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Amidst increased public scrutiny of policing practices and rising concerns over police officer safety, a recent Cato/YouGov national survey finds fully 65% of Americans say there is a “war on police” in America today. Majorities across partisan groups share this view, although Republicans (81%) express greater concern than independents (62%) and Democrats (55%). 

While Americans are concerned about police safety, this does not mean they wish to avoid reform. Instead, Americans overwhelming support (92%) requiring police officers wear body cameras that would record video of their interactions. Moreover fully 6 in 10 “strongly support” such a proposal. A paltry 8% oppose police wearing body cameras. Support extends across demographic and political groups. In an era of hyper-partisanship, police wearing body cameras achieves rare post-partisan consensus.

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Studies of police departments reveal officers perceive public support for body cameras as an indication of public distrust. However, this does not comport with this survey’s findings. Americans who have a favorable opinion of the police are as likely as those with an unfavorable view to support implementing a police body camera program in their community. 

Moreover, Americans do not view the police wearing body cameras as exclusively protecting citizens from the police. Instead, 81% believe such a policy will protect both—the police officers who wear them and the citizens who interact with the police—equally. Only 10% expect cameras to protect citizens more and 9% percent expect cameras to protect police officers more. While African-Americans and Hispanics (19%) are about three times as likely as Caucasians (7%) to say cameras will primarily protect citizens, overwhelming shares of all groups still say cameras will protect both members of the public and officers equally. 

A truth too often overlooked is that public support for a policy is not synonymous with a willingness to pay for it. However in the case of body cameras, a majority—55%—of Americans says they would be willing to pay higher taxes in order to outfit their local police department with body cameras, while 45% would not support increased taxes for this purpose. Nevertheless, it is worth emphasizing that if support were contingent on raising additional revenues, initial support decreases a substantial 37 points.

Politics, rather than demographics, primarily drive attitudes toward tax increases for body cameras. Sixty-five percent of Democrats (including independent leaners) say they’d pay higher taxes in exchange for a police body camera program, while 35% oppose. Conversely, a majority (54%) of Republicans (including leaners) oppose raising additional revenues and prefer local governments redirect funds from other programs to pay for police body cameras, while 46% would favor. There are not significant differences across race, gender, and age. Furthermore, favorability toward the police does not correlate with support for raising tax revenues for cameras.

Police body camera policy becomes particularly contentious when it comes to accessing the video footage. Fifty-two percent of Americans say police officers ought to be allowed to watch body camera footage before making their official statement about violent encounters, while 48% oppose. Recent legislative trends have favored police advocates’ recommendation that police officers be allowed to view video footage before making any official statements. They reason doing so allows officers to “more clearly” remember a stressful incident and point out that officers will still have to explain their actions. However body camera advocates have warned that allowing officers to view the footage beforehand creates an opportunity for officers to change their stories in efforts to absolve themselves from blame. This will likely remain a contentious policy issue going forward.

Public support for early officer access to video footage hinges largely on favorability toward the police. Among those with a favorable opinion of the police, 61% say officers should be allowed to watch the video footage before making a statement, while 39% say they should not. Results are reversed among those with an unfavorable view of the police: 74% say officers should not be allowed to watch the footage while 26% say they should. There are stark political divisions as well: 59% of Democrats oppose early access while 68% of Republicans favor early access. Non-partisan independents are divided but lean with Democrats with 53% opposed to early video access. A similar pattern emerges across ideology, with respondents who identify as “very liberal” stridently opposed (72%) while “very conservative” respondents are firmly in support (64%). Self-identified libertarians reflect moderates with slightly more in favor than opposed (55% v 45%).

Race, income, and living in a city or suburb also correlate with support for officers obtaining early access to body camera footage. Majorities of Caucasians (57%), individuals living in the suburbs and rural areas (56%), and households making more than $50,000 a year (58%) say officers ought to be allowed to watch camera footage before making an official statement of a violent encounter. Conversely, majorities of African-Americans (65%), Latinos (51%), city dwellers (56%), and households making less than $50,000 a year (55%) oppose allowing an officer view video footage before making an official statement.  A simple statistical model that simultaneously controls for race/ethnicity, urban density, and income finds that race and living in a city both exert independent effects on attitudes, while income loses statistical importance.

