team throws a flash grenade in a baby’s crib and disfigures the infant’s face, or when a family’s life is ruined by militarized police looking for tea leaves, or when protesters find themselves staring down the barrels of sniper rifles and accosted by masked, camo-wearing, rifle-toting police units.

Combined with President Trump’s recent pardon of Sheriff Joe Arpaio (who is no stranger to overly violent militarized raids and was convicted for repeatedly violating people’s rights in defiance of a court order), this move sends a strong message that police restraint and accountability are taking a back seat in this administration. 

Last night I was reading AEI president Arthur Brooks’ excellent Wall Street Journal op-ed on the lottery, that seemingly ubiquitous government revenue scheme targeted at the poor, and it brought to mind Horace Mann, the “father of the common schools.” Did Mann pop into my brain because he was also the father of the “Diamond Dollars” scratcher, or “Pick 6 XTRA”? In a way, yes.  

Mann actually hated the unproductive, greed-fueled lottery, which he wrote “cankers the morals of entire classes of the people.” As was the case for seemingly every social ill perceived by Mann, he had a cure for the canker: universal public schooling. Lotteries, he wrote, “await the dawning of that general enlightenment which common schools could so rapidly give, to be banished from the country forever.”

Fast forward to the present day, and what do we have? Roughly 90 percent of school-aged Americans attending public schools—and all children with access to them—while slickly advertised state lotteries pull in $70 billion annually, according to Brooks, with a disproportionate amount coming from low-income Americans who have little chance of breaking even, much less striking it rich.

Contra Mann’s promise, common schooling did not doom the lottery. Far, far from it. Today, perhaps the primary justification for the lottery is that it provides money for the public schools!

Frankly, Mann, who pronounced with assumed authority on everything from proper chewing to the number of “bodies” in the solar system, should have seen that coming. He certainly identified the supposed beneficiaries of lottery proceeds in his day: “the erection of public works,–to build a bridge, a canal, or a church [italics in original].” Mann was especially incensed by the latter, decrying, “When a church is built by a lottery, can there be any doubt which has the best side of the bargain, the Evil Spirit or the Good?”

Today, the “churches” conceived by Mann—the public schools—are themselves enriched by lotteries. Maybe that’s because they could never spread the universal enlightenment that Mann confidently promised. Maybe it is also because, like most of us, those employed by the public schools want as much money as they can reasonably get, and government schemes like the lottery enable them to bring in more.

As the NAFTA renegotiation enters its second round this week-end, President Trump is bringing back talk of a possible NAFTA “termination.” He tweeted this on Sunday: “We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?”  And at a press conference yesterday, he said the following: “I’ve talked about NAFTA, you’ve heard me many times – and I’ve said that we will either terminate it or renegotiate it.”

Recall that a few months ago, the White House seemed to be considering a withdrawal from NAFTA, but later backed off. Is the current termination threat anything new and different from what took place before? Is it just a pretty transparent attempt to gain negotiating leverage? As Trump himself said, “I believe that you will probably have to at least start the termination process before a fair deal could be arrived at because it’s been a one-sided deal.” 

In theory, you can gain leverage in any negotiation by threatening to walk out. It’s not clear how much credibility Trump’s threat has, though. Two law professors have argued recently that the President does not have the legal authority to terminate NAFTA on his own, without a Congressional say (to be clear, there is a lot of uncertainty on this legal point). Aside from the law, such an action by President Trump would create a political battle between the White House and Congress that could upset the rest of Trump’s agenda, so it may be unlikely.

At this stage, I’m not taking these termination threats by Trump very seriously. Most likely, it is a negotiating tactic, and I suspect the Canadian and Mexican governments have been following U.S. political events closely enough to realize this. If Trump eventually does push for terminating NAFTA, either to gain leverage or to try to unwind the deal, we can all start pushing back. But for now, it’s better to focus on getting a positive outcome in the negotiations.

In 1993, a Pennsylvania jury found Willie Tyler not guilty of murder but guilty of conspiracy to intimidate a witness. He was sentenced to “two-to-four years” and paroled in 1994. Two years later, a federal grand jury issued a four-count indictment against Tyler after Justice Department officials deemed he could be subject to a “retrial” on federal charges. He was convicted on all four counts and sentenced to a life term.

Following an appeal, second trial, and conviction, the case was remanded for reconsideration and a third trial was ordered. In the subsequent appeal of this third trial, Tyler challenged his second prosecution as a violation of the Fifth Amendment, which guarantees that no person shall “be twice put in jeopardy of life or limb” for the same offense. But under a strange exception to the Double Jeopardy Clause created by the Supreme Court 60 years ago, the state and federal governments are allowed to both prosecute someone for the same act.

Cato has joined the Constitutional Accountability Center in filing a brief urging the Supreme Court to review Tyler’s case and overturn this misguided “dual sovereignty” exception—as we did last December in Walker v. Texas, which presented the same issue. We make three principal arguments. First, none of the Framers would have contemplated such a large exception to Double Jeopardy protection. Even before the Founding, English jurist and legal theorist William Blackstone wrote that it was considered a “universal maxim of the common law of England, that no man is to be brought into jeopardy of his life, more than once, for the same offence.” And in congressional debates before the enactment of the Fifth Amendment, Rep. Roger Sherman observed that “the courts of justice would never think of trying and punishing twice for the same offence.”

Second, the practical magnitude of the dual-sovereignty exception is much greater today than it was 60 years ago. For most of our nation’s history, the federal government left most criminal matters to be handled by the states; there were relatively few offenses punishable by both authorities. But in recent decades, there has been “a stunning expansion of federal criminal jurisdiction into a field traditionally policed by state and local laws,” as Justice Clarence Thomas wrote in dissent in Evans v. United States (1992). Now that nearly every state crime has a federal analog, the dual-sovereignty exception risks entirely swallowing the Double Jeopardy rule.

Finally, the Supreme Court created the dual-sovereignty exception a decade before it held that the Double Jeopardy Clause fully applies to the states. Now that we know that it does, there’s no reason why a state prosecution shouldn’t “count” when a defendant objects to having been prosecuted twice.

As Justice Hugo Black once put it, also in dissent, “If double punishment is what is feared, it hurts no less for two ‘Sovereigns’ to inflict it than for one.” Bartkus v. Illinois (1959). The Court, when it considers whether to take up Tyler v. United States this fall, should listen to that common-sense advice and put an end to the misguided dual-sovereignty exception, at least as it works in practice in modern times.

The Trump administration has quietly made immigration more difficult for people seeking to immigrate to the United States. It has increased the length of immigration applications significantly. Since January, it has increased the length of 15 immigration forms, yet at the same time, it claims that most of these forms will take no more time to complete. The table below presents a list of all of the forms that the new administration has increased since January and how long each administration estimated the forms would take to complete.

Collectively, immigration forms have doubled in length, but key forms like the I-485 to adjust to permanent residency were tripled. The I-130 to sponsor a relative increased sixfold. U.S. citizens will need to fill out nine times as many pages to sponsor a spouse as they did last year. It’s a monsoon of bureaucracy. 

Table: Immigration Form Lengths by Presidency

 

Form

President Trump

President Obama

    Form Pages Instruction Pages Minutes to Finish Form Pages Instruction Pages  Minutes to Finish

1

I-130 | Petition for Alien Relative

12

12

120

2

7

90

2

I-130 | Petition for Alien Spouse Supplement

18

12

170

2

7

90

3

I-526 | Immigrant Petition by Alien Entrepreneur

13

13

110

3

4

110

4

I-485 | Application to Register Permanent Residence or Adjust Status

18

42

390

6

8*

390

5

I-290B | Notice of Appeal or Motion

5

9

90

2

8

90

6

I-129F | Petition for Alien Fiancé(e)

13

15

195

6

9

95

7

I-485 Supplement A | Supplement A to Form I-485, Adjustment of Status Under Section 245(i)

4

11

13

2

4

75

8

I-730 | Refugee/Asylee Relative Petition

8

7

40

4

6

40

9

I-765 | Application for Employment Authorization

2

18

205

1

12

205

10

N-600 | Application for Certificate of Citizenship

15

13

95

9

9

95

11

N-600K | Application for Citizenship and Issuance of Certificate Under Section 322

13

16

125

8

9

125

12

I-693 | Report of Medical Examination and Vaccination Record

13

12

150

9

11

150

13

I-918 | Petition for U Nonimmigrant Status

11

17

300

8

9

300

14

I-914 | Application for T Nonimmigrant Status

10

14

135

9

9

135

15

I-363 | Request to Enforce Affidavit of Financial Support and Intent to Petition for Legal Custody for Public Law 97-359 Amerasian

7

4

N/A

1

2

N/A

 

Total

162

215

2,138

72

114

1,990

*Note the form goes onto the ninth page, but USCIS doesn’t include those sections as part of the form instruction length.
Source: U.S. Citizenship and Immigration Services; Old Forms Obtained through Web Archive

 

Several weeks ago the Defense Department revealed it is seriously considering drone strikes against Islamist terrorists in the Philippines, which would make it the eighth country the United States has bombed in the war on terror. Certainly the terrorists—who have operated in various forms there for over a hundred years—are a threat to Filipinos. They are not, however, a threat to the United States. Why, then, would the United States start bombing?

