Feed aggregator

Regardless of whether wall construction is funded through a discriminatory tariff on imports from Mexico or the border adjustment taxes envisaged in the GOP tax proposal, U.S. consumers and taxpayers will be flipping the bill.  The very idea of building the wall in the first place is a disgrace, but demonizing our neighbors and hatching plans that could subvert the Mexican economy and put another Venezuela on our southern border, is belligerent and potentially disastrous.   Hitting all Mexican imports with a 20% tariff is, unfortunately, something the president could do.  Under the Constitution, Congress is authorized to regulate foreign commerce, which includes imposing tariffs.  But over the years, Congress has delegated some of that authority to the president through various statutes. All of those statutes require that some condition be met (findings of a surge in imports; subsidized imports; unfair foreign practices that hurt U.S. companies; national security crises; public health or safety threats, etc.) before restrictions can be imposed. Sometimes the restrictions are limited in magnitude and duration, sometimes not.  Sometimes the actions are subject to judicial review, sometimes not.   By and large, these statutes were passed in conjunction with legislation to implement trade agreements, lower tariffs, or otherwise liberalize trade.  They were crafted as safeguards to assuage those concerned that the country’s seemingly inexorable march toward free trade would bring rapid change, which would carry massive adjustment costs and other maladies and threats that the government would be incapable of addressing. The expectation was that the president would use this conditional power sparingly and in the service of greater openness and liberalization. In other words, unlike the Founding Fathers, U.S. Congresses during the 20th century failed to imagine adequately the likes of a Donald Trump as president.    There are a few statutes under which Trump could impose a 20% tariff on all Mexican imports and likely be within the letter of the law.  The most probable statute is Section 232(b) of the Trade Expansion Act of 1962, which permits the president to impose duties in the event of a “national emergency.”  This statute was invoked once before, by Nixon, in 1971 in response to a balance of payments crisis, involving Japan.  Nixon imposed a 10% surcharge on Japanese imports under this law.  Trump might claim that the loss of manufacturing jobs or the influx of illegal immigrants from Mexico is a national security crisis that justifies his invocation of this law, and imposition of the tariff.  Whether the action would pass muster in a NAFTA panel or at the WTO is another matter.  There has never been such a case – duties imposed to redress a national security crisis – brought to dispute settlement.   One thing is all but certain.  If Trump acts in this manner, the Mexicans will most certainly retaliate.  How all the king’s men don’t see the danger in this tack is what scares me the most.  

A New York Times report that Donald Trump continues to carry his ancient and insecure Android phone—despite having received a new Secret Service-approved secure device on Inauguration Day—has prompted a flurry of reports on the cybersecurity “risks” this entails.  But “risk”—the connotations of which are both future-oriented and hypothetical—seems like the wrong word here.  We should be asking how many foreign intelligence services have had access to the phone, for how long, and what sensitive information they’ve already gleaned from it.

Because let’s be clear: An American president’s personal smartphone may be a holy grail for foreign spies, but a phone belonging to a president-elect, or even a credible candidate, would be an extremely juicy target too.  It’s almost inconceivable it would not have been attacked already.  And given the laughable level of security provided by a phone that last saw an update in 2015, any serious effort to compromise it by a state-level adversary would likely have succeeded. The safe assumption that NSA’s overseas counterparts have a similar array of “implant” tools would mean that Trump’s movements could have been tracked, any credentials stored on the phone exfiltrated, and any conversation held in the same room as the phone, recorded.  

If the White House has been following the most basic protocols, we can at least expect Trump’s Android hasn’t been allowed into the Secure Compartmentalized Information Facilities where classified briefings are held, but even so, that’s a rich trove of intelligence on Trump’s strategic intentions and mindset, and may well include sensitive personal information that could be used for leverage.  So, by all means, he ought to ditch the phone immediately—but instead of tossing it in the trash, he ought to hand it off to NSA’s technical division for a thorough look, assuming they haven’t already had one.  It will be too late to undo the damage, but perhaps not too late to mitigate the consequences if the Intelligence Community can start piecing together what the adversaries would have obtained and how they’re likely to use it. 

President Trump is expected to sign an executive order shortly to temporarily ban all visas for people from Iran, Iraq, Syria, Libya, Yemen, Sudan, and Somalia among other actions.  An advanced copy of this order was available earlier this week.  The first sentence of his order states that it is to “protect the American people from terrorist attacks by foreign nationals admitted to the United States.”  However, the countries that Trump chose to temporarily ban are not serious terrorism risks. 

I compiled a list of foreign-born people who committed or were convicted of attempting to commit a terrorist attack on U.S. soil from 1975 through 2015.  Below is a table with the distribution of their countries of origin (Figure 1).  The first seven countries are those to be initially and, hopefully, temporarily denied visas.  During the time period analyzed here, 17 foreign-born folks from those nations were convicted of carrying out or attempting to carry out a terrorist attack on U.S. soil and they killed zero people.  Zero Libyans or Syrians intended to carry out an attack on U.S. soil during this time. 

Figure 1

Foreign-Born Terrorist Country of Origin, 1975-2015

Country

Terrorists

Murders

Terrorists (percent)

Murders (percent)

Iran

6

0

3.9%

0.0%

Iraq

2

0

1.3%

0.0%

Libya

0

0

0.0%

0.0%

Somalia

2

0

1.3%

0.0%

Sudan

6

0

3.9%

0.0%

Syria

0

0

0.0%

0.0%

Yemen

1

0

0.6%

0.0%

Afghanistan

3

0

1.9%

0.0%

Algeria

4

0

2.6%

0.0%

Armenia

6

1

3.9%

0.0%

Australia

1

0

0.6%

0.0%

Bangladesh

2

0

1.3%

0.0%

Bosnia

1

0

0.6%

0.0%

Croatia

9

1

5.8%

0.0%

Cuba

11

3

7.1%

0.1%

Dominican Republic

1

0

0.6%

0.0%

Egypt

11

162

7.1%

5.4%

Ethiopia

1

0

0.6%

0.0%

France

1

0

0.6%

0.0%

Ghana

1

0

0.6%

0.0%

Guyana

2

0

1.3%

0.0%

Haiti

3

0

1.9%

0.0%

India

2

0

1.3%

0.0%

Japan

1

0

0.6%

0.0%

Jordan

4

0

2.6%

0.0%

Kazakhstan

1

0

0.6%

0.0%

Kosovo

2

0

1.3%

0.0%

Kuwait

2

6

1.3%

0.2%

Kyrgyzstan

2

3

1.3%

0.1%

Lebanon

4

159

2.6%

5.2%

Macedonia

3

0

1.9%

0.0%

Mexico

1

0

0.6%

0.0%

Morocco

3

0

1.9%

0.0%

Nigeria

1

0

0.6%

0.0%

Pakistan

14

3

9.1%

0.1%

Palestine

5

2

3.2%

0.1%

Saudi Arabia

19

2,369

12.3%

78.3%

Serbia

2

0

1.3%

0.0%

South Korea

1

0

0.6%

0.0%

Taiwan

1

1

0.6%

0.0%

Trinidad and Tobago

2

1

1.3%

0.0%

Turkey

1

0

0.6%

0.0%

United Arab Emirates

2

314

1.3%

10.4%

United Kingdom

3

0

1.9%

0.0%

Uzbekistan

3

0

1.9%

0.0%

Vietnam

1

0

0.6%

0.0%

Total

154

3,024

100.0%

100.0%

Sources: John Mueller, ed., Terrorism Since 9/11: The American Cases; RAND Database of Worldwide Terrorism Incidents; National Consortium for the Study of Terrorism and Responses to Terrorism Global Terrorism Database; Center on National Security; Charles Kurzman, “Spreadsheet of Muslim-American Terrorism Cases from 9/11 through the End of 2015,” University of North Carolina–Chapel Hill; Department of Justice; Federal Bureau of Investigation; New America Foundation; Mother Jones; Senator Jeff Sessions; Various news sources; Court documents.

Attempting or committing a terrorist attack on U.S. soil is not the only terrorist offense.  Materially supporting foreign terrorist organizations, seeking to join a foreign terrorist group overseas, plotting or carrying out terrorist attacks in other countries, and others are also terrorism offenses.  I excluded foreign-born people convicted of those offenses because Trump is concerned with “making America safe again,” not with making other countries safe or with a global war on terrorism.  A terrorist attack in another country doesn’t kill Americans inside of the United States and these threats are not what concern American voters nearly as much as terrorism on U.S. soil.  You can call this an America First weighting of terrorism offenses.