Conclusions

Americans support equipping their local police departments with body cameras even if doing so requires them pay higher taxes. Furthermore, animus toward the police does not appear to drive support for police body cameras. Police favorability does not correlate with support for the program, raising taxes to pay for cameras, or whether one believes cameras better protect citizens or police officers.

One explanation for broad public support is that different groups favor body cameras and raising revenues to pay for them for different reasons. Those who trust the police may view cameras as a safeguard protecting police officers from frivolous lawsuits or may encourage citizens to behave better when interacting with cops. Furthermore, this disproportionately conservative group also tends to view policing as part of the proper role for government and thus may be more willing to raise taxes for this purpose. On the other side, those distrustful of the police may view cameras as a way to encourage officers to behave better and will make it easier to hold officers accountable for misconduct.

Favorability—and by extension public trust—of the police does play a significant role when it comes to providing individual officers early access of video footage. Those with greater confidence in their local departments likely trust that officers won’t use their early access to change their stories or mislead investigators. Conversely those who lack confidence in their local police likely worry that officers who view footage before making statements will use the opportunity to absolve themselves from blame.

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The Cato Institute/YouGov national survey of 2000 adults was conducted November 19-24, 2015 using a sample drawn from YouGov’s online panel, which is designed to be representative of the US population. The margin of sampling error for all respondents is +/-3.27 percentage points. Topline (.pdf) results can be found here, full methodological details can be found here.

Note: In this report, Democrats include independents who lean Democratic and Republicans include independents who lean Republican. Independents include those who said they did not lean toward either the Democratic or Republican parties.

The Identity Project says that a new DHS “Rumor Control” web page lies about the REAL ID Act. That may be true, but a lie is an intentional misstatement, and we don’t know if the PR professional who wrote the material on that page knows the issues or the law. Let’s review the record, taking each of the rumors DHS addresses in turn, so that the agency doesn’t misstate the federal government’s national ID policy in the future.

Rumor: I need a passport to fly domestically

The DHS is correct that residents of any state can currently use their drivers’ licenses and IDs, as well as a variety of other forms of ID, at TSA checkpoints. Last fall, though, in an effort to buffalo states into compliance, DHS officials and others started fanning rumors that TSA would soon refuse the IDs and licenses of states that resisted the national ID program. You don’t need a passport to fly yet.

Given the practice of checking IDs at airport checkpoints, the upshot of REAL ID compliance would be that the U.S. will have an internal passport system for domestic air travelers. You don’t need a passport to travel within the United States now, but that is the direction the policy is going.

Rumor: TSA isn’t going to accept my driver’s license starting on January 1, 2016

It must have been reassuring when DHS’s “Rumor Control” page started spreading this good news on December 31, 2015….

After deferring deadlines many times since the statutory deadline came and went in May 2008, DHS said last year that it would begin to refuse IDs from recalcitrant states “no sooner than 2016,” and it has said it would provide 120-days’ notice before it did. But the desire to manufacture urgency and bring states to heel seems to have gotten the better of the department, and refusal of IDs on January 1 became a widespread belief.

In fact, TSA will never institute a policy of turning away travelers from recalcitrant states. The reason why is the tidal wave of blame the agency would bring down on itself and the Congress if it ever followed through on this threat.

That doesn’t mean its brinksmanship won’t work. Many governors and state legislators haven’t calculated what the politics look like, and they don’t know that DHS has backed down every time a state has refused them.

What’s also little understood is that DHS is picking and choosing which states to threaten based not on the REAL ID law, but on an in-house “material compliance checklist.” DHS is issuing blanket waivers of some terms of the law to some states while it tells state officials in other states that it is absolutely required to enforce other terms against them.

Rumor: I need to get a new driver’s license or passport

The DHS response here says, “The REAL ID Act places the responsibility for action on the state, not residents of the state.” A more complete clarification would say, “The REAL ID Act threatens residents of states to coerce action out of their state representatives.”

The only thing that might require people to get new driver’s licenses is their state legislatures and governors caving to the DHS and putting them into the national ID system. People in those states will be required to go back to the DMV and stand in line to show papers proving that they’re legally entitled to be in the country. That’ll be a challenge for many people, an insult to others, costly and time-consuming for everyone.

Rumor: The Department of Homeland Security is trying to build a national database with all of our information

DHS should not try to refute this again. Doing so is untruthful, false, not accurate, and incorrect. As I’ve noted before, the law requires states to

(12) Provide electronic access to all other States to information contained in the motor vehicle database of the State.