The answer may lie in the misguided theory driving American thinking about terrorism.

During the Cold War, America’s political leaders subscribed to the domino theory. The theory, whose name comes from a 1954 speech by President Eisenhower, held that if one country fell to communism, then its neighbors would fall next, toppling like dominoes. This fear encouraged U.S. officials to worry about the emergence of communism even in places of little strategic importance.

History reveals that the domino theory was a poor guide to international relations, but its power during the Cold War was real. The United States intervened repeatedly in the Third World, toppling governments and fueling civil conflicts, in order to prevent the spread of communism. Most importantly, the domino theory provided the primary justification for the Vietnam War, which cost the United States almost 60,000 lives and also strained the fabric of American society. Tragically, the irrelevance of the loss of the Vietnam War for American security was not enough to vanquish the domino theory. It continued to motivate American intervention in Central America and elsewhere until the collapse of the Soviet Union.

The 9/11 attacks in turn spawned what we might call the pandemic theory. According to this theory, terrorism spreads as the terrorism “contagion” jumps from person to person, oblivious to distance or national borders. Thanks to its viral spread, which can occur via interpersonal contact or online through propaganda and chat rooms, terrorism anywhere in the world is a threat to reach the U.S eventually. As with infectious diseases, even a small outbreak of terrorism in a faraway land can be used to justify extreme responses. The best time to eradicate a disease, after all, is before it gets a foothold and infects a large number of people.

The pandemic theory looks compelling at first glance. But like many popular theories, it is dangerously inaccurate. 

First, terrorists themselves do not suffer from a disease. Instead, they almost always have a specific political goal, and their choice of violence to achieve that goal typically derives from a coherent thought process. Scholars have shown that even seemingly unthinkable acts like suicide bombing follow a strategic logic, with their horrific nature making such acts particularly potent tools for generating fear and attention. The bombers themselves are a mix of the willing and angry and those forced into it, including the young and mentally disabled. But suicide terrorism occurs not because terrorists are sick, but because terrorist organizations believe it is a useful coercive weapon. 

Second, terrorism does not spread like an infectious disease. Ideas animating the group may have appeal (e.g., esprit de corps and income for unemployed males, promises of power for the disenfranchised). However, terrorism’s spread is limited to those who are willing to kill their fellow human beings. Thankfully, there are very few of those people. Indeed, the act is so unnatural that militaries have difficulty training recruits to kill. Evidence shows that even in combat, soldiers will often fail to kill unless they have been repeatedly conditioned to do it. It is no wonder, then, that most terrorist groups eventually decide to enter the political process or wind up marginalized after failing to reach their objectives.

Third, unlike a pandemic, terrorism’s deadly impact is geographically limited. The historical evidence shows that the vast majority of attacks occur in war zones or failed states. Just one country—Iraq—endured nearly a quarter of all terror attacks over the past 16 years, while ten countries account for 73 percent of the total. All ten of the countries experienced a war during that time. Conversely, stable and developed countries rarely experience terror attacks. The United States and nine peers (e.g., Canada and the UK) only experienced two percent of the attacks.

What makes the pandemic theory so attractive, then? The psychological shock and fear induced by 9/11 probably has something to do with it. It is also true that some terrorist groups, like Al Qaeda and ISIS, have managed to spread, at least to some degree.

But a clear-eyed assessment shows that the Islamist “virus” is severely self-limiting. Though Al Qaeda and the Islamic State have shown some capacity to inspire lone wolf attacks against America and other nations, those attacks are relatively few in number. Moreover, there is no sign that their ideology has taken root within the United States (or anywhere else) despite massive levels of terrorism in the Middle East and their purported mastery of digital propaganda.

In short, though terrorism is a terrible scourge and sometimes a threat to the United States, it does not behave like a pandemic. Terrorism elsewhere, whether in the Middle East, Latin America, or the Philippines, is not automatically a threat to America.

Unfortunately, bad theories lead to bad policy. Just as the domino theory led to tragic and unnecessary wars to contain communism, pandemic theory has led the United States to wage a costly and fruitless war on terrorism. As long as pandemic theory dominates official thinking, there is no end to the war in sight.

The Trump administration has quietly made immigration more difficult for people seeking to immigrate to the United States. It has increased the length of immigration applications significantly. Since January, it has increased the length of 15 immigration forms, yet at the same time, it claims that most of these forms will take no more time to complete. The table below presents a list of all of the forms that the new administration has increased since January and how long each administration estimated the forms would take to complete.

Table: Immigration Form Lengths by Presidency

 

Form

President Trump

President Obama

    Form Pages Instruction Pages Minutes to Finish Form Pages Instruction Pages  Minutes to Finish

1

I-130 | Petition for Alien Relative

12

12

120

2

7

90

2

I-130 | Petition for Alien Spouse Supplement

18

12

170

2

7

90

3

I-526 | Immigrant Petition by Alien Entrepreneur

13

13

110

3

4

110

4

I-485 | Application to Register Permanent Residence or Adjust Status

18

42

390

6

8*

390

5

I-290B | Notice of Appeal or Motion

5

9

90

2

8

90

6

I-129F | Petition for Alien Fiancé(e)

13

15

195

6

9

95

7

I-485 Supplement A | Supplement A to Form I-485, Adjustment of Status Under Section 245(i)

4

11

13

2

4

75

8

I-730 | Refugee/Asylee Relative Petition

8

7

40

4

6

40

9

I-765 | Application for Employment Authorization

2

18

205

1

12

205

10

N-600 | Application for Certificate of Citizenship

15

13

95

9

9

95

11

N-600K | Application for Citizenship and Issuance of Certificate Under Section 322

13

16

125

8

9

125

12

I-693 | Report of Medical Examination and Vaccination Record

13

12

150

9

11

150

13

I-918 | Petition for U Nonimmigrant Status

11

17

300

8

9

300

14

I-914 | Application for T Nonimmigrant Status

10

14

135

9

9

135

  Total

155

211

2,138

71

112

1,990

*Note the form goes onto the ninth page, but USCIS doesn’t include those sections as part of the form instruction length.
Source: U.S. Citizenship and Immigration Services; Old Forms Obtained through Web Archive

An article in Politico today reports on a persistent problem with the Pentagon providing inaccurate numbers of U.S. troops deployed in foreign countries, particularly war zones like Afghanistan, Syria, and Iraq.

The Defense Department has long been among the worst federal offenders in terms of lack of transparency in public reporting on everything from where Americans are deployed to how tax dollars are spent. Specifically, though, Pentagon officials have recently resorted to some clever accounting tricks in order to make total troop levels appear lower than they actually are.

At least a few factors are motivating this “concealment of total troops in war-zones,” as Politico puts it. First, the Obama administration set certain caps on the number of troops permitted to be deployed in Afghanistan, Iraq, and Syria. In Afghanistan, for example, President Obama capped troop levels at 8,400. That is significantly lower than the 12,000-13,000 total troops actually present in Afghanistan, and once President Trump deploys another 4,000 or so as he outlined in his speech to the nation last week “the total will be nearly double the current public number,” Politico reports.

The reason for the undercounting is that the Pentagon has not been including troops present in the country for fewer than 120 days—including, for example, “construction engineers who are building a bridge or repairing an airfield, as well as the combat units like Marine artillery batteries that have deployed to Syria.” When military officials decide a short-term boost in troop numbers is necessary to achieve some tactical objective, they do so without counting them in the total numbers so as to avoid violating the caps imposed by the executive branch.

Another reason the Pentagon deliberately undercounts troop levels is because higher numbers of troop deployments can be a political liability for some U.S. clients, like Iraqi Prime Minister Haider al-Abadi, who is up for election next year amid widespread misgivings among Iraqis about the continued presence of U.S. troops there.

I ran into this problem while researching my recent Cato Policy Analysis on overseas basing. Official statements from the military and civilian sectors of government, as well as references to foreign troop numbers in the news media, were consistently lower than some more accurate (or inclusive) internal Defense Department estimates.

According to the Politico report, Secretary of Defense James Mattis is intent on fixing this problem. But his efforts may conflict with the preferences of President Trump, who has repeatedly indicated a desire to keep foreign governments, and the American people, ignorant of things like troop numbers or movements, the initiation of military action, strategy, and so on. Politico:

“We will not talk about numbers of troops or our plans for further military activities,” Trump said in his address [on Afghanistan].

Trump’s suggestion that his administration may stop releasing troop numbers is consistent with rhetoric he used on the campaign, when he lambasted the Obama administration for talking about the impending advance into the ISIS-held city of Mosul and told opponent Hillary Clinton during a debate that she was “telling the enemy everything you want to do.”