Trump’s executive order cites the “[h]undreds of foreign-born individuals [who] have been convicted or implicated in terrorism-related crimes” as another reason for a visa ban for these countries.  He likely got the “hundreds of foreign-born individuals” from a news release and list put out by Senator Jeff Sessions (R-AL) that purportedly shows all 580 “terrorism-related” convictions since 9/11 with at least 380 of them as immigrants. 

It is disturbing that Sessions’ flawed list of terrorism convictions is the basis for much of this executive order.  There are at least two major problems with the list.  First, you might get the impression that all of those convictions were for terrorist attacks planned on U.S.-soil but only 40, or 6.8 percent, were.  Second, 241 of the 580 convictions, or 42 percent, were not even for terrorism offenses.  Many of the investigations started based on a terrorism tip like, for instance, the suspect wanting to buy a rocket-propelled grenade launcher.  However, the tip turned out to be groundless and the legal saga ended with only a mundane conviction of receiving stolen cereal.  According to Sessions’ list, that cereal thief is a terrorist.   

In the little over 13 years covered in the Sessions’ list, there were about three convictions per year for planning or committing an attack on U.S. soil.  For every one of them, there were six non-terrorism convictions counted as terrorism and 4.5 convictions for supporting, joining, or planning a terrorist attack overseas.  In short, the list provided by Senator Jeff Sessions does not show a daunting terrorist threat to American lives in the homeland. 

Trump’s executive order goes on to argue that “[d]eteriorating conditions in certain countries due to war, strife, disaster, and civil unrest increase the likelihood that terrorists will use any means possible to enter our country.”  Presumably, the goal is to reduce American deaths from terrorism on U.S. soil so the deadliness of terrorist attacks matters more than the number of terrorists.  For instance, 114 of the 154 foreign-born terrorists from 1975 to the end of 2015 didn’t kill anybody.  The three countries where the deadliest terrorists came to the United States from were Saudi Arabia, the United Arab Emirates, and Egypt.  Together they all accounted for 94.1 percent of all American deaths in terrorist attacks on U.S. soil committed by the foreign-born.  Saudi Arabia and the United Arab Emirates are not beset by any of the supposedly-terrorism increasing problems that are described in this order.  Egyptians account for 5.4 percent of all terrorist victims but their attacks occurred between 1993 and 2002 when Egypt was a more stable country than it is today.  The only exception to this might be Lebanon which accounts for 5.2 percent of all terrorist victims but nearly all of those were committed by Ziad Jarrah on 9/11 – a single data point.  Meanwhile, foreign-born people from Syria, Libya, Iraq, Sudan, Somalia, Iran, and Yemen have not successfully killed anybody in a U.S. terrorist attack. 

Trump’s executive order goes on to say that the United States “cannot, and should not, admit into our country those who do not support the U.S. Constitution.”  Virtually nobody in the world, including most Americans, supports the U.S. Constitution and it seems peculiar to block tourists who want to visit Disneyland from entering because they “do not support the U.S. Constitution.”  My guesses are that whoever wrote this executive order is either confused about the difference between immigrants and non-immigrants, it is just sloppily drafted, or this is an earlier draft.  Temporary visitors should not have to swear allegiance or express support for the Constitution any more than an American should have to swear allegiance to or express my support for monarchy when visiting the United Kingdom.  In terms of support for the Constitution, all that matters is that immigrants who naturalize take an oath to do so – as they are currently required to under U.S. law. 

The order also directs the government to find a way to identify immigrants “with the intent to cause harm, or who are at risk of causing harm subsequent to their admission.”  Blocking immigrants who intend to commit crimes or terrorist attacks is a wonderful idea – so wonderful that the government already does it.  However, the line that seeks to identify those who “are at risk of causing harm subsequent to their admission” is hopelessly vague.  There is a risk greater than zero that virtually anybody is a risk subsequent to their admission so this type of broad, ill-defined dictate could theoretically screen out everybody.  More likely, it will just be used to capriciously target individuals for political or personal reasons. 

A later line in the executive order provides some context for the “risk of causing harm subsequent to their admission” line.  It orders DHS to regularly publish “information regarding the number of foreign-born individuals in the Untied States who have been radicalized after entry into the United States and engaged in terrorism-related acts, or who have provided material support to terrorism-related organizations in countries that pose a threat to the United States.”  Presumably, DHS will use that information to build a detailed risk profile of immigrants to exclude those who could become radicalized.  One worrying term is “terrorism-related organizations.”  I couldn’t find any mentions or definition of a “terrorism-related organization” in U.S. law.  There are no mentions of “terrorism-related convictions” either.  If “terrorism-related organizations” is defined as broadly as “terrorism-related convictions” has been in Jeff Sessions’ terrorist list then many non-terrorist organizations will be included for flimsy reasons.  This is like the no-fly list but with far graver consequences.  

The order also says there should be a “process to evaluate the applicant’s likelihood of becoming a positive contributing member of society, and the applicant’s ability to make contributions to the national interest.”  The immigration law already does the former by excluding criminals, national security threats, and numerous other categories of excludable people while the broad immigrant and non-immigrant work visas supposedly identify which foreigners are most valuable.  At best this line in the executive order is redundant and at worst it signals the government’s intent to be even more involved in planning the labor market by selecting winners and losers through the immigration system.      

The seven countries temporarily banned under this executive order represent a small percent of all green cards and entries into the United States (the latter estimated by I-94s per country).  In 2015, the government issued 52,365 green cards to immigrants born in those seven countries which amount to just 4.98 percent of all green cards issued that year and 29.4 percent of all green cards issued to nationals from Muslim countries (Table 2).  In the same year, there were 86,236 non-immigrant entries from those countries which accounted for 0.11 percent of all entries although they comprised 4.5 percent of all entries for Islamic countries (Table 2). 

The economic cost of a temporary ban, or even a permanent one, is small because so few green cards and nonimmigrant visas are issued to folks from those seven countries.  However, the danger of terrorism on U.S. soil committed by citizens of those countries has also been very low historically with only 17 convictions from 1975 through 2015 and zero Americans killed in domestic attacks.  Future terrorists could come from different countries than terrorists did in the past but, based on current evidence, this ban is still a net loss because it will likely stop few terrorists, prevent zero deaths, and slightly reduce immigration and tourism.  All minor economic pain, no gain. 

Table 2

Number of Green Cards and Entries per Country, 2015

 

Green Cards

Entries (I-94)

Iran

13,114

35,266

Iraq

21,107

21,381

Libya

734

2,879

Somalia

6,796

359

Sudan

3,580

4,792

Syria

3,840

16,010

Yemen

3,194

5,549

All Countries

1,051,031

76,638,236

Islamic Countries (OIC)

178,015

1,896,383

 Source: Department of Homeland Security

If President Trump was committed to banning immigrants from certain countries in order to reduce the already small risk of terrorism on U.S. soil committed by the foreign-born then he would not just ban nationals from these seven countries.  For this reason, I expect his administration to expand the list of countries banned in the near future.  Section 3, subsections c, d, e, and f clarify that the president can extend these bans to other countries or make them permanent.  This is a warning about additional bans on migrants and immigrants to come as well as the process by which those bans will be enacted.        

Based on new 10-year fiscal estimates from the Congressional Budget Office, I wrote yesterday that balancing the budget actually is very simple with a modest bit of spending restraint.

If lawmakers simply limit annual spending increases to 1 percent annually, the budget is balanced by 2022. If spending is allowed to grow by 2 percent annually, the budget is balanced by 2025. And if the goal is balancing the budget by the end of the 10-year window, that simply requires that spending grow no more than 2.63 percent annually.

I also pointed out that this wouldn’t require unprecedented fiscal discipline. After all, we had a de facto spending freeze (zero percent spending growth) from 2009-2014.

And in another previous column, I shared many other examples of nations that achieved excellent fiscal results with multi-year periods of spending restraint (as defined by outlays growing by an average of less than 2 percent).

Today, we’re going to add tax cuts to our fiscal equation.