(13) Maintain a State motor vehicle database that contains, at a minimum –

(A) all data fields printed on drivers’ licenses and identification cards issued by the State; and
(B) motor vehicle drivers’ histories, including motor vehicle violations, suspensions, and points on licenses.

Who knows why those two items are listed out of order, but compliance with REAL ID means maintaining a big database and sharing it with every other state. States that don’t do that are non-compliant with the REAL ID Act. DHS isn’t requiring it yet—it’s not on their “material compliance checklist”—but if states get on board, DHS will add this statutory requirement to the list.

REAL ID compliance now will put states “in for a penny, in for a pound.” They’re going to have to share lots of information about their residents with other states and the federal government.

Rumor: I can’t use my license to access a federal facility or nuclear power plant

As part of its staged implementation, DHS says that agencies are to refuse IDs from non-compliant states at federal facilities and locations regulated by federal identification rules. You see lots of announcements in the Federal Register about meetings where IDs from non-compliant states will be refused, and I’ve heard anecdotes about people coming to Washington, D.C., for government meetings being warned to have compliant IDs if their states are on the wrong side of DHS. What we haven’t seen yet is anyone actually turned away from a meeting, a courthouse, or other location because the only ID they had was from a non-compliant state.

When someone is turned away from a meeting or government facility for not having a national ID, the lawsuit will be really interesting. DHS will have to claim that it can condition the right to petition the government (for example) on showing ID. And it will raise the question whether a person can be denied a constitutional right because they live in a state whose driver licensing policy differs from what the federal government prefers. The lawsuit will also expose that DHS is picking and choosing among provisions of the REAL ID law to treat as “compliance.”

So, if you want your life to be easy, bring a passport on your next tour of a nuclear facility. But there are people in the country who stand on principle for liberty, sometimes at substantial cost to their convenience.

Accepting Syrian migrants in America and Europe has become an increasingly divisive political issue. While the Gulf States have refused to offer refuge to any fleeing Syrians, Syria’s direct neighbors bear a huge burden, with Jordan, Lebanon, and Turkey each hosting more than a million refugees. More than four million people have left Syria and even more have been displaced internally.

Last year I visited Zaartari Refugee Camp, located just a few miles from the Syrian border in Jordan. I was traveling with International Orthodox Christian Charities, which carries out an expansive ministry addressing the many needs of Syrians inside and outside of their country.

Zaartari, just a few miles from the Syrian border, opened in July 2012 and now contains around 80,000 people, making it Jordan’s 4th largest “city.” The United Nations High Commissioner for Refugees has overall authority to care of refugees, but a multitude of other governments and NGOs, such as the IOCC, my host, support Zaartari’s operations.

Camp residents are dependent on the charity of others. Economic life is almost entirely controlled from outside.

I visited a clinic which typically serves about 700 people daily. Samer Makahleh, with the Jordan Health Aid Society, coordinates health care programs. “To fill gaps we go to outside partners like IOCC,” he explained. Two people came up to me during my brief visit seeking financial support for operations.

Refugees receive a stipend of roughly $30 a month. Many also work for the camp, NGOS, or in private shops. Most surprising may be the diversity of private businesses, around 2500 in all, many of which line the main street, called the Champs-Elysees. (I’ve included photos in my photo-essay on Forbes online.)

The UNHCR estimates that 60 percent of working age refugees are employed to some degree. Helping with security was 22-year-old Abdul al-Jabbar, who said his family of nine came from the city of Daraa to the camp three years ago. Life is difficult, he said, “but at least we are alive. We must adapt.”

Almost anything is available for a price. Shops sell food, cell phones, tools, household supplies, and clothes, including wedding dresses, which are available for rent. There are barbers and hair-dressers. Restaurants and cafes.

Residents can buy falafels and order pizzas. There’s even a travel agency, though few refugees are in a position go far. I bought a few worry beads to supplement my supply.

Homes are a mix of tents and containers, which can be purchased by residents to gain a bit more protection from the extremes of hot and cold. Most refugees now have their own latrines and kitchens, instead of having to rely on communal facilities.

The landscape is dusty, a bit out of Mad Max World, suggested journalist Mark Haddon of London’s Daily Mail. But there are spots of green. Two homes, across from each other, have a few plants growing outside.