Trump’s remarks on Monday put the brakes on the plan to start disclosing more accurate numbers, at least as far as Pentagon spokesmen are concerned.

The number of troops the United States has in foreign countries, especially war zones, is unquestionably something the American people deserve to know. At the very least, it allows Americans, who are increasingly insulated from the costs of U.S. military engagements, to have a clear understanding of our efforts and commitments abroad and to make informed judgments about U.S. foreign policy. Greater transparency, and accuracy, on this issue is something to which the president and the military he commands ought to fully commit. 

Just before the annual rush to get out of town for the August District Work Period, the Senate Intelligence Committee passed its annual Intelligence Authorization bill by a 14-1 vote. The lone dissenter was Democrat Ron Wyden of Oregon, a recent guest at Cato and arguably the most articulate and well-informed member of Congress on Intelligence Community oversight issues. Almost a month after the vote, Wyden explained to The Hill why he elected to oppose the bill, which includes language aimed at Wikileaks and its founder and leader, Julian Assange:

“My concern is that the use of the novel phrase ‘non-state hostile intelligence service’ may have legal, constitutional, and policy implications, particularly should it be applied to journalists inquiring about secrets,” said Wyden.

“The language in the bill suggesting that the U.S. government has some unstated course of action against ‘non-state hostile intelligence services’ is equally troubling.”

 The specific language in the bill reads as follows:

SEC. 623. SENSE OF CONGRESS ON WIKILEAKS.

It is the sense of Congress that WikiLeaks and the senior leadership of WikiLeaks resemble a non-state hostile intelligence service often abetted by state actors and should be treated as such a service by the United States.

“Sense of Congress” provisions are legislative puffery—they have no legal force or effect. This is a political messaging and propaganda exercise aimed at the press and the Intelligence Community workforce, not a serious assault on Wikileaks or Assange. To claim otherwise trivializes the real threats that actual investigative journalists and their news organizations face from the U.S. government—such as attempted prosecutions for leaks under the Espionage Act or Congressional efforts to eradicate public encryption technologies journalists and their sources use to communicate securely. 

Genuine hostile intelligence services are not passive recipients of purloined secrets that they subsequently publish for all the world to see. Real spy services employ real human beings to actively seek out the secrets of other state-level actors or non-state entities like terrorist organizations, and they do everything possible to keep their successes—and failures—secret, for what should be obvious reasons. Wikileaks may be many things, but the notion that it is a stateless equivalent to the FSB or Mossad is laughable. 

Instead of obsessing about Assange and his organization, the Senate and House Intelligence Committees would do well to focus on real problems and real bad actors inside the American Intelligence Community—especially those who seem so intent on retaliating against IC employees and contractors trying to expose waste, fraud, abuse, or criminal conduct by IC officials. 

The Cato Institute’s Libertarianism.org web site has released a new, online version of The Encyclopedia of Libertarianism.

The Encyclopedia offers “a general guide to the social and political philosophy that today goes by the name of libertarianism,” including several chapters of interest to health policy scholars:

There’s been some talk this week about a few people who once called themselves libertarians and have now turned up in alt-right circles, at the Charlottesville march or elsewhere. As I told the Daily Beast, “People change ideologies all the time. Some libertarians become conservatives, some become welfarist liberals, a few drift into creepy extremes.” And of course it’s not just libertarians. Hillary Clinton says she was a Goldwater Girl, a lot of ex-communists became the original neoconservatives, and Nobel laureates in economics have tended to move toward classical liberalism (libertarianism). But since the topic has come up, let me just agree with Nick Gillespie that “The alt-right—and Trumpism, too, to the extent that it has any coherence—is an explicit rejection of foundational libertarian beliefs in ‘free trade and free migration’ along with experiments in living that make a mess of rigid categories that appeal to racists, sexists, protectionists, and other reactionaries.” And add my own commentary, excerpted from my 2015 book The Libertarian Mind:

The dignity of the individual under libertarianism is a dignity that enhances social well-being. Libertarianism is good not just for individuals but for societies. The positive basis of libertarian social analysis is methodological individualism, the recognition that only individuals act. The ethical or normative basis of libertarianism is respect for the dignity and worth of every (other) individual. This is expressed in the philosopher Immanuel Kant’s dictum that each person is to be treated not merely as a means but as an end in himself.

Of course, as late as Jefferson’s time and beyond, the concept of the individual with full rights did not include all people. Astute observers noted that problem at the time and began to apply the ringing phrases of Locke’s Second Treatise of Government and the Declaration of Independence more fully. The equality and individualism that underlay the emergence of capitalism and republican government naturally led people to start thinking about the rights of women and of slaves, especially African American slaves in the United States. It’s no accident that feminism and abolitionism emerged out of the ferment of the Industrial Revolution and the American and French revolutions. Just as a better understanding of natural rights was developed during the American struggle against specific injustices suffered by the colonies, the feminist and abolitionist Angelina Grimké noted in an 1837 letter to Catherine E. Beecher, “I have found the Anti-Slavery cause to be the high school of morals in our land—the school in which human rights are more fully investigated, and better understood and taught, than in any other.”

The abolitionist movement grew logically out of the Lockean libertarianism of the American Revolution. How could Americans proclaim that “all men are created equal … endowed by their Creator with certain unalienable rights,” without noticing that they themselves were holding other men and women in bondage? They could not, of course, and had they tried, they would have been reminded by people such as the great English scholar Samuel Johnson, who wrote in 1775, “How is it that we hear the loudest yelps for liberty among the drivers of Negroes?” The world’s first antislavery society was founded in Philadelphia that same year. Jefferson himself owned slaves, yet he included a passionate condemnation of slavery in his draft of the Declaration of Independence: “[King George] has waged cruel war against human nature itself, violating its most sacred rights of life and liberty in the persons of a distant people who never offended him.” The Continental Congress deleted that passage, but Americans lived uneasily with the obvious contradiction between their commitment to individual rights and the institution of slavery.

Although they were intimately connected in American history, slavery and racism are not inherently bound together. In the ancient world the act of enslaving another person did not imply his moral or intellectual inferiority; it was just accepted that conquerors could enslave their captives. Greek slaves were often teachers in Roman households, their intellectual eminence acknowledged and exploited.

In any case, racism in one form or another is an age-old problem, but it clearly clashes with the universal ethics of libertarianism and the equal natural rights of all men and women. As Ayn Rand pointed out in her 1963 essay “Racism,”

Racism is the lowest, most crudely primitive form of collectivism. It is the notion of ascribing moral, social or political significance to a man’s genetic lineage … which means, in practice, that a man is to be judged, not by his own character and actions, but by the characters and actions of a collective of ancestors.

In her works Rand emphasized the importance of individual productive achievement to a sense of efficacy and happiness. She argued, “Like every other form of collectivism, racism is a quest for the unearned. It is a quest for automatic knowledge—for an automatic evaluation of men’s characters that bypasses the responsibility of exercising rational or moral judgment—and, above all, a quest for an automatic self-esteem (or pseudo-self-esteem).” That is, some people want to feel good about themselves because they have the same skin color as Leonardo da Vinci or Thomas Edison, rather than because of their individual achievements; and some want to dismiss the achievements of people who are smarter, more productive, more accomplished than themselves, just by uttering a racist epithet.

And as I wrote when a group of newsletters seemed to connect racist ideas to the libertarian movement:

Libertarians should make it clear that the people who wrote those things are not our comrades, not part of our movement, not part of the tradition of John Locke, Adam Smith, John Stuart Mill, William Lloyd Garrison, Frederick Douglass, Ludwig von Mises, F. A. Hayek, Ayn Rand, Milton Friedman, and Robert Nozick. Shame on them.

More on libertarianism, individualism and race – and feminism and gay rights – in The Libertarian Mind.

Accountability to the people is a cornerstone of our republic.  The Constitution provides for the creation of certain offices that may be filled by appointment, but the law has been clear: the line between appointed officers and the electorate may not become too attenuated or else accountability will be lost.

The line between certain administrative judges and the people has reached well past this point.  Administrative law judges (ALJs) are individuals who serve as adjudicators presiding over hearings within federal agencies.  In most cases, they wear long black robes just like judges, and preside over a hearing process that, to a layperson, would appear to be very similar to a trial.  In some agencies, they determine what benefits the government should give to certain person.  But in others they determine the outcome of actions the government has taken against individuals.  They hear witness testimony, determine witness credibility (i.e., whether a witness is lying), decide what evidence can be presented, and ultimately rule on the case and decide the punishment.

And yet these ALJs are not selected either through presidential appointment, as federal judges are, or through election, as many state judges are.  They are not even considered at present to be “officers” under the appointments clause of the Constitution.  Instead, they are deemed mere employees and are hired through a complex process involving both the federal Office of Personnel Management and the heads of the agencies in which they serve. 