Some people seem to think it’s impossible to balance the budget if lawmakers are also reducing the amount of tax revenue that goes to Washington each year.

And they think big tax cuts, such as the Trump plan (which would reduce revenues over 10 years by $2.6 trillion-$3.9 trillion according to the Tax Foundation), are absurd and preposterous.

After all, if politicians tried to simultaneously enact a big tax cut and balance the budget, it would require deep and harsh spending cuts that would decimate the federal budget, right?

Nope. Not at all.

They just need to comply with my Golden Rule.

 

 

Let’s examine the fiscal implications of a $3 trillion tax cut. If you look at CBO’s baseline revenue forecast for the next 10 years, the federal government is projected to collect more than $43 trillion during that decade. If you reduce that baseline by an average of $300 billion each year, receipts will still grow. Indeed, they’ll rise from $3.4 trillion this year to $4.8 trillion in 2027.

And since CBO is forecasting that the federal government this year will spend more than $3.9 trillion, we simply have to figure out the amount of spending restraint necessary so that outlays in 2027 don’t exceed $4.8 trillion.

That’s not a difficult calculation. It turns out that the American people can get a substantial $3 trillion tax and a balanced budget if politicians simply exercise a modest amount of fiscal discipline and limit annual spending increases to 1.96 percent annually.

In other words, if the crowd in Washington does nothing more than simply have government grow just a tiny bit less than the projected rate of inflation, lots of good things can be achieved.

P.S. I can’t resist pointing out yet again that we shouldn’t fixate on balancing the budget. The real goal should be to shrink the burden of federal spending so more resources are allocated by the productive sector of the economy. That being said, if lawmakers address the underlying disease of excessive spending, that automatically solves the symptom of red ink.

P.P.S. Higher taxes, by contrast, generally lead to higher deficits and debt.

The Christian Science Monitor thinks that the Democrats wrote their infrastructure plan as a “political bridge to President Trump.” Fox News thinks that Trump might “get on board” the Democrats’ plan. Statements like these show that many reporters–and by extension members of the public–haven’t yet figured out the real issues behind the infrastructure debate.

As Business Insider points out, there’s a bigger difference between the two sides over “how it’s paid for” than “what gets built.” The Democrats want the federal government to spend a trillion dollars, money it would have to borrow. Trump wants private investors to spend their own money. Never the twain shall meet. 

But Business Insider doesn’t understand how Trump’s idea will work. If Trump is going to rely on the private sector, it says, then only projects that generate revenue will be built because “projects that don’t generate revenue for the private sector generally don’t get financed.” But there are two kinds of public-private partnerships. The kind that Business Insider is writing about is called demand risk because the private partner takes the risk that tolls, fares, or other user fees won’t repay the cost.

The second kind is called availability payments because the government agrees to pay the private partner the cost of the project over time, whether or not anyone pays user fees or even uses it at all. In this kind, the public takes the risk. While I much prefer the demand-risk form because I think nearly all infrastructure ought to be paid for out of user fees, Trump may be happy to go with availability payments so long as state or local governments are making the payments, not the feds. Democrats in Congress don’t like either one because they short-circuit their ability to appear to give gifts to their constituents.

The third issue that many people don’t understand is the difference between Trump and the Democrats over jobs. The Democrats’ plan estimates that number of jobs that will be created by spending money on construction and maintenance. They used a simple formula: each billion dollars of spending generates 13,000 jobs (about $76,000 per job). Of course, they really mean job-years, and that formula works as well for digging holes and filling them up as for building roads or water lines.

Trump is less concerned about the immediate jobs than whether projects generate long-term benefits for the economy. Digging a hole and filling it up creates short-term jobs, but if there are no jobs after the project is done, it wasn’t worth it. A transportation improvement that generates new travel will generate jobs in the long term. A transportation project that merely substitutes one form of travel for another will generate few, if any, long-term jobs.

So there are three irreconcilable differences between Trump and the Democrats: where the money comes from in the short run (public vs. private); how it is financed in the long run (feds vs. state & local); and what kind of jobs they should shoot for (short-term vs. long-term). In short, while both sides talk about “trillion-dollar plans,” they mean very different things.

One of President Trump’s executive orders will reestablish Secure Communities (SCOMM), which was the most effective interior immigration enforcement program in decades. It was started during the Bush administration and rapidly expanded under Obama, eventually covering virtually all counties in the United States. It worked by checking the fingerprints of local and state arrestees against federal immigration and criminal databases. If Immigration and Customs Enforcement (ICE) suspected the arrestee of being an illegal immigrant they would issue a detainer to hold the arrestee until ICE could pick them up. The Obama administration ended SCOMM in 2014 and replaced it with the similar Priority Enforcement Program.

SCOMM was certainly effective at apprehending and deporting illegal immigrants but it did not make communities more secure from actual criminals. SCOMM was not rolled out nationwide all at once, but rather incrementally (by county) over a four year period of time, in a way unrelated to local crime rates. Social scientists were able to exploit this quirk of SCOMM’s implementation to see if it had an effect on local crime rates, which it would if illegal immigrants were more or less likely to commit violent or property crimes. To make communities more secure, SCOMM would have to have lowered local crime rates.

In a paper published in the prestigious Journal of Law and Economics, Thomas J. Miles and Adam B. Cox found that SCOMM had no effect on local crime rates. Elina Treyger, Aaron Chalfin, and Charles Loeffler similarly found that SCOMM had no effect on local crime rates. Their findings suggest several things. One, SCOMM did not make communities more secure from crime. Two, illegal immigrants are less crime-prone than many people think and probably have about the same level of criminality as natives. Three, a community’s cooperation with the federal government in enforcing immigration law doesn’t seem to raise crime rates (some people suggest that such cooperation makes policing less effective).

Secure Communities is an immigration enforcement strategy that was very effective at identifying and removing illegal immigrants. Many states, like California, will not cooperate with the federal government in this reiteration of SCOMM, so it will likely be less effective than before. However, SCOMM supporters cannot claim that the program makes communities more secure by reducing the amount of violent or property crime.

Tomorrow, President Trump is expected to sign an executive order enacting a 30-day suspension of all visas for nationals from Iraq, Iran, Libya, Somalia, Sudan, Syria, and Yemen.  Foreigners from those seven nations have killed zero Americans in terrorist attacks on U.S. soil between 1975 and the end of 2015.  Six Iranians, six Sudanese, two Somalis, two Iraqis, and one Yemini have been convicted of attempting or carrying out terrorist attacks on U.S. soil. Zero Libyans or Syrians have been convicted of planning a terrorist attack on U.S. soil during that time period.

Many other foreigners have been convicted of terrorism-related offenses that did not include planning a terrorist attack on U.S. soil.  One list released by Senator Jeff Sessions (R-AL) details 580 terror-related convictions since 9/11. This incomplete list probably influenced which countries are temporarily banned, and likely provided justification for another section of Trump’s executive order, which directs the Department of Homeland Security (DHS) to release all information on foreign-born terrorists going forward, and requires additional DHS reports to study foreign-born terrorism.

I exhaustively evaluated Senator Sessions’ list of convictions based on publicly available data and discovered some startling details.

First, 241 of the convictions (42 percent) were not for terrorism offenses.  Senator Sessions puffed his numbers by including “terrorism-related convictions,” a nebulous category that includes investigations that begin due to a terrorism tip but then end in non-terrorism convictions.  My favorite examples of this are the convictions of Nasser Abuali, Hussein Abuali, and Rabi Ahmed.  An informant told the FBI that the trio tried to purchase a rocket-propelled grenade launcher, but the FBI found no evidence supporting the accusation.  The three individuals were instead convicted of receiving two truckloads of stolen cereal.  That is a crime but it is not terrorism. 

Second, only 40 of the 580 convictions (6.9 percent) were for foreigners planning a terrorist attack on U.S. soil.  Seeking to join a foreign terrorist group overseas, material support for a foreign terrorist, and seeking to commit an act of terror on foreign soil account for 179 of the 580 convictions (31 percent).  Terrorism on foreign soil is a crime, should be a crime, and those convicted of these offenses should be punished severely but the government cannot claim that these convictions made America safe again because these folks were not targeting U.S. soil.

Third, 92 of the 580 convictions (16 percent) were for U.S. born citizens.  No change in immigration law, visa limitations, or more rigorous security checks would have stopped them. 