Both families, from the Syrian city of Daraa, were farmers. They are determined to preserve a little memory of home, and use wastewater to keep the plants alive.

The future weighs heavily. Many refugees want to return to homes which may no longer exist. Others would like to try life outside of the camp in Jordan, but cannot go legally without financial sponsorship. Resettlement elsewhere grows less likely as political opposition to increased immigration rises.

Still, life goes on. One of al-Jabbar’s sisters is engaged. The present may be difficult, but who wants to wait for a future which may never come?

As I write in Forbes online, “people in America and elsewhere in the West enjoy lives of comparative privilege. We should respond with compassion to those in need. Even Americans afraid to open their nation to Syrian refugees can give to organizations which help care for the human tsunami from Syria.”

“Whatever you did for one of the least of my brothers of mine, you did for me,” said Jesus. (Matthew 25:40) Helping refugees in Zaartari would be a fine place to start.

We’ve all heard it said that the “rich are getting richer” while the middle class suffers. Political figures on both the right and left frequently speak about the need to “bring back” or “restore” the “disappearing” middle class. Pew Research Center just put out a report that calls those ideas into question, according to a recent Washington Post opinion piece.

The report shows that from 1971 to 2014, middle-income households (meaning three-person households making from $41,869 to $125,608 annually in inflation-adjusted dollars) decreased from 61 to 50 percent of U.S. households. Why the 11 percentage point difference?

Seven of those 11 percentage points can be explained by households moving into a higher income bracket. High-income households grew from 14 percent to 21 percent of all households during the same period.

The Pew report also stated that all income groups have typically made double-digit pre-tax income gains since the 1970s:

Middle-income household income increased by 13% in the 1970s, 11% in the 1980s, and 12% in the 1990s. Lower-income households had gains of 13% in the 1970s, 8% in the 1980s and 15% in the 1990s. Upper-income households registered a 10% gain in the 1970s [and] 18% in both the 1980s and 1990s.

Then the Great Recession struck in the late 2000s. But even the Great Recession only removed 6 percentage points from the gains made by the middle class. In 2000, an average middle-income household earned 40 percent more than in 1970. In 2014, an average middle-income household earned 34 percent more than in 1970.

The Washington Post piece opines that “We’ve mistaken what is plausibly a one-time setback—the response to the Great Recession—for long-term stagnation. People have understandably but wrongly taken their recent experience and projected it onto the past.” We cannot predict the future, but it certainly seems as though the middle class has fared better than many people believe.

Yet another top North Korean official has met a violent and untimely death. No one knows if it was a tragic accident or political assassination.

Kim Yang-gon was in charge of negotiations with South, where he was respected. He supposedly died in an early morning car accident. A surprising number of North Korea’s high officials appear to leave the world this way; yet defectors say accidents are common given the poor streets and tendency of top officials to drive drunk.

Still, it looks suspicious. But it doesn’t appear to be a state-sanctioned hit. Dictator Kim Jong-un praised his “close comrade-at-arms” and showed emotion at the state funeral. 

Perhaps a rival took out Kim Yang-gon. However, while he was well-connected, having served “Dear Leader” Kim Jong-il too, it’s not apparent that he is the sort of rival worth killing.

Which leaves everyone outside again looking through the mirror darkly, as the Bible puts it.

The Korean status quo obviously is unsatisfactory. Indeed, it is positively dangerous. While everyone discounts North Korea’s endless threats against both South Korea and the U.S., as the North’s military capabilities grow people are more likely to treat them as warnings to be taken seriously. Proposals for military action against the Democratic People’s Republic of Korea might enjoy a revival.

Of course, the more dangerous Pyongyang perceives the international environment, the more committed it likely will become to building a sizeable nuclear arsenal and missile force. And to the extent that the North can argue that it is responding defensively to America, the less likely Beijing will be to apply more pressure on the DPRK.

An intrepid few have forthrightly proposed military action. But that would be a wild gamble, risking thousands of lives, mostly Korean, on both sides.

Enhanced sanctions look pretty good compared to war. And tighter financial controls would make it much harder for the Kim regime to do business with the world. However, Sudan gets by despite strict financial controls.

Moreover, without Beijing’s acquiescence, the U.S. won’t be able to cut the North’s lifeline. Forcing a national implosion would have unpredictable and potentially violent consequences.