It is ludicrous that someone vested with so much power is deemed a mere employee and not an officer.

Today, Cato filed a brief urging the Supreme Court to accept the case of Lucia v. SEC, and to find that the ALJs who preside over cases at the Securities and Exchange Commission are officers.  There are broader questions as to whether ALJs should be used in enforcement actions at all.  But to the extent that they are, they should at least adhere to the basic principles of accountability provided by the appointments clause.

Recently the University of California, Berkeley, took down online lecture and course content that it had offered free to the public, rather than risk liability for not modifying them so as to be conveniently usable by members of the public with hearing, visual, or manual disabilities. Harvard and M.I.T. had already been sued on similar grounds.

Now imagine the Berkeley take-down times 10,000 — a world in which private commercial, educational, and non-profit entities alike have legal incentive to de-publish any web content they do not think bulletproof against claims of lack of ADA accessibility. That’s not just imagining. It’s the world we’re looking at as a number of federal courts, setting aside years-old precedent, have begun to accept plaintiffs’ arguments that the ADA applies broadly to the web. As freelance lawsuits against private defendants proliferate, the choice is plain: either act to stop this trend, or expect widening disruption and takedown of formerly free web content.

In a much noted June case against the Winn-Dixie supermarket chain, a federal court accepted the notion that the store could be sued under the ADA because its website was a “place” of public accommodation, like a brick and mortar store. As Frank Cruz-Alvarez and Rachel Canfield observe in a Washington Legal Foundation paper, “the court found that the website was ‘heavily integrated’ and a ‘gateway’ to the physical stores, notwithstanding that the website limits customer participation to acquiring in-store coupons, refilling existing prescriptions for in-store pick-up, and utilizing a store locator function.” Since then federal courts have ruled favorably on ADA-for-the-web claims in more than one other case, including a decision by Judge Jack Weinstein of the Eastern District of New York in a case against Blick Art Materials.

I’ve been warning for a long time that web accessibility has the potential to be one of the most damaging and onerous regulatory initiatives in memory. It’s true that with courts split on the issue there is a chance that at some point the U.S. Supreme Court will take a case allowing to resolve the uncertainty and — if we are lucky — uphold earlier precedents such as that in a 2002 case in which a court dismissed a lawsuit against Southwest Airlines. In the mean time, entrepreneurial lawyers have been filing hundreds of lawsuits against local and national businesses over their websites, many of which settle for money out of court, and on the current momentum will soon be suing thousands more. Millions of existing web presences are uncompliant and easy targets for litigation. The real answer is for Congress to step in.

Robert Rector of the Heritage Foundation recently argued that the RAISE Act, a bill introduced by Senators Cotton (R-AR) and Perdue (R-GA), would save taxpayers billions by reducing lower-skilled immigration.  Below I will argue that the RAISE Act does no such thing mainly because it does not actually increase skilled immigration, does not much alter the current education level of immigrants in the United States, and would result in removing at least 500,000 H-1B visas within a year of passage.  Using the National Academy of Science (NAS) fiscal estimates, the RAISE Act is more likely to increase deficits over the next 75 years than to decrease them.

Rector makes two main claims in his post.  The first is that “[b]ased on the National Academy of Sciences’ estimates, the average low-skill immigrant (with a high school degree or less) who enters the country imposes a net present value on taxpayers of negative $142,000.”  A fiscal net present value (NPV) means that each immigrant in this education range would have to deposit $142,000 upon arrival that would earn 3 percent compounded annual interest to cover the full cost of social services that he or she will be expected to consume over the next 75 years.  The second claim is that the RAISE Act could save taxpayers at least $1 trillion by cutting the flow of immigrants with a high school degree or less.  The sections below will analyze these claims by using the National Academy of Sciences’ estimates and information from the Current Population Survey of the U.S. Census (CPS).

The Fiscal Net Present Value of Individual Low-Skilled Immigrants and Their Descendants

An immigrant’s education and age of immigration are the two most relevant characteristics used by the NAS to estimate his fiscal NPV.  The more educated and younger the immigrant is, the more positive his fiscal impact.  Table 8-14 in the NAS shows that age is very important—as almost every fiscal estimate looking at immigrants alone or immigrants plus their descendants has a positive fiscal NPV for those who immigrated between ages 0 and 24.  However, all immigrants have a negative NPV if they entered at age 65 years or older, regardless of education.  There is variation here, of course, as it is more fiscally positive for a high school graduate to immigrate at age 19 than age 17 as it will save taxpayers at least one year of public schooling, but those numbers are not reported in the averages for NAS’ broad age ranges.

Despite Rector’s first claim, the NAS does not have a 75-year fiscal projection that finds a fiscal NPV of -$142,000 per immigrant with a high school degree or below for the local, state, and federal governments.  It is unclear how he calculated that figure based on the NAS findings.   

My analysis uses the total impact results for immigrants and their descendants for the consolidated federal, state, and local governments in NAS table 8-14 that excludes public goods, just as Rector recommends, and adjusts for the age and eventual education of the new immigrants.  The adjusted NAS 8-14 table is displayed here in Tables 1–3.   This exercise is carried out under the same two budget scenarios provided by the Congressional Budget Office (CBO) and an additional unrealistic scenario that assumes that current budgets, benefits, and tax rates will continue with no adjustment despite the looming entitlement crisis.    

Roughly 62 percent of immigrants with less than a high school education are younger than 18.  Tables 1–3 make two adjustments.  First, they conservatively estimate that those under the age of 18 will eventually be as educated as older immigrants who arrived in the same years.  Second, they adjust for the immigrant age of arrival based on 2013-2016 CPS data.  Those two minor adjustments produce an average NPV of -$24,233 per dropout immigrant in the best CBO estimate (Table 1).  Those adjustments mean that an immigrant with only a high school education has an NPV of +$14,988.  According to this calculation, the fiscal NPV for the average immigrant with a high school degree or less is -$9,244—94 percent below Rector’s estimate of -$142,000.

Averaging results over the three different budget scenarios mentioned above barely worsens the outcomes.  The average fiscal NPV of an individual immigrant falls to -$27,700 for dropouts and +$7,275 for high school-only graduates.  The average fiscal NPV for dropouts and high school graduates across these three budget scenarios is -$20,426—86 percent below Rector’s estimate. 

Table 1

NPV Fiscal Impact on Federal, State, and Local Government, CBO Long-Term Budget Outlook, by Age and Eventual Education at Arrival.

 Total

0-24

25-64

65+

Total

$2,975

-$23,444

-$3,764

-$24,233

HS

$20,700

-$4,820

-$892

$14,988

SomCol

$32,755

$11,481

-$665

$43,571

BA

$45,749

$80,142

-$854

$125,038

>BA

$24,508

$116,256

-$157

$140,607

Total

$126,687

$179,615

-$6,332

$299,971

          Taxes

0-24

25-64

65+

Total

$66,131

$35,426

$557

$102,114

HS

$81,589

$54,511

$180

$136,280

SomCol

$89,524

$48,189

$172

$137,885

BA

$107,117

$155,514

$283

$262,914

>BA

$59,787

$169,004

$122

$228,913

Total

$404,148

$462,645

$1,313

$868,106

          Benefits

0-24

25-64

65+

Total

$63,156

$58,870

$4,321

$126,346

HS

$60,975

$59,331

$1,072

$121,378

SomCol

$56,851

$36,636

$832

$94,319

BA

$61,461

$75,372

$1,136

$137,969

>BA

$35,224

$52,631

$281

$88,135

Total

$277,667

$282,840

$7,642

$568,148

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

 

Table 2

NPV Fiscal Impact on Federal, State, and Local Governments, CBO Long-Term Budget Outlook with Deficit Reduction, by Age and Eventual Education at Arrival.

 Total

0-24

25-64

65+

Total

$4,760

-$22,089

-$3,720

-$21,049

HS

$22,779

-$3,213

-$881

$18,685

SomCol

$34,879

$12,724

-$648

$46,955

BA

$48,244

$83,482

-$838

$130,888

>BA

$25,937

$119,648

-$152

$145,432

Total

$136,599

$190,550

-$6,239

$320,911

          Taxes

0-24

25-64

65+

Total

$67,236

$35,947

$557

$103,740

HS

$83,062

$55,200

$180

$138,441

SomCol

$91,158

$48,847

$172

$140,177

BA

$109,151

$157,740

$283

$267,174

>BA

$60,886

$171,577

$124

$232,587

Total

$411,492

$469,312

$1,314

$882,118

          Benefits

0-24

25-64

65+

Total

$62,476

$57,932

$4,277

$124,685

HS

$60,369

$58,413

$1,061

$119,843

SomCol

$56,279

$36,124

$824

$93,227

BA

$60,814

$74,259

$1,126

$136,198

>BA

$34,949

$51,929

$276

$87,154

Total

$274,887

$278,657

$7,563

$561,107

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

 

Table 3

NPV Fiscal Impact on Federal, State, and Local Government, No Budget Adjustment, by Age and Eventual Education at Arrival.