The executive order includes national security exemptions to be made on a case-by-case basis.  The President reserves the option to ban the entry of nationals from additional countries in the future based on a national security risk report written by DHS.  Furthermore, the Secretaries of State and Homeland Security can recommend visa bans for nationals from additional countries at any time.

In addition to the visa restrictions above, Trump’s executive order further cuts the refugee program to 50,000 annually, indefinitely blocks all refugees from Syria, and suspends all refugee admissions for 120 days.  This is a response to a phantom menace.  From 1975 to the end of 2015, 20 refugees have been convicted of attempting or committing terrorism on U.S. soil, and only three Americans have been killed in attacks committed by refugees—all in the 1970s.  Zero Americans have been killed by Syrian refugees in a terrorist attack on U.S. soil.  The annual chance of an American dying in a terrorist attack committed by a refugee is one in 3.6 billion.  The other 17 convictions have mainly been for aiding or attempting to join foreign terrorists.  

President Trump tweeted earlier this week that executive orders were intended to improve national security by reducing the terrorist threat.  However, a rational evaluation of national security threats is not the basis for Trump’s orders, as the risk is fairly small but the cost is great. The measures taken here will have virtually no effect on improving U.S. national security.

The new mayor of São Paulo is showing the way if President Trump wants to follow through on his “drain the swamp” pledge. According to today’s Wall Street Journal:

The multimillionaire star of the Brazilian version of “The Apprentice” TV show, who took over as São Paulo’s mayor this month, is set to embark on the biggest municipal privatization drive in the country’s history.

João Doria, who won a landslide victory in October and has drawn comparisons to U.S. President Donald Trump, said in an interview with The Wall Street Journal he plans to sell off everything from São Paulo’s carnival venue to rights to the city’s cemeteries, aiming to raise more than 7 billion reais (about $2.2 billion).

The plan by the businessman-turned-mayor comes as Brazil looks to shrink its cumbersome and graft-ridden government apparatus in the wake of a vast corruption scandal that has destroyed voters’ faith in traditional politicians.

“The heavy role of the state is one of Brazil’s most serious problems—it is inefficient and it invites corruption,” said Mr. Doria.”

The problem is the same in the United States, and so is the solution.

Mark Fields, president and CEO of Ford Motor Company, celebrated President Trump’s Jan. 23, 2017, executive order withdrawing the United States from the Trans-Pacific Partnership (TPP).  In a statement the following day, Fields said, “And I would just call out yesterday, the president’s decision to withdraw from the TPP.  We’ve been very vocal, both as an industry and as a company, and we’ve repeatedly said that the mother of all trade barriers is currency manipulation, and TPP failed in meaningfully dealing with that, and we appreciate the president’s courage to walk away from a bad trade deal.”

Field’s comments are consistent with Ford’s longstanding position, so were not surprising.  What is harder to understand is that the company appears to be ignoring the economic interests of farmers and ranchers, a significant portion of its customer base for F-150 and heavier trucks.

The F-150 is the best-selling vehicle in the United States and has enjoyed that status for many years.  Some 820,000 were sold last year in this country, with another 145,000 sold in Canada.

The 2012 Census of Agriculture reported slightly more than 2.1 million farms in the United States.  Many of them are quite small, part-time operations.  However, there are more than 500,000 commercially significant farms with sales in excess of $50,000 per year.  A high percentage of farmers drive pickup trucks.

Due to relatively low commodity prices, recent years haven’t been great for farmers.  Net farm income has fallen almost by half since 2013, dropping from $123.7 billion to a forecast level of $66.9 billion in 2016.  Many farmers are putting off buying new machinery and equipment, as well as new pickups.  The farm economy really could benefit from a boost in demand for agricultural products.

Farmers expressed dismay at the president’s decision to withdraw from TPP.  An American Farm Bureau Federation study had predicted that improved access to 250 million customers in Japan, Vietnam, Malaysia, New Zealand, and Brunei would raise U.S. net farm income by $4.4 billion per year, as well as adding more than 40,000 jobs to the American economy.  (No estimate was made as to how many of those jobs would have been related to building more pickup trucks.)

It’s true that not all F-150s are bought by farmers.  Construction workers and others who need to haul stuff around find them to be genuinely useful vehicles.  It’s not obvious that many non-farm pickup buyers would have seen their economic prospects hurt by the implementation of TPP.  The detailed TPP study prepared by the U.S. International Trade Commission estimated real Gross Domestic Product (GDP) would increase by more than $40 billion per year by 2032, and employment would rise by over 120,000.  Even though the gains from TPP would be modest in the context of the large U.S. economy, any additional growth leads to demand for more F-150s.

But what about currency manipulation?  TPP included a side agreement “that addresses unfair currency practices by promoting transparency and accountability.”  Member nations committed to avoid currency devaluations intended to enhance the competitiveness of their exporters.  The agreement called for regular consultations and public reporting regarding foreign-exchange interventions.  Achieving consensus on this provision was made easier because no TPP member currently is pushing its currency to an abnormally low level.

Even though this was the first time the issue of currency manipulation had been dealt with in the context of a U.S. free-trade agreement, the provision was insufficient to quell the concerns of critics, including Ford.  The company has not explained how its pursuit of justice with respect to currency scofflaws will be enhanced by killing this meaningful effort to address it.

As a major manufacturer with large investments in numerous countries, changes in relative currency values can be problematic for Ford.  Global investment decisions made on the basis of one set of currency relationships can become uneconomic if the dollar’s value changes markedly compared to the yen, for instance.  Firms with world-wide supply chains tend to prefer currency stability.

For the broader economy, though, the effects of currency manipulation can be counterintuitive.  A shift in exchange rates changes a country’s “terms of trade,” which is an expression used by economists to describe the ratio of a country’s export prices to its import prices.  From a U.S. perspective, if another country sets its currency at an artificially low level relative to the dollar, America’s terms of trade will improve.  The United States will be able to obtain a greater quantity of imports for the same quantity of exports.  Exporting the same number of airplanes and soybeans as before will pay for the importation of larger quantities of shoes, coffee and flat-screen TVs.

The country that chooses to undervalue its currency will be placing an unrealistically low value on the output created by workers and capital in its domestic economy.  It will, in effect, be selling its exports for less than their true economic worth.  A nation that is consciously devaluing is making a decision to transfer wealth to the United States.  Our country should think twice before rejecting such a gift.

An increase in affordable imports generally doesn’t strike consumers as a bad thing.  People tend to enjoy the higher standards of living that result from trade.  Lower prices on imported goods mean that consumers have more money left with which to buy pickup trucks.  And Ford needn’t have worried about TPP unleashing a flood of foreign pickups onto the U.S. market.  U.S. negotiators were successful in getting other countries to agree to a 30-year continuation of the 25-percent U.S. tariff on light trucks.  (Not exactly a “free trade” provision, is it?)  This tariff helps explain why Honda and Nissan manufacture pickup trucks in the United States.

It’s difficult to conclude anything other than that Ford’s misguided perspective on currency manipulation has caused it to embrace a curious approach to trade policy that will be detrimental to a substantial portion of its customer base.  What the death of TPP ultimately will mean to the U.S. and world economies, to vehicle manufacturers, and to farmers and ranchers remains to be seen.

In the meantime, pickup buyers have a number of alternatives.  Chevy Silverado, anyone?

During his inaugural address, Donald Trump vowed to “completely eradicate” radical Islamic terrorism. Today, in its first moves intended to do that, the administration acknowledged its plans for a complete ban on immigrants and refugees from several majority Muslim countries, including Syria, Iraq, Iran, Libya, Somalia, Sudan and Yemen. Yet the new policy will work contrary to its goal. U.S. Muslim immigration is reducing radical Islamism and anti-Americanism around the world.

For President Trump to fulfill his promise, America will need to do more than kill terrorists and arrest their collaborators. It will need to change the minds of many Muslims around the world about America and its institutions. Immigration is the best—perhaps the only—way that it can do this, and right now, U.S. Muslim immigration is reforming the religion, creating a new cohort of liberal Muslims able to combat Islamist arguments.