For some the People’s Republic of China is the preferred option. Just get the PRC to force the North into line. That presumes Beijing has the ability to do so.

Moreover, the PRC has good reason to choose the status quo over creating the possibility of chaos and war on China’s southern border. Moreover, Beijing is unlikely to do any favors for the U.S., which would use a united Korea as part of a containment strategy against China.

If none of these, then what?

Some form of engagement with the objectives of moderating regime behavior, easing the threat environment, constraining arms development, encouraging domestic reform, and improving human development. Not because the chances of success seem great, but because there is no better option.

That means the South should continue talks despite Kim Yang-gon’s death. In fact, in his New Year’s Day address, Kim Jong-un expressed his desire to improve bilateral relations.

And as I argue on National Interest online: “the U.S. should open a dialogue, with the objective of initiating official though low-key relations. A diplomatic presence in Pyongyang would provide a small keyhole for peering into this mysterious country. Although expectations should be low, tempering hostilities could lead to additional benefits, especially if Kim Jong-un uses next year’s party congress to modernize.”

Winston Churchill once said of the Soviet Union that it was “a riddle wrapped in a mystery inside an enigma.” That certainly describes the DPRK for the West. Kim Yang-gon’s death only makes the puzzle more complex. Increasing contact with Pyongyang is the best way to begin to understand the North and influence its future.

History weighs heavily on East Asia. To Washington’s enduring frustration, its two most important democratic allies, Japan and the Republic of Korea, have been at odds for decades.

The divergence between the two grew especially sharp over the last couple of years, during which ties between Seoul and the People’s Republic of China notably warmed while those between Japan and the PRC sharply deteriorated, driven by the dispute over the Senkaku/Diaoyu Islands. Moreover, South Korea had its own contentious territorial contretemps with Tokyo.

Both parties deserved blame. The South was determined to hang onto emotional grievances—serious and real, but long past. Japan insisted on justifying indefensible actions whose perpetrators were long dead. Destructive domestic politics ruled.

At the end of December, however, the two countries tried to put the issue of the “comfort women” behind them. Beginning in 1931, with Japanese military operations in China, Tokyo created brothels for its soldiers. For years Japanese officials insisted that the women were prostitute voluntarily engaged, despite evident coercion.

Now Japan has apologized and agreed to create a compensation fund. In return, the ROK promised to drop the matter and “address” the issue of the private statue of a young girl, representing the comfort women, facing the Japanese embassy in Seoul.

It’s an important step forward, but does not yet close the issue. Both leaders have been called “traitors” by domestic critics. South Koreans have protested and termed the accord “humiliating.”

Unsurprisingly, the PRC denounced the agreement. Beijing cited the plight of Chinese comfort women. Japan must “face up to its history and take concrete actions to win the trust of its Asian neighbors and the international community,” said Foreign Ministry spokesman Lu Kang.

Of course, that is precisely what Tokyo has been doing. It previously moved ahead with relations with India. Manilla has publicly urged Japan to do more to promote regional security. Tensions never have been as great with Taiwan and Australia.

Most interesting are the implications for the Japan-Korea-China triangle. An unnamed State Department official called the agreement “strategically consequential.”

While Tokyo and the ROK have been at odds, Beijing and Seoul have ostentatiously embraced, with President Park meeting PRC President Xi-Jinping several times. This has simultaneously hindered U.S. efforts to isolate and contain China and added pressure on North Korea to moderate its behavior.

The PRC’s warm feelings toward South Korea may ebb a bit as a result of the pact, but Beijing cannot easily criticize another government—the sort of interference with internal affairs which it routinely decries when directed in its direction. Moreover, the bilateral economic ties are too important great for the two nations to drift apart.

While the pact opens the way for expanded military cooperation between the ROK and Seoul, President Park is unpopular and nearing the end of her term. More important, the two nations face very different security situations.

In contrast to Japan, the South fears North Korea more than the PRC. The historical and territorial disputes between Beijing and South Korea are very unlikely to lead to war.

Thus, irrespective of Washington’s wishes, it makes sense for Seoul to continue to prioritize its relationship with China over that with Tokyo. In contrast, Japan has little desire to get sucked into a land war on the Korean peninsula, while worrying mightily about Beijing’s naval advances.