 Total

0-24

25-64

65+

Total

-$10,030

-$24,069

-$3,720

-$37,819

HS

$1,126

-$12,050

-$925

-$11,849

SomCol

$9,557

$2,559

-$699

$11,417

BA

$15,897

$45,001

-$944

$59,953

>BA

$7,693

$73,333

-$188

$80,837

Total

$24,242

$84,774

-$6,477

$102,539

          Taxes

0-24

25-64

65+

Total

$43,690

$26,882

$542

$71,115

HS

$53,353

$40,396

$163

$93,912

SomCol

$58,485

$35,027

$150

$93,662

BA

$68,947

$111,945

$251

$181,142

>BA

$38,081

$119,882

$100

$158,063

Total

$262,557

$334,131

$1,206

$597,895

          Benefits

0-24

25-64

65+

Total

$53,636

$50,951

$4,262

$108,849

HS

$52,227

$52,561

$1,088

$105,876

SomCol

$48,928

$32,467

$849

$82,245

BA

$53,050

$66,944

$1,195

$121,190

>BA

$30,333

$46,432

$290

$77,055

Total

$238,174

$249,356

$7,685

$495,215

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

 

Cut Benefits for Immigrants

Robert Rector is famous for his work on America’s bloated means-tested welfare state.  Although the benefits sections in Tables 1–3 include more than welfare, a mere 10 percent cut in the NPV of benefits for only immigrants (not for their descendants) slashes the average fiscal NPV for immigrant dropouts in Table 1 by 52 percent and increases the surplus by 80 percent for high school-only graduates.  This 10 percent cut in the NPV of immigrant benefits adjusts the average fiscal NPV for each dropout and high school-only graduate is +$15,441—a whopping $157,441 more positive than Rector’s estimate. 

The average fiscal NPV across all three budget scenarios for high school graduates and below when the NPV of immigrant benefits is cut by 10 percent is -$12,197—a mere 9 percent of Rector’s estimate.  That number includes the wildly unrealistic assumption that government spending can continue at its present unsustainable growth rates for the next 75 years.  Reducing government benefits for immigrants, or everybody for that matter has a large and immediate positive fiscal impact on the future flow and the stock of immigrants already living in the United States. 

Fiscal Net Present Value of the Current Immigration System, the RAISE Act, and Increased Legal Immigration

My simple analysis in this blog post misses many details about the RAISE Act. For example, the RAISE Act would have a negative fiscal impact by shrinking the stock of skilled foreign workers by forcing at least 500,000 H-1B workers out of the current green card backlog and out of the country in its second year.  H-1B workers can extend their work permit on an annual basis if they are currently in line for a green card.  Since RAISE would boot them out of the green card line after a year, H-1B workers will be unable to extend their work visas on an annual basis and will be forced to leave.  If they have enough points for a green card then they will have to wait overseas.  Those 500,000 workers have about as many spouses and minor children who are likely to be either highly educated or to become so.  Removing so many skilled workers on H-1B visas would have a large and immediate negative fiscal impact that is not captured in this simple model. 

This section uses the NAS Table 8-14 CBO Long Term Budget Outlook for Immigrants and their descendants to look at the impact on budgets for the combined state, local, and federal governments for a single year of legal green card immigration.  I make the same assumptions as in the above section for looking at the current immigration system, how the flow of immigrants would change under the RAISE Act, and under a hypothetical doubling of immigrants with at least a college degree combined with a 25 percent increase in immigrants with some college education or less.  The last scenario is a skills-boosting legal immigration reform that provides an alternative policy point as a comparison.  In those two scenarios, I assume that any shift in future immigration is proportional to the age ranges that are currently entering so that any percent shift in the number of immigrants under one scenario is applied proportionately across all ages in every other scenario.  This section does not look at the stock of current immigrants as that would remain unchanged under each iteration. 

Some of the following numbers may seem huge but they are actually small in comparison to the 75-year NPV of $320.3 trillion for local, state, and federal budgets, assuming a 1.5 percent growth rate in budgets at a 3 percent discount rate.

Current Immigration Policy

This section assumes a million green cards is the current policy.  Although that number is not set in law, that is about the average over the last several years.  The fiscal NPV of all immigrants that year is +$299.9 billion (Table 4).   

Table 4

Current Immigration System, One Year, NPV Fiscal Impact on Federal, State, and Local Government, CBO Long-Term Budget Outlook, by Age and Eventual Education at Arrival.

Age

0-24

25-64

>65

Total

$2,975,031,678

-$23,443,874,882

-$3,763,992,049

-$24,232,835,254

HS

$20,700,441,632

-$4,819,960,247

-$892,143,530

$14,988,337,855

SomCol

$32,754,803,413

$11,480,594,204

-$664,818,496

$43,570,579,122

BA

$45,748,978,458

$80,142,274,296

-$853,645,779

$125,037,606,975

>BA

$24,508,107,780

$116,256,093,734

-$156,920,180

$140,607,281,334

Total

$126,687,362,960

$179,615,127,105

-$6,331,520,033

$299,970,970,031

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

 

RAISE Act

For future annual flows under the RAISE Act, I assume a proportional 50 percent increase in immigrants with at least a college education and a corresponding drop in those with a high school degree and below.  Even with that, the number of new immigrants with at least a college education under RAISE would be more than 100,000 below what it is under the current system.  Thus, the annual fiscal NPV for the RAISE Act is +$222.9 billion—$77.1 billion below the current system (Table 5).  Any fiscal gains from decreasing the low-skilled immigrant flow would be overwhelmed by fiscal losses from the RAISE Act’s indirect decrease in the number of skilled immigrants from cutting family reunification

The RAISE Act’s NPV of these annual flows is +$6.7 trillion over the next 75-years discounted at 3 percent—a staggering $2.3 trillion below the current system’s 75-year fiscal NPV of just over +$9 trillion. 

Table 5

RAISE Act, One Year, NPV Fiscal Impact on Federal, State, and Local Government, CBO Long-Term Budget Outlook, by Age and Eventual Education at Arrival.

Age

0-24

25-64

>65

Total

$678,821,775

-$2,777,487,185

-$1,539,203,892

-$3,637,869,301

HS

$7,066,903,686

-$1,181,922,795

-$381,734,491

$5,503,246,400

SomCol

$16,377,401,706

$5,740,297,102

-$332,409,248

$21,785,289,561

BA

$34,311,733,843

$60,106,705,722

-$640,234,334

$93,778,205,231

>BA

$18,381,080,835

$87,192,070,300

-$117,690,135

$105,455,461,000

Total

$76,815,941,846

$149,079,663,145

-$3,011,272,100

$222,884,332,891

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

 

Double Skilled Immigration and 25 Percent Increase in Lower Skilled Immigration

Congress could also decide to increase legal immigration with a heavy emphasis on more skilled workers without cutting family reunification or other immigrant categories.  Using the same tools and assumptions employed above, a 50 percent increase in the number of skilled immigrants and a 25 percent boost in the number of low-skilled immigrants produces the most positive fiscal effects:  A one-year fiscal NPV of $574.2 billion (Table 6).  The fiscal NPV in one year under this scenario is $274 billion above the current system and $351 billion above what would exist under the RAISE Act.

Table 6

Pro-Skill Immigration Increase, One Year, NPV Fiscal Impact on Federal, State, and Local Government, CBO Long-Term Budget Outlook, by Age and Eventual Education at Arrival

Age

0-24

25-64

>65

Total

$3,718,789,597

-$29,304,843,603

-$4,704,990,062

-$30,291,044,068

HS

$25,875,552,040

-$6,024,950,309

-$1,115,179,412

$18,735,422,319

SomCol

$40,943,504,266

$14,350,742,756

-$831,023,120

$54,463,223,902

BA

$91,497,956,915

$160,284,548,593

-$1,707,291,558

$250,075,213,950

>BA

$49,016,215,560

$232,512,187,467

-$313,840,360

$281,214,562,667

Total

$211,052,018,378

$371,817,684,904

-$8,672,324,511

$574,197,378,771

Sources: NAS Table 8-14, Current Population Survey, Author’s Calculations.

 

Wages

Another claim made in Rector’s piece is that “Low-skill immigration reduces the wages of similar U.S.-born workers. An immigration-induced increase in the low-skill labor force of 10 percent can reduce the wages of low-skill non-immigrant labor by 3 to 10 percent.”  The last paper that found that a 10 percent increase in immigration reduces wages by about 10 percent is a working paper by George Borjas and Joan Monras.  Much of that paper is an extension of Borjas’ other work on the wage-effect of the Mariel Boatlift.   