For example, Pew Research Center polls reveal that an average of just 4 percent of Muslims in other countries consider homosexuality “morally acceptable,” compared to 45 percent among U.S. Muslims—81 percent of whom are either first or second generation immigrants. Only 20 percent of foreign Muslims believe that other religions can lead to eternal life, compared to 56 percent in the United States. Fully 55 percent of U.S. Muslims believe that the Quran should not be even a source among many for legislation, compared to just 15 percent elsewhere.

This process of assimilation is actually accelerating as Muslim immigration to the United States has peaked. More immigration is not impeding integration. From 2007 to 2014, the share of U.S. Muslims who agree not just that homosexuality should be legal, but that it is “morally acceptable” rose from 27 percent to 45 percent. Pew also documents an 8 percent decline—from 50 percent to 42 percent—in the share of U.S. Muslims who believe that the Quran should be interpreted “literally.”

These facts show that Americans as individuals are good at changing people’s minds. One Syrian refugee and her husband were resettled in Las Vegas—not really known as a haven for religious Muslims. “We had to Google it,” she told the Las Vegas Sun. “We read about its image as a sin city.” But even in the midst of the most extremely socially liberal environment in America, they were quickly won over. “When we came here, we liked it,” she said.

America’s socially tolerant Muslims also reflect the fact that many Muslims who want to come to the United States are prone to accept our way of life from the start. “I immigrated to the U.S. and left my family and home because of my freedom,” one Syrian who escaped to Nashville said. “I also wanted to ensure such freedom is protected, not only for my children, but also for everyone else. I strongly believe in the U.S. Constitution and will fight to protect it, period! Everyone in my community felt the same way.”

These warm feelings about the United States and religious freedom are being transmitted to families and friends around the world. “I want to keep painting the image to all of my family and friends about the goodness of the American people,” Marwan Batman told the Indy Star. “I wish other refugees would be able to come and experience the same things we have experienced … to find the same happiness we have found here.”

This pattern is replicated repeatedly across the United States, where almost 20,000 Syrian refugees have come. “I didn’t know anything about Memphis,” one Syrian refugee told his local paper early last year. “The people have been excellent.” He wants everyone to know. “When I talk to my family they ask, ‘How is the treatment of Americans,’ and I say ‘it’s wonderful,’” he explained.

America has changed a major world religion before. During the 19th and early 20th centuries, as Catholic immigrants poured in, its popes repeatedly condemned religious freedom as an anti-Catholic idea. Americans raised the alarm about this “invasion” of illiberal immigrants who operated their own schools and lived in separate neighborhoods.

Yet it was this wave of immigration that changed the Church. Just after America elected its first Catholic president who vowed to fiercely defend the separation of Church and State, the Church evolved its view, pointing to liberal democracies as proof that freedom of conscience worked. American theologian John Courtney Murray even drafted its statement on religious liberty and convinced the Second Vatican Council to accept it in 1965.

Something similar is already underway in a much smaller way among the 3 million U.S. Muslims. But for this movement to change Islam worldwide, there will need to be many more U.S. Muslims. Right now, they make up just 1 percent of the U.S. population, while Catholics represented a quarter in 1965.

Rejecting Muslims from this part of the world will not make us safer. To “eradicate” radical Islamic terrorism completely, Trump will need more than just bombs and “extreme vetting.” He will need to convince many millions of people that freedom of religion and tolerance is better than jihad. He will need many more allies than he has now. Preventing potential allies from coming to the United States is no way to win this fight.

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

In a bit of a departure from our typical YOTHAL recipe, where we highlight three or four items from around the web that we found worthy of recommending to you for additional scrutiny, this week we highlight just a single, albeit somewhat lengthy, article that we feel is worth dedicating your time to. The article takes the form of an in-depth interview with Dr. William Happer, emeritus Department of Physics professor at Princeton University (and Cato Adjunct Scholar). It was conducted by TheBestSchools.org as part of their “Focused Civil Dialogues” series, with the topic being global warming. Although the interview was conducted last summer, it has received renewed attention lately as Happer’s name has come up as a good choice for President Trump’s science advisor. It is therefore a good example of the kind of tone that the incoming Administration could set on the topic of human-caused climate change.

During the interview, TheBestSchools and Happer work through the flow chart below, from top to bottom. Each step along the way, including the introduction featuring Happer’s personal history and accomplishments, is an interesting read featuring numerous anecdotes to back his well-thought out and thorough reasoning on why carbon dioxide emissions should not be vilified or regulated (at the same time being an ardent supporter of government actions to restrict/reduce real forms of pollution). The interview exudes history, including historical examples of the dangers and downfalls of political intervention in science and restrictions placed on scientific inquiry.

Here’s Happer’s bottom line (with internal figure references removed):

Strongest arguments against consensus view:

  • Climate models have predicted far more warming than has been observed. This is strong evidence that the equilibrium temperature increases from doubling CO2 levels is not 3° C to 3.5° C, as assumed in most climate models, but much less, probably close to 1° C.
  • The consensus has largely ignored the huge positive effects of more CO2.
  • The large temperature changes of the Medieval Warm Period and the Little Ice Age occurred before the widespread use of fossil fuels after the industrial revolution.
  • There is a strong correlation of temperature with solar activity.
  • Frenzied, ad hominem attacks on credible opponents show that consensus supporters have a very weak scientific case. You don’t need potentially counterproductive ad hominem attacks if you have strong scientific arguments.

Weakest arguments for consensus view:

  • Ninety-seven percent of scientists agree with the consensus.
  • Temperature has increased for the past century and CO2 levels have increased. Therefore the temperature increase was caused by CO2.
  • Government funded, consensus-supporting researchers have no conflict of interest.
  • Scientific opponents of the consensus are prostitutes of the evil fossil fuel industry.

But there is so much more to this interview than is captured by the bottom line—you ought to have a look at the whole thing!

Senate Judiciary Committee Chairman Chuck Grassley recently reintroduced an E-Verify bill that ought to concern privacy advocates. If enacted, the bill would implement the employment verification scheme nationwide, something President Trump called for during his campaign. Nationwide E-Verify would establish the framework for a national ID system that would undoubtedly come to be used for more than the enforcement of immigration laws.

E-Verify allows employers to check a new hire’s information against government databases to confirm legal status. It is an ineffective system. One reason why E-Verify suffers from inefficiency is because, as things stand, employers taking part in E-Verify use information from documents such as Social Security cards provided by employees. Because the E-Verify system matches employees’ names with a Social Security Number (SSN) it’s possible for an unauthorized worker using a fraudulent SSN to be cleared for employment. A 2009 audit commissioned by the United States Citizenship and Immigration Services estimated that 54 percent of unauthorized workers who submitted documents via E-Verify were erroneously cleared for employment thanks to fraud.

An effective E-Verify system would have to address this glaring loophole. One way of addressing E-Verify’s inadequacy is to include biometric information, such as a facial photograph. Such proposals are worrying.

The E-Verify system currently checks submitted data against Department of Homeland Security (DHS) and Social Security Administration databases. Section 11 of Grassley’s bill would allow the E-Verify system to include the “passport and visa record (including photographs) maintained by the Department of State” as well as driver’s license photos. Seven states voluntarily provide DHS with driver’s license data as part of the Records and Information from DMVs for E-Verify (RIDE) initiative. 

That Grassley’s bill explicitly mentions driver’s license photos is important. Allowing the DHS secretary to deem it necessary for the E-Verify system to confirm identity via driver’s license photos introduces biometric information that proponents believe will make the system more effective.

If the statute purports to require that 43 states provide DMV information that raises constitutional concerns, but as the recent debates surrounding REAL-ID show, the federal government could try to coerce states into compliance. DHS announced earlier this year that residents in nine states will need an identifying document other than a state driver’s license to fly if their licenses are not REAL-ID compliant by January 22, 2018.

Even if the federal government fails to force states to submit DMV data under a nationwide E-Verify scheme, there is still the possibility of nationwide E-Verify leading to a de facto biometric national ID card.

Congress could gather biometric data from residents of states that don’t send DMV data to the federal government by mandating a biometric Social Security card in an attempt to address one of E-Verify’s most prominent flaws. Such a plan has been proposed before.

In 2010 Sens. Charles Schumer (D-NY) and Lindsey Graham (R-SC) took to the pages of The Washington Post, proposing a way to “mend immigration.” They listed mandatory biometric Social Security cards as one of the four pillars of their plan. 