In addition to the finding that Rector reported, Borjas and Monras also found cross-skill complementarities whereby a 10 percent increase in the number of dropout immigrants increased the relative wages of native high school-only graduates by 7 percent.  Since high school graduates earn about $180 per week more than dropouts do and there are about three times more of them (9.4 percent to 28.6 percent), the net wage increase is actually positive—as I re-discovered when re-creating Borjas’ results.  Immigrants have a net positive effect on native-born American wages—especially on Americans with more skills.  Anything more than a back-of-the-envelope fiscal analysis should consider those wage effects.

Conclusion

The RAISE Act will increase the deficit relative to current immigration policy when updated CPS data on new arrivals are applied to the findings of the National Academy of Sciences.  A doubling of skilled immigrants, even if it is accompanied by a modest 25 percent increase in the flow of lower-skilled immigrants, almost doubles the fiscal benefit.  Small cuts in benefits received by immigrants increase the fiscal benefits by large amounts.  

The federal government faces a severe budget crunch in the near future due to the cash shortfalls in Social Security and Medicare.  Immigration has increased net-revenues but not by nearly enough to offset the cost of the looming entitlement crisis.  Tinkering with immigration flows is not a serious way to address government debt as only fiscal reforms to means-tested welfare schemes, entitlement programs, and other government expenditures can do that.  The RAISE Act would worsen the federal government’s fiscal position even without considering how removing 500,000 skilled immigrant workers on H-1B visas within two years of enactment would affect revenues. 

Republicans control both Houses of Congress and the Presidency.  If they are serious about reducing the budget deficit then they need to tackle spending head on rather than playing around with the future flow of foreign workers through complex RAISE Act-like schemes that will actually make things worse.  Furthermore, it is more likely that Congress will be able to reduce these benefits than pass the RAISE Act.  Conservatives should jump at the opportunity to use immigration as a reason to cut the welfare state rather than using welfare as a reason to cut immigration.  

From The American Spirit, Simon & Shuster, 2017:

Why do some men reach for the stars and so many others never even look up? Thomas Jefferson reached for the stars.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness, –That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed…”

Never, never anywhere, had there been a government instituted on the consent of the governed.

Was Jefferson including women with the words “men” and “mankind”?  Possibly he was.  Nobody knows.  Was he thinking of black Americans when he declared all men are created equal?  Ideally, yes, I think.  Practically, no.  He was an eighteenth-century Virginia planter, it must be remembered, as the slave quarters along Mulberry Row… attest. He was an exceedingly gifted and very great man, but like the others of that exceptional handful of politicians we call the Founding Fathers, he could also be inconsistent, contradictory, human.

And more important than how he interpreted his ringing words, is their sustaining power to inspire, beyond influences of time and place.

“All honor to Jefferson,” wrote Abraham Lincoln on the eve of the Civil War, “[all honor]to the man who, in the concrete pressure of a struggle for national independence by a single people, had the coolness, forecast, and capacity to introduce into a merely revolutionary document, an abstract truth, applicable to all men and all times.”

All honor to Jefferson in our own world now… Indeed, we may judge our own performance in how seriously and what effect we take his teachings to heart.

As part of a yearly tradition, the Cato Institute and Heritage Foundation co-host a debate in which interns of both think tanks debate whether conservatism or libertarianism is a better ideology. Following this year’s debate, the Cato Institute conducted a post-debate survey of attendees to ask who they thought won the debate and what they believe about a variety of public policy and social issues.

The survey finds that millennial conservative and libertarian attendees agree on matters of free speech and religious liberty, the size and scope of government, regulation, health care and what to do about climate change. However, striking differences emerge between the two groups particularly on matters of immigration, the temporary Muslim travel ban, gender pronouns and bathrooms, government’s response to opioid addiction, the death penalty, religious values in government, domestic surveillance, foreign policy, as well as evaluations of the Trump administration.

Full LvCDebate Attendee Survey results found here

Priority Differences and Similarities

Examining conservative and libertarian millennial attendees’ issue priorities offers a quick overview of their similarities and differences. The survey asked attendees how concerned they are about 21 different issues:

 

As the chart shows above, conservative millennials are more concerned about morality in society, abortion, terrorism, national security, drug use, and immigration. Libertarian millennials are more concerned about government domestic surveillance, the criminal justice system, and trade. Top priorities shared by both groups include the size and scope of government, free speech, government spending and debt, the economy, and taxes. Notably, libertarians and conservatives share their lowest priority: few are concerned about income inequality.

Voting in 2016

Although 88% of conservative millennial attendees identify as Republican (and 100% do if you include independent leaners), only 51% voted for Donald Trump in 2016. Nevertheless, this is considerably higher than the 20% of libertarian millennial attendees who voted for Trump. Among both sets of Trump voters, fully 7 in 10 said their vote was against Hillary Clinton rather than a vote for Trump. Thus, President Trump received few enthusiastic votes among this group of politically engaged millennial conservatives and libertarians.

While a majority of conservative attendees ultimately voted for Trump, a majority (55%) of libertarian attendees voted for Libertarian candidate Gary Johnson instead. Few voted for Democratic candidate Hillary Clinton (3%).  In fact, more said they did not vote (19%) than voted for Clinton.

Party Identification

Conservative millennials overwhelmingly (88%) identify as Republicans, while most libertarian attendees identify with the Libertarian Party (42%) or as politically independent (36%).

However, after asking independents and libertarians if they lean toward a political party, 100% of the conservative millennial attendees leaned with the Republican Party. A majority (58%) of libertarian millennial attendees did as well, while a third said they are truly independent, and 6% identified as Democrats.

Evaluations of Trump and Key Political Figures

Although few of the libertarian and conservative millennial attendees were enthusiastic supporters of Trump during the election, 64% of conservative attendees approve of Trump’s job performance. In stark contrast, 80% of libertarian attendees disapprove. Nevertheless, conservative approval is “soft” with only 12% “strongly” approving.  Libertarians are more ardently opposed, with 53% who “strongly disapprove” of President Trump.

Major differences also emerge in evaluations of key political figures. Notably, while 8 in 10 conservative millennial attendees have a favorable opinion of Attorney General Jeff Sessions, 8 in 10 libertarian attendees have an unfavorable view of him. Libertarian aversion likely stems from disagreements about the criminal justice system, policing, and drug policy. Conservative attendees also have favorable views of Kellyanne Conway (62%), former campaign manager and now Counselor to President Trump, while libertarian attendees do not (22%). Conversely, libertarian millennial attendees have positive views of former Gov. Gary Johnson (61%), while conservatives do not (18%). Conservative attendees are also about twice as likely as libertarians to have positive views of Senators Ted Cruz (88% vs 50%) and Marco Rubio (91% vs 48%).

Libertarian and conservative millennial attendees come together in their shared favorable views of Senator Rand Paul, Education Secretary Betsy Devos (likely due to their shared support of school choice), and writer George Will. They also share unfavorable views of Steve Bannon, Milo Yiannopoulos, and Ann Coulter, figures more closely associated with the “alt-right.”

Where Do They Get their News?

Conservative and libertarian millennial attendees share similar news consumption habits, sharing five of their top six news outlets: the Wall Street Journal (85%, 86%), the New York Times (66%, 75%), the Washington Post (68%, 72%), CNN (50%, 48%) and National Review (76%, 61%). However, conservatives are about 30 points more likely to regularly watch Fox (74% vs 45%) and 44 points more likely to read the Federalist (51% vs 36%). Conversely, libertarians are 53 points more likely to read Reason (24% vs 77%).

Culture Wars and Transgender Issues

Conservatives and libertarian millennials are starkly at odds when it comes to what pronouns to use when referring to transgender people.  When referring to a transgender person, 68% of libertarian millennial attendees choose to use the person’s preferred gender pronouns. In contrast, 67% of conservative millennial attendees say they use the pronouns corresponding with the transgender person’s biological sex.

This difference extends to bathroom access as well. Eight in 10 conservative millennials say transgender people should be required to use the restroom corresponding with their biological sex. Conversely, 70% of libertarian millennials say transgender people should be allowed to use the restroom of the gender they identify with.

Most conservatives (81%) disagree that we as a society need to do more to ensure LGBT people feel fully accepted.  Meanwhile, libertarians are split, with 50% believing more should be done for LGBT people to feel accepted and 47% agreeing with conservatives that no more needs to be done.

Despite these differences, conservatives and libertarians agree on religious liberty: 99% of conservative and 87% of libertarian respondents believe that businesses should be allowed to refuse service to same-sex weddings.

Immigration

Conservative and libertarian millennials diverge dramatically on questions of illegal and legal immigration.  While 79% of libertarians support increasing the number of immigrants allowed into the country each year, only 20% of conservatives agree. Instead, most conservatives would prefer to decrease the number (35%) or keep it the same (45%).

When it comes to handling illegal immigration, a majority (52%) of conservative attendees support deporting illegal immigrants and 24% wish to bar them from citizenship. In contrast, 70% of libertarian attendees want to allow illegal immigrants to stay in the US and be able to eventually apply for citizenship.