If nationwide E-Verify is enforced we should expect such proposals to resurface as states resist DHS requests for their driver’s license photos. These proposals would lead to a biometric national ID being required for employment.

Such a biometric ID card will not only be used to enforce immigration law. A mandatory nationwide identity card provides an ideal mechanism for lawmakers wishing to establish a gun registry, something gun rights activists haven’t overlooked. In 2015, the president of the National Association for Gun Rights (NAGR) wrote to supporters, urging them to contact the House Judiciary Committee to register their opposition to Rep. Lamar Smith’s (R-TX) “Legal Workforce Act.” If enacted, the legislation would have mandated E-Verify nationwide. 

But it’s not only law abiding gun owners who should fear nationwide E-Verify. A national ID system designed for immigration enforcement will almost certainly be applied in wider law and regulatory enforcement contexts. A national ID could be used to regulate and oversee access to healthcare, medicine, and housing. Such a system would put citizens’ privacy at risk, allowing for increased government monitoring and data collection.

Grassley’s bill is cosponsored by some of his Republican colleagues. Perhaps Grassley and his bill’s cosponsors should consider that many notable members of their party considered national ID schemes anathema to Republican principles. When Attorney General William French Smith proposed a national ID, President Reagan ridiculed the idea saying, “Maybe we should just brand all the babies.” Sen. Barry Goldwater (R-AZ) was also opposed to a national ID system. More recently, Sen. Rand Paul (R-KY) has spoken out against national ID

Nationwide E-Verify’s costs would vastly outweigh its proclaimed benefits, and would lead to calls for, and implementation of, nationwide biometric ID. Such proposals are a threat to Americans’ privacy and a needless expansion of federal government power.

Donald Trump’s rhetoric on trade policy has been, to say the least, over the top.  The economic nationalism in his inauguration speech was particularly alarming. But there is a great deal of uncertainty about the extent to which his actual policies will reflect this rhetoric. As an example, look at what Trump said yesterday about requiring domestic materials (mainly iron and steel) in the construction of pipelines, and compare that to what he actually did.

First, here’s what he said as he signed a Presidential memorandum on “Construction of American Pipelines”:

This is construction of pipelines in this country. We are – and I am – very insistent that if we’re going to build pipelines in the United States, the pipes should be made in the United States. So, unless there’s difficulty with that because companies are gonna have to sort of gear up; much pipeline is bought from other countries. From now on, we’re gonna start making pipeline in the United States. We build it in the United States; we build the pipelines; we wanna build the pipe. Gonna put a lot of workers, a lot of steel workers, back to work. Okay. We will build our own pipeline. We will build our own pipes. That’s what it has to deal with. Like we used to, in the old days.

That sounds very strident and forceful: We will use American steel for American pipelines!

What he actually did, however, is much more nuanced. Here is an excerpt from the memorandum he signed:

MEMORANDUM FOR THE SECRETARY OF COMMERCE

SUBJECT: Construction of American Pipelines

The Secretary of Commerce, in consultation with all relevant executive departments and agencies, shall develop a plan under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States, including portions of pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law. The Secretary shall submit the plan to the President within 180 days of the date of this memorandum.

So instead of there being an immediate requirement to use domestic iron and steel in pipelines, which is kind of how it sounded when Trump made the announcement, there will be an interagency consultations process to “develop a plan” within 180 days.  And under this plan, domestic iron and steel is to be used “to the maximum extent possible and to the extent permitted by law.”  The “to the extent permitted by law” qualification is particularly relevant, as it could be interpreted to mean that the requirement would not apply if it violated international trade obligations, such as the non-discrimination rules in the World Trade Organization (WTO).  That is, the requirement which is actually applied after the plan is developed might exempt all countries who are members of the WTO.  If such an exemption were used, the impact of the requirement would be negligible, since most counries are WTO members.  (On a trade specialty blog I run, I explained why this kind of domestic content requirement would almost certainly violate trade obligations).  

The difference between the rhetoric and the possible reality here means that we still don’t have a very good idea of what U.S. trade policy under Trump is going to look like. At some moments, it seems like we are headed into uncharted protectionist territory; at others, it seems more like a continuation of existing policies, with minor modifications.  All we can do at this point is wait for concrete policy proposals and evaluate them as they come out.  Hopefully the reality will not match the rhetoric.

The Congressional Budget Office, as part of The Budget and Economic Outlook: 2017 to 2027, has just released fiscal projections for the next 10 years.

This happens twice every year. As part of this biannual exercise, I regularly (most recently here and here) dig through the data and highlight the most relevant numbers.

Let’s repeat that process. Here’s what you need to know from CBO’s new report.

  • Under current law, tax revenues over the next 10 years are projected to grow by an average of 4.2 percent each year.
  • If left on autopilot, the burden of government spending will rise by an average of 5.2 percent each year.
  • If that happens, the federal budget will consume 23.4 percent of economic output in 2027 compared to 20.7 percent of GDP in 2017.
  • Under that do-nothing scenario, the budget deficits jumps to $1.4 trillion by 2027.

But what happens if there is a modest bit of spending restraint? What if politicians decide to comply with my Golden Rule and limit how fast the budget grows every year?

This shouldn’t be too difficult. After all, even with Obama in the White House, there was a de facto spending freeze between 2009-2014. In other words, all the fights over debt limits, sequesters, and shutdowns actually yielded good results.

So if the Republicans who now control Washington are serious about protecting the interests of taxpayers, it should be relatively simple for them to adopt good fiscal policy.

And if GOPers actually decide to do the right thing, the grim numbers in the CBO’s new report quickly turn positive.

  • If spending is frozen at 2017 levels, there’s a budget surplus by 2021.
  • If spending is allowed to grow 1 percent annually, there’s a budget surplus by 2022.
  • If spending is allowed to grow 2 percent annually, there’s a budget surplus by 2025.
  • If spending is allowed to grow 2.63 percent annually, the budget is balanced in 10 years.
  • With 2.63 percent spending growth, the burden of government spending drops to 18.4 percent of GDP by 2027.

To put all these numbers in context, inflation is supposed to average about 2 percent annually over the next decade.

Here’s a chart showing the overall fiscal impact of modest spending restraint.

By the way, it’s worth pointing out that the primary objective of good fiscal policy should be reducing the burden of government spending, not balancing the budget. However, if you address the disease of excessive spending, you automatically eliminate the symptom of red ink.

For more background information, here’s a video I narrated on this topic. It was released in 2010, so the numbers have changed, but the analysis is still spot on.

P.S. Achieving good fiscal policy obviously becomes much more difficult if Republicans in Washington decide to embark on a foolish crusade to expand the federal government’s role in infrastructure.

P.P.S. Achieving good fiscal policy obviously becomes much more difficult if Republicans in Washington decide to leave entitlement programs on autopilot.

Senate Democrats have proposed an infrastructure plan that calls for $1 trillion in federal deficit spending. In detail, the plan calls for:

  • $100 billion for reconstructing roads and bridges;
  • $100 billion to “revitalize Main Street,” that is, subsidies to New Urbanism and affordable housing;
  • $10 billion for TIGER stimulus projects;
  • $110 billion for reconstructing water and sewer;
  • $50 billion for modernizing rail (Amtrak and freight railroad) infrastructure;
  • $130 billion to repair and expand transit;
  • $75 billion for rebuilding public schools;
  • $30 billion to improve airports;
  • $10 billion for ports and waterways;
  • $25 billion to improve communities’ resistance to natural disasters;
  • $100 billion for a next-generation electrical grid;
  • $20 billion for broadband;
  • $20 billion for public lands and tribal infrastructure;
  • $10 billion for VA hospitals;
  • $10 billion for an infrastructure bank;
  • $200 billion for “vital projects” that “think big,” such as building “the world’s fastest trains.”

In response, someone has leaked what is supposedly the Trump administration’s own list of 50 infrastructure priority projects. It includes such boondoggles as a Dallas-Houston passenger rail line, the congestion-inducing Maryland Purple Line, the $14 billion Hudson River tunnels, and completion of the $2.2-billion-per-mile Second Avenue Subway. Except for the Dallas-Houston line, most of the passenger rail projects were already pretty well decided, but they are still foolish investments that will cost a lot and return little to the economy. There are supposedly more than 250 other projects on a priority list, but it isn’t absolutely certain that this list was endorsed by Trump or merely proposed to him.