Finally, 69% of conservatives favor building a wall along the Mexican border, but 90% of libertarians oppose. However, conservatives are less intensely in favor of the wall than libertarians are opposed to it: only 14% of conservatives “strongly favor” while 67% of libertarians “strongly oppose” its construction.

When it comes to passing a temporary ban on Muslims immigrating to the United States, conservative attendees are evenly divided, while 86% of libertarian attendees are opposed.

Opioid Epidemic

While most likely share concerns about overuse of prescription painkillers, conservative and libertarian attendees starkly disagree about what government should do about it. Eight in 10 conservatives agree “government needs to do more” to combat prescription painkiller addiction, but 8 in 10 libertarians disagree that government should take on this role.

Organ Donations

It is currently illegal to buy or sell human organs. However, 92% of libertarian attendees believe such a market should be legal; 8% agree with the status quo. Conservatives are ardently opposed with 72% who think such a market should remain illegal, while 28% would favor legalization.

Foreign Policy and National Security

Conservative and libertarian millennials sharply disagree on questions of foreign policy. Nearly 90% of conservative attendees support either increasing (38%) or maintaining (51%) our military presence around the world, while 84% of libertarians support decreasing this presence.  Moreover, 92% of libertarian respondents support cutting defense spending to help balance the federal budget, while 72% of conservatives oppose such cuts.

Conservative and libertarian attendees also make different trade-offs between national security and privacy. Seven in 10 conservatives say they’d be willing to give up some personal freedom and privacy for the sake of national security. In contrast, 9 in 10 libertarians say they would not be willing to give up more freedom and privacy for security.

In line with such priorities, 60% of conservative attendees approve of government collection of domestic telephone and Internet data, while 92% of libertarians disapprove of this collection.

Health Care

On matters of health care, conservatives and libertarians are often aligned—particularly when it comes to repealing the Affordable Care Act/Obamacare (99%, 95%). However, similar to what’s playing out at the Congressional level, libertarians and conservatives disagree about how to improve the health care system in the country. Three-fourths (76%) of libertarians say the health care system “needs to be completely rebuilt.” However, conservatives are evenly divided with 49% agreeing that the system should be rebuilt, but 46% who think the system “needs major reform but doesn’t need to be completely rebuilt.” Less than 5% of either group think the current system works well and only needs minor changes.

Climate Change

Libertarian and conservative millennial attendees disagree about the causes of climate change but they agree on a solution. Conservatives are more likely to believe climate change is a natural phenomenon, with 54% believing increases in Earth’s temperature are either mostly or entirely due to natural causes. Meanwhile, 62% of libertarians think climate change comes partially, mostly, or entirely from human activity. Despite these different underlying beliefs, 99% of conservative and libertarian attendees agree that technological innovation in the free market will better solve climate change than government regulation.

Criminal Justice

Majorities of conservatives and libertarians reach consensus on several criminal justice issues. Both agree that police departments using military weapons and drones are not necessary for law enforcement purposes. But libertarians (92%) agree more than conservatives (61%). Both groups also favor eliminating mandatory minimum prison sentences for people convicted of selling drugs (64% conservative, 84% libertarian).

However, conservative and libertarian attendees diverge on the death penalty: a majority (56%) of conservatives favor it while a majority (75%) of libertarians oppose it.  Respondents also diverge in their perception of racial equality before the law, with 54% of conservatives saying that African Americans and other minorities “receive equal treatment with whites” in the criminal justice system and 73% of libertarians believing that minorities do not receive equal treatment.

Free Markets and the Welfare State

Despite the variety of policy differences between libertarian and conservative attendees outlined above, the two groups largely agree about economic issues, the benefits of free markets, and trade.

For instance, 100% of both groups say they favor a smaller government providing fewer services and low taxes. Nearly 100% of both oppose raising taxes on wealthy households and also agree that regulation too often does more harm than good. Eight in 10 conservatives and nearly 100% of libertarians believe free trade must be allowed even if domestic industries are hurt by foreign competition.

Religion

Conservative and libertarian millennials have different ideas about the role of religion in society. An overwhelming majority (83%) of libertarian attendees say religious values should not play a more important role in government. But, 62% of conservative attendees disagree and think such values should play a more important role. Conservatives also believe that it’s important for kids to be brought up with religious values. Libertarians are divided, but tend to disagree (56%).

Much of this contrast may stem from differences in religious affiliation and habits.  While 95% of conservative respondents have a religious preference, 38% of libertarians describe themselves as “non-religious.” Moreover, conservative millennial attendees are twice as likely as libertarians to attend church weekly or monthly (80% vs 41%).  A majority (58%) of libertarian respondents either never or rarely attend a religious service.

Who Won the Intern Debate?

Who won the intern debate depends on whom you ask. Among conservative millennial attendees: 53% said the conservative team won and 44% said the libertarian team won. Among libertarian millennial attendees, 94% said the libertarians won while 5% said the conservatives won. Among the moderates, liberals and progressives in the audience, 83% felt the libertarian team won and 12% thought the conservatives won.

Implications

This survey provides a useful snapshot of young politically engaged conservatives and libertarians who are interested enough in politics and public policy to intern in Washington or attend an event for Washington interns. Thus, this data offers an idea of the direction young activists may take public policy as they age and the cleavages that may animate policy debates into the future. 

Full LvCDebate Attendee Survey results found here

David Kemp contributed to this report.

Rumors are swirling that mortgage interest deduction reform is “on the table” for the White House and House Republicans. Is that a good thing or a bad thing? In order to answer that question it is first necessary to determine whether the deduction works as intended.

In our forthcoming chapter on international homeownership in The Routledge Handbook of Housing Policy and Planning, Mark Calabria and I discuss the deduction’s impact on homeownership rates. For years, the mortgage interest deduction has been justified under the pretense that it supports homeownership.

Spoiler alert: empirical evidence suggests it does not. Most studies find the mortgage interest deduction has no impact on homeownership rates, and at least one study finds that eliminating the deduction would boost homeownership.

People generally find this counterintuitive. Why wouldn’t a subsidy for homeowners increase the amount of homes owned? A simple way of thinking about it is that some people are like Person A: they are both financially qualified and want to buy a home. People like Person A will buy a home with or without the subsidy.

On the other hand, some people are like Person B: they are not financially qualified to buy a home or do not desire homeownership. The mortgage interest deduction does not address the reasons Person B is financially unqualified (income instability, weak credit, or poor savings) or the reasons that Person B doesn’t desire homeownership (maintenance, debt, reduced geographic mobility).

A more economically sophisticated way of understanding the mortgage interest deduction is that it reduces the cost of housing for existing homeowners, but increases the price of homeownership for non-homeowners. In other words, any positive impacts on homeownership rates are canceled out by the negative impacts.

So what does the deduction do, if it doesn’t boost homeownership? Research indicates the deduction encourages people to buy larger or more expensive homes. In other words, it motivates homeowners to over-consume housing. Studies indicate that mortgage subsidies distort the allocation of saving and investment across OECD countries and redistribute income “from new entrants in the housing market to insiders.”

What does the path forward look like? House Republicans have a proposal for reform; Paul Ryan’s A Better Way plan suggests doubling the standard deduction and reducing use of the mortgage interest deduction, though not eliminating it. Theoretically, under his plan taxpayers will have more money in their pockets they can use that to pay mortgage interest or something else. 

There are also other possibilities for reform, like capping, limiting, and phasing the benefit out. Great Britain did so over a twenty year period (1974-1994), and far from a housing market catastrophe, Great Britain’s homeownership rates rose during this time period. Although the rise in homeownership was partly attributable to the privatization of public housing stock in the 1980s, it’s still notable that market turmoil was avoided.

Whatever shape reform ultimately takes, Republicans are smart to flag the opportunity. Since the mortgage interest deduction disproportionately benefits high-income blue states while also redistributing to the wealthy, the politics of reform could unite some unlikely rivals. That might be just what tax reform needs.

I’ve begun working on a new book on the gold standard. In the first chapter I plan to discuss the origin of money, as a preliminary to discussing how silver and gold became the world’s dominant commodity monies.

The topic of the origin of money has become controversial in recent years. The dominant view among economists (for good reason), suggested by Adam Smith in the eighteenth century and fleshed out by Carl Menger in the nineteenth, is that money is a market-born institution. Convergence on one or two commodities as the common media of payment emerged from the actions of barterers seeking more effective trading strategies, without anyone aiming at the final result. But this view has lately been challenged by a resurgence of the “state theory of money,” also known as Cartalism, which argues that governments played an essential role in the establishment of money.