What most people have been calling Trump’s infrastructure plan calls for giving tax credits to private investors who spend money on these kind of infrastructure projects. This has some virtues over the Democratic proposal of direct federal spending:

  1. While the Democrats take a top-down approach dictating where the money will go, Trump leaves the setting of priorities to state and local governments, which have already approved most of the projects on his top-50 list;
  2. Where Democrats would commit the federal government to spend an arbitrary amount of money whether it needs to be spent or not, Trump lets state and local governments decide how much to spend and how they will pay for it;
  3. Where Democrats would add $1 trillion to the deficit, Trump relies on a tax credit program that will cost the feds no more than $167 billion per trillion in spending (less, obviously, if less than $1 trillion is spent);
  4. Where a lot of the Democrats’ money would go down a rat hole, at least some of federal tax credits that Trump’s plan would issue will be offset by the reduced use of tax-free municipal bonds and taxes paid by companies and workers earning the money.

Typical of central planners, the dollar figures in the Democrats’ plan are completely arbitrary.

  • Why should trains and transit, which carry 1 percent as many passenger miles as roads, get roughly as much money as roads and bridges (and probably more considering much of the $200 billion “vital infrastructure” fund would go for high-speed rail)?
  • Why spend $40 billion expanding transit and no money expanding highways when highway use is growing faster than transit in most places and most years?
  • Why no money for upgrading the air traffic control system (which is on Trump’s top-50 list)? I don’t support the use of tax dollars for such things, but it is a huge oversight from a plan predicated on the idea that federal central planners know the best places to spend your money.
  • Why $110 billion on water and sewer, and not $100 billion or $120 billion? It seems the point of these numbers is to add up to a nice round $1 trillion while divvying up the money to special-interest groups.
  • For that matter, why any at all on water, sewer, and the electrical grid when these should already be adequately funded through user fees?
  • Why is education even on the list when the federal government has never spent more than token amounts of money for school infrastructure?

My complaints about the Trump plan have been:

  1. It’s not really a plan—it’s just one funding tool;
  2. It doesn’t prevent state and local governments from spending the money on completely looney projects such as the aforementioned Dallas–Houston high-speed rail; and
  3. The private-partnership aspect has confused many people into believing that it will only fund projects that can be paid for out of user fees when in fact most projects would require state and local taxpayers to ultimately replay the private contractors out of tax dollars.

While these are valid complaints, the Trump plan is more bottom-up than top-down, as most if not all of the projects on the possibly fake priority list are supported by state and local officials. And while Trump brought a new idea to the table, the Democrats’ plan is the same old borrow-and-spend formula that they have used in the past. This is actually worse than tax-and-spend because taxing and spending doesn’t leave huge debt problems and interest payments for the future.

While we can hope that Trump’s projects will rely more on user fees more than taxes, at the moment the score has to be Trump 1/2, Democrats minus 1.

In its ongoing crackdown on advocates of free speech, human rights and other liberties, China’s communist party has shut down the website of Milton Friedman Prize winner Mao Yushi’s think tank. Mao has spent a lifetime promoting the values and principles of a free society for which he has often paid a high price, including severe persecution. The Unirule Institute of Economics that he cofounded has educated new and old generations of Chinese on the importance of private property, the rule of law, freedom of choice, voluntary exchange, and other aspects of the market economy, and on how to transition away from central planning.

In recent years, Mao has been warning about a “leftist revival” in China and has called for a critical evaluation of Mao Zedong’s role in Chinese history—an officially taboo subject. His essay “Returning Mao Zedong to Human Form” (upon which this English summary is based) condemned the communist leader’s brutal policies and earned him retribution from the neo-Maoist movement that has been growing with the regime’s encouragement. Repression under President Xi Jinping has intensified as journalists, lawyers, human rights activists, scholars, and members of religious communities have been jailed or otherwise oppressed. The regime has warned against the danger of foreign and western ideas, increased censorship and closed numerous NGOs, accusing them of being foreign agents.

It is in the context of that widening crackdown and disregard for due process or the rule of law that the communist party has closed Mao Yushi’s website. We hope that it does not signal further repression against Mao, his think tank or his colleagues, but we cannot be confident that the law will protect them. Indeed, the head of China’s Supreme Court recently asserted that the Party is above the law and warned against western concepts such as judicial independence.

Free speech champion Flemming Rose, also a Friedman Prize winner, rightly denounces the regime’s abuse: “I am deeply concerned by the Chinese authorities shutting down of Unirule’s website. Why silence a voice for reason calling for the rule of law? Without the rule of law that includes a climate of a free exchange of ideas, China won’t be able to transform itself successfully.”

Unfortunately, it has not been a great year for Friedman Prize winners. Venezuelan Yon Goicoechea, who received the award in 2008, was illegally arrested by the regime last August and remains imprisoned. His and Mao’s experiences are a reminder of what’s at stake in too many places in the world where the promotion of liberalism requires courageous and admirable efforts.

President Donald Trump has not yet signed an executive order about his proposed border wall.  An executive order would only do so much as Congress would have to appropriate funds to actually construct the wall.  A wall built to the dimensions and specifications promised by Trump would cost about $25 billion to $31.2 billion and run 1000 miles along the border with Mexico

Since the Mexican government won’t pay for the wall and holding up all remittances in order to get the Mexican government to pay for it runs into constitutional problems, some like Mark Krikorian of the Center for Immigration Studies have proposed a nation-wide refundable fee (a tax with another name) on wire remittances to fund the wall.  Taxing remittances of illegal immigrants will not raise enough funds for a huge new border wall.

A remittances tax would have to be very high to raise enough revenue to pay for a wall, even assuming there is no fall off in revenue at higher rates.  The state of Oklahoma has a wire transmitter fee equal to about one percent of the funds transmitted.  In 2016, the tax raised $12,696,879.25 or $133.65 per illegal immigrant in the state.  Back of the envelope, a nationwide version of the wire transmitter fee would only raise about $1.6 billion annually.  If the nationwide wire transmitter fee tax was 5 times as high as in Oklahoma then it would raise enough money to pay for the wall in three to four years assuming there is no fall off in revenue at such a high rate or other disruptions don’t occur.           

Oklahoma labels this tax a fee because it’s a fully refunded tax credit.  A full 96 percent of those who pay the fees don’t claim the credit.  David North of the Center for Immigration Studies argues that illegal immigrants pay virtually the entire tax because most of the credits aren’t claimed.  That’s probably right but North overstates his case.  The IRS estimates that about one in five folks eligible for the EITC do not claim it although there are many improper payments made too.  Furthermore, between 55 percent and 75 percent of illegal immigrants file tax returns, have money withheld from their paychecks, or both.  That being said, most of the people paying the tax are likely illegal immigrants but many Americans also pay directly.

Another reason that a nationwide wire transfer tax won’t pay for a wall is that a high rate will simply force remittances onto non-wire systems.  The most obvious alternative is sending remittances through banks or credit unions that are exempt from Oklahoma’s Wire Transmitter Fee.  Congress could try to impose a transfer fee for those funds but that would penalize millions of Americans transferring money abroad – including those of us who paid for college abroad.  The government could set up another tax credit scheme but that would be more bureaucracy and time added on top of an already overly complex tax system.  Using Bitcoin or sending  gift cards are also viable ways to remit large amounts of cash outside of the wire system

Illegal immigrant remitters will also be able to rely on their American citizen or legal immigrant friends and family members to transfer funds through wire services.  About 16.6 million people live in households with the 11 to 12 million illegal immigrants in the United States.  Many of those legal immigrants or U.S.-natives would be happy to remit money for their illegal immigrants family members.    

As a last resort, remitters could use the black market.  Many unlawful immigrants entered the country illegally and some of them use fraudulent documents to work in the United States.  Surely they will find a way to illegally remit funds if the tax is large enough.  Expanding the size of the black market is not the point of a tax on remittances. 

Trump’s proposed border wall is expensive and the Mexican government will not pay for it.  Taxing remittances by illegal immigrants is a proposed way of funding such a wall but it is unlikely to raise enough funds and will also directly tax many Americans.  Either the tax will have to raise much more revenue than I anticipate, the border wall will have to be a lot cheaper,  or both for a tax on remittances to raise enough money for this project.  If this wall ever gets built then American taxpayers will foot the bill - as usual.  