Money’s Origins: A Cartalist View

Cartalists have made the valid point that extensive specialization in production could not have preceded the development of commonly accepted media of exchange; rather, greater specialization and wider acceptance of media of exchange must have developed together. But this is a useful expositional caveat rather than a refutation of the Mengerian theory. While a lecturer spelling out the Mengerian theory (and I have done this myself) may ask the listener to imagine a highly specialized producer (say, an asparagus farmer) entering a moneyless market and meeting frustration in attempts to trade directly (say, for a plaid shirt) in order to dramatize the difficulty of direct barter, this should not be taken to suggest that, as a historical matter, societies developed extensive specialization and trade before the emergence of money. Indeed, because it starts from the premise that finding a well-matched trading partner (who “has what you want and wants what you have”) is very difficult, Menger’s theory implies the opposite. As Adam Smith himself emphasized, the division of labor is limited by the extent of the market, and the extent of the market is limited by the ease of trade.

The classic source of the Cartalist view is The State Theory of Money (1924) by the German economist George Friedrich Knapp. Knapp’s rejection of a market evolutionary account, it appears on close inspection, is more a matter of wordplay than of substance. Rather than regarding “money” in the conventional way as any medium of exchange commonly accepted in the market, and so viewing the explanatory challenge as how to account for a particular commodity coming to play that role, Knapp focuses his attention on what he calls public money. The test of a public money, in his words, is that “the money is accepted in payments made to the State’s offices,” namely in tax collections. Knapp (1924, p. 95) declares: “State acceptation delimits the monetary system.”

A market process cannot endow a payment medium with state acceptance; only the sovereign state can do that. Mengerians would reply: True enough, but this does nothing to contradict Menger’s logical evolutionary account of how a commonly accepted means of payment arises without state action.

The anti-Mengerians, in the words of sympathetic economist Charles Goodhart, “are those who argue that the use of currency was based essentially on the power of the issuing authority (Cartalists) — i.e., that currency becomes money primarily because the coins or monetary instruments more widely are struck with the insignia of sovereignty.” The claim that state power or sovereignty is essential or primary for any currency to become a commonly accepted medium of exchange, however, is plainly at odds with the historical fact that privately issued banknotes without sovereign backing were the dominant media of exchange in the eighteenth and nineteenth centuries where they were allowed. And with the fact that privately minted silver and gold coins were widely accepted when and where they were allowed (which was much rarer), as in gold-rush California.

While Knapp (1924, p. 134) recognized the fact of the widespread use of private banknotes, he simply classified them — by definition — as outside the system of public money. A note-issuing private bank and its customers “form, so to speak, a private pay community; the public pay community is the State.”

Why Did Precious Metals Become the Dominant Commodity Monies?

Turning from the question of origins to the question of why silver and gold became the most popular commodity monies, out of a large set of contenders that included salt, cowrie shells, and oxen, one naturally wonders what the Cartalists have to say on the second question. The answer turns out to be: nothing helpful.

Menger’s approach lends itself to a decentralized account of why silver and gold emerged as the most commonly accepted, pushing other candidates to the margins. Put yourself in the position of a trader in a market where there are a variety of commodity exchange media (the market has not yet converged). You sell your produce for a physical payment medium which you then carry around with you until you spend it away in purchases. In this situation it pays you not only to consider which media are most popular with other traders, but also which media involve the least cost or hassle in acquiring, carrying to the next transaction, and trading away.

As textbooks during the nineteenth century emphasized, the precious metals have a number of properties that make them superior media of exchange in such a setting. Compared to other commodities, silver and gold score high on (1) portability or preciousness, allowing you to carry around high purchasing power with little bulk; (2) durability, not spoiling between the date of acquisition and a later date of spending; (3) divisible and fusible, like any metal, allowing pieces to be made in a range of sizes to suit a range of transactions, and allowing small change to be given; (4) stable in value across the seasons, unlike foodstuffs that are cheap right after the harvest but dear six months later. These properties enhance their widespread acceptance.

An important technical advance came with the introduction and spread of coinage in Turkey and Greece during the 7th to 5th centuries BCE. Unlike raw nuggets straight from the mine or variously refined precious-metal bars, coined pieces of silver and gold gained a major additional advantage: they became (5) uniform in size and quality, so that traders need not incur the cost of testing (or the risk of not testing) each piece for its weight and its fineness (percentage of pure silver or gold content). Early coining entrepreneurs could have profited, as later mint masters in California did, by charging for the service of converting raw silver or gold into easier-to-spend uniform coins. With the spread of coinage to India, the Middle East, and Europe, merchants found silver and gold payments easier to make and to accept. The use of bulky commodity monies like shells and salt dwindled. Market convergence on the precious metals in coined form reflected a “survival of the fittest,” namely of the most convenient media for hand-to-hand exchange.

The Cartalist approach, by contrast, doesn’t provide a distinct theory as to how silver and gold came to dominate other commodity monies. In the Cartalist view the sovereigns of various lands must have chosen to preferentially accept silver and gold, of course, but why? It seems reasonable to suppose that sovereigns made the choice because they, like other transactors, were aware that coined pieces of silver and gold score high on the five useful properties listed above. If so, then sovereigns did not alter but merely reinforced the market process already underway.

Leading Cartalists have made other suggestions, however. Anthropologist David Graeber, author of Debt: The First 5000 Years, states in an interview that:

… coinage seems to be invented or at least widely popularized to pay soldiers — more or less simultaneously in China, India, and the Mediterranean, where governments find the easiest way to provision the troops is to issue them standard-issue bits of gold or silver and then demand everyone else in the kingdom give them one of those coins back again.

The economist L. Randall Wray (2000, p. 46) likewise states: “Coins appear to have originated as government ‘pay tokens’ (in Knapp’s colourful phrase), as nothing more than evidence of debt.” Silver and gold coins, in other words, should be understood as state-issued tax-anticipation tokens, their value resting on a state-imposed obligation to pay them back.

This account fails to explain, however, why governments chose bits of gold or silver as the material for these tokens, rather than something cheaper, say bits of iron or copper or paper impressed with sovereign emblems. In the market-evolutionary account, preciousness is advantageous in a medium of exchange by lowering the costs of transporting any given value. In a Cartalist pay-token account, preciousness is disadvantageous — it raises the costs of the fiscal operation — and therefore baffling. Issuing tokens made of something cheaper would accomplish the same end at lower cost to the sovereign. (By the way, note also Graeber’s equivocation “invented or.” Proposing that governments enlarged the acceptance of coins, after the market economy had already begun using them, is categorically different from proposing that governments invented coinage. Menger himself had no problem with the former proposition, but he rejected the latter as an unfounded prejudice.)

Wray offers in passing (p. 46) the conjecture that kings likely minted coins “in the form of precious metal to reduce counterfeiting.” But a sovereign imprint on silver or gold coins is not in any obvious way harder to counterfeit than the same imprint on iron or copper coins. So the bafflement remains.

The notion that full-weight silver and gold coins are mere tokens, deriving their value from the future tax liabilities they discharge, is in clear conflict with the historical experience that large-value silver and gold coins issued by (say) the Spanish national mint circulated well outside the set of Spanish taxpayers. (Small-value silver coins, which sovereigns debased and did treat as overvalued tokens, were another and more Cartalist story.) Large-value coins were used as media of exchange among participants in an international trade network that operated beyond any one nation’s boundaries. They were valued by holders who had no tax obligations to the state of the issuing mint. In the international market, coins issued by various national mints were valued against one another in proportion to their precious metal content, not in proportion to the nominal values at which national tax offices accepted them, where the two values differed. These facts indicate a market source of the moneyness of large-value silver and gold coins, not a tax-acceptance source.

Wray denies that coins were valued according to their precious metal content, as it conflicts with his maintained view that even full-weight precious metal coins were merely tokens. He even denies (p. 47), rather surprisingly, that kings debased their coins, i.e. reduced their precious metallic content below the standard, since “it would make no sense” when they are mere tax-discharging tokens to begin with. The histories of state-issued Roman and medieval silver coins, however, shows repeated debasements.

Once sovereigns monopolized the mints they took advantage of the propaganda value of stamping their own faces on the coins, of course. But as far as we know coins were already in use among merchants before that happened. Very early coins from ancient Lydia, in what is now Turkey, were not inscribed with human faces but rather animal figures. The Ancient History Encyclopedia states: “It appears that many early Lydian coins were minted by merchants as tokens to be used in trade transactions. The Lydian state also minted coins.” Regarding Lydian coins inscribed with the names Walwel and Kalil, the British Museum comments: “It is unclear whether these are names of kings or just rich men who produced the earliest coins.” Regarding a nearly contemporary ancient Greek coin bearing the legend “I am the badge of Phanes,” the Museum comments: “We cannot be certain who this Phanes was, but it seems that he was placing his badge on coins as a guarantee of their quality.”

It is possible, of course, that in surveying the literature I have overlooked a more plausible Cartalist account of why sovereigns chose very expensive materials, silver and gold, for their tax-anticipation tokens. If anyone can point me to such an account, I would be grateful.

[Cross-posted from Alt-M.org]

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