Nearly eight-and-a-half years after its initial application, the Keystone XL pipeline project has been given the green light (“subject to a renegotiation of terms by us”) by an executive order signed by President Trump today. Finally.

Whether the impetus and economics is still there to build it (with oil prices in the mid-$50 barrel range) remains to be seen. But I’d imagine so, if nothing more than as an infrastructural investment in the future.

But from the federal government standpoint, this shouldn’t matter. If private monies want to take the risk, the federal government should not stand in the way. After all, the Keystone XL pipeline passed each and every environmental impact/safety assessment along the way. Even the climate impact, much touted and hyped by the previous Administration and its supporters, was shown, dispassionately, to be inconsequential—a mere 1/100th of a degree of warming by century’s end (and that’s being generous).

President Obama rejected the pipeline for no other reason than for appearances—to make it seem to the rest of the world that the U.S. was serious about climate change. Apparently, he didn’t see the irony.

His successor is resurrecting the pipeline for the same reason—appearances. In this case, the appearance of creating jobs. But as I exasperatingly explained in these pages some two years ago (“Keystone XL Pipeline: Enough Already!”):

This project is so small in the grand scheme of anything it boggles the mind anyone outside of those directly involved in building and operating it gives it a second thought…

At this point, the Keystone XL is just another construction project. In fact, that is all it ever was. If it didn’t require crossing the border with Canada (which required a “presidential permit”), we never would have heard a peep about it.

With the pipeline’s apparent revival, now at least, all the government resources spent examining and re-examining and fretting and re-fretting, etc. over the project will have amounted to something—even though that something should have been decided (and approved) some four or five years ago.

What executive powers taketh away, executive powers giveth. I’m sure this won’t be the last of Obama’s symbolic actions on climate change that President Trump overturns. Each will better clear the way for us to move on to more important matters.

Congressional Republicans have a new plan for a military spending boost. John McCain, the Chairman of the Senate Armed Services Committee, last week released a report calling for a $54 billion increase in 2018 Pentagon spending and a $430 billion increase above current Pentagon plans for the next five fiscal years. McCain’s House counterpart, Mac Thornberry, backed that plan today in a Fox News op-ed. Both chairmen also want an immediate “supplemental” increase of an indeterminate amount to the 2017 military budget. 

Enacting the McCain/Thornberry plan requires undoing the defense spending caps set by the Budget Control Act. Complying with the caps would shave more than $100 billion off existing plans over the next five years, meaning that the new plan would spend more than half a trillion more than current law allows. That’s before counting any 2017 supplemental or Overseas Contingency Operations (OCO) funding, currently at $59 billion. The plan calls for transferring OCO spending, which is now uncapped, back into the base budget once the abolishment of the Budget Control Act leaves it unconstrained.

The title of Thornberry’s op-ed, Here’s How We Will Make America’s Military Great Again, suggests its intended audience. During the campaign, President Trump endorsed an across-the-board military buildup likely to cost $70 to $100 billion a year but absurdly claimed that he could fund it by cutting Pentagon waste, fraud, and abuse. Since his election, Trump and his advisors have done little to clarify how they’ll fund the buildup or use the expanded military, besides parading it down Pennsylvania Avenue.

Trump’s distraction allowed McCain and Thornberry the opportunity to set the GOP’s direction on defense. Trump’s appointments and his difficulty formulating policies mean that he’s likely to support the McCain/Thornberry plan. Given that and Republican control of both Houses, the plan might seem destined for success, with the increase funded in the GOP’s preferred way: through cuts to non-defense spending.

But Senate Democrats are likely to filibuster an effort to erase the defense caps absent a matching increase in non-defense discretionary spending. While that sort of deficit-swelling deal might be acceptable to Trump, McCain, and Thornberry, it could produce enough congressional Republican opposition to prevent passage.

If there’s a way to have a defense build-up while satisfying Democrats and most Congressional Republicans, it’s to stick with what’s worked in recent years: maintaining a semblance of concern about deficits and a show of parity between defense and non-defense spending. That means raising but maintaining caps in both areas while shoving more base Pentagon funds into OCO under the pretext that it’s temporary. The bottom line is that the current political circumstances will probably produce a big defense buildup funded through deficit spending or, more likely, a smaller defense increase funded by more deceptive deficit-spending.

Not even that sort of watered-down buildup is needed. The case for a buildup relies on a tired litany of exaggerated dangers and misrepresentations about the horrors of the Pentagon having to live on $600 billion a year. In fact, current military spending is easily sufficient to meet current threats. With a more restrained military strategy steering the U.S military away from avoidable tensions and endless wars, the defense budget could be far smaller.

Both McCain and Thornberry contend that sequestration is ravaging U.S. military readiness. But there has been no sequestration since 2013; it occurs only if spending exceeds caps, and defense spending remains near Cold War highs. The recent drawdown was historically mild and mostly funded by shrunken war costs. Readiness is generally okay but could be improved if the Pentagon—or the House Armed Services Committees—shifted money from acquisition to operational accounts.

The report and op-ed both focus on the threats low defense spending is supposedly encouraging. They fail to note that fighting terrorists including ISIS—even if the effort were expanded by Trump—costs less than a tenth of U.S. military spending. They fail to explain how higher defense spending would solve the difficulties posed by Iran and North Korea. Nor is there reason to believe that higher military spending would cow Russia and China into more compliant behavior, as both Chairmen contend. If there is a deficiency in the U.S. approach to the Ukraine and the South China Sea that allows aggression, it is a result of the limited U.S. will to start a catastrophic war over matters remote from U.S. safety, not an absence of military power to use if war occurs.

There are strains on the U.S. military today. But they’re more the result of a lack of strategy than a lack of money. By spending money on everything and endorsing every mission, the McCain/Thornberry plan would create a larger version of the same problem. We should instead do less with our military—avoiding the distant trouble that justifies most military spending.

On why that sort of restraint would improve U.S. security, see the various Cato works on defense budgets and policy and our conference on “The Case for Restraint.” On the exaggeration of danger as a means to justify high defense spending, see Christopher Preble and John Mueller’s edited volume and other works by Cato scholars.

It’s National School Choice Week, so it’s a good time to survey the countryside and see what’s in store for the year ahead.

Last year was relatively quiet in terms of school choice legislation. South Dakota enacted a relatively limited tax-credit scholarship program and Maryland enacted a small voucher program, but there wasn’t much progress otherwise. 

By contrast, 2015 was the Year of Educational Choice. Not only did 15 states adopt 21 new or expanded educational choice programs, three of them enacted education savings account (ESA) laws. As I’ve noted previously, ESAs represent a move from school choice to educational choice because families can use ESA funds to pay for a lot more than just private school tuition. Parents can use the ESA funds for tutors, textbooks, homeschool curricula, online classes, educational therapy, and more. They can also save unused funds for future educational expenses, including college.

Already, several states this year are considering ESA legislation. Last week, legislators in Arkansas introduced a universal-eligibility, tax-credit funded ESA similar to what Jonathan Butcher and I described in our report last year, “Taking Credit for Education.” Donors would receive tax credits for contributions to nonprofit scholarship organizations that would fund the ESAs. According to a just-released study from Julie Trivitt and Corey DeAngelis of the University of Arkansas, if enacted, the ESA would expand educational choice while saving taxpayers an estimated $2.8 million.

This week, the Missouri Senate Education Committee will hold a hearing on a bill to create tax-credit funded ESA, similar to the Arkansas bill described above. Missouri will also consider publicly funded ESAs, as well as other choice proposals.

Other states considering publicly funded ESAs include Indiana, Iowa, New Hampshire, Oklahoma, and Texas. I’ve also heard that Arizona legislators are considering expanding their ESA, possibly to include all Arizona students. Meanwhile, in Nevada, Gov. Sandoval is looking to find ways to fund his state’s ESA after the state supreme court upheld the constitutionality of the program but struck down its funding mechanism

Several states will also be considering tax-credit scholarship programs, including Kentucky, Nebraska, and (likely) Texas. In addition, South Carolina is looking to expand its tax credit.

I’m liking missing a number of proposals, and it will be tough to top 2015, but 2017 very well might be the Year of Educational Choice, Jr.

Pages