Only if the ROK appears to actively join America in seeking to contain the PRC might Chinese-South Korean relations suffer. And Seoul is unlikely to make that mistake. The giant next door will always be there. The U.S. will remain the world’s leading power for years, but no longer can afford to police the globe.

As I point out in National Interest: “The South Korean-Japanese settlement is a positive step. But while it will ease tensions between America’s two top allies, it isn’t likely to turn their relationship into a new anti-China axis. Washington’s job in East Asia has gotten easier, but only somewhat.”

There are no good guys to cheer for in the militia takeover of an Oregon federal office building on January 2. The ostensible issue is the re-sentencing of two Oregon ranchers–Dwight Hammond and son Steven Hammond–for arson, while the underlying issue is federal land ownership of much of the West.

The arson fires lit by the Hammonds in 2001 and 2006 may have actually represented sensible land management, but the Hammonds lost the high ground by their failure to coordinate with the government agency managing the land they burned. Prescribed fire is a tool used to improve wildlife habitat, increase land productivity, and control wildfire. The 2001 fire aimed at improving productivity, but the government says the ranchers didn’t bother informing the Bureau of Land Management (BLM) they planned to burn until two hours after they lit the fire. While they lit the fire on their own land, it escaped and burned 139 acres of federal land, but that burning probably did not do serious damage to the grassland and they put the fire out themselves.

The 2006 fire was more questionable. A wildfire was burning on BLM land near the Hammond’s ranch, so to defend their land they lit a backfire on their own land. That would be standard procedure except, again, they didn’t tell anyone and when their fire crossed over onto federal land it endangered firefighters who the Hammonds apparently knew were located between the wildfire and their backfire. Due to severe fire hazards, the county had a no-burn rule which the Hammonds apparently violated, but this was hardly a terrorist act.

For these actions, they were sentenced to a year in jail, which possibly was appropriate considering they endangered people’s lives. But the federal government, citing an anti-terrorism law that sets a mandatory minimum sentence of five years for arson on federal land, demanded that they be re-sentenced. Having already served the first year, they were scheduled to be re-incarcerated for four more years after the New Year. It is always disturbing when the federal government uses laws aimed at foreign terrorists to oppress citizens who have political differences of opinion with government policy. The Hammonds, who have paid $400,000 in fine related to the fires they lit, probably should not have been re-sentenced to four more years in prison, but that’s a problem with mandatory sentencing laws and overly aggressive prosecutors, not federal land management.

Enter Ammon Bundy, son of Cliven Bundy, the Nevada rancher whose use of BLM land in that state became a hot issue in 2014. The Bundys and their allies believe that federal land should belong to the states or the ranchers themselves since the ranchers have grazed their cattle on it for so many generations. Thus, they ignored limits the BLM placed on the number of cattle they could graze on federal land near their ranch and refused to pay legally mandated fees for grazing those cattle.

Section 8 of the Constitution authorizes the federal government to control land in the nation’s capital, but nowhere else. If you believe that any power not granted to the federal government belongs to the states, then the Bundys are correct. However, the federal government has owned land outside the capital since 1790, when Alexander Hamilton convinced the states to yield land west of the Appalachians in exchange for federal assumptions of state debt. A few years later, Thomas Jefferson himself questioned the constitutionality of the Louisiana Purchase even as he persuaded the Senate to approve it 

The Supreme Court has heard hundreds of cases involving federal land and has never ruled that the Constitution does not allow the federal government to own land in the West. So any battle against federal ownership would have to fought politically, not in the courts.

That may be what Bundy and his friends think they are doing. Just as tree sitters raised public awareness of issues related to old-growth forests in the 1980s, the “militia’s” occupation of a Fish & Wildlife Service building that was closed for the holidays might be a way to raise public awareness of alleged federal mistreatment of ranchers. The problem with this tactic is that 90 percent of western residents are urbanites who are much more likely to sympathize with spotted owls and sandhill cranes than with cattle and sheep.

Decades ago, ranchers grazing their livestock on public lands paid enough fees to earn the Forest Service a profit. But in 1978, ranchers persuaded Congress to adopt a grazing fee formula on national forests and BLM lands that is designed to guarantee ranchers a profit even as grazing costs taxpayers more than $100 million per year. Thus, many people, including some agency officials, view the ranchers as freeloaders and their livestock as invasive species damaging the habitat for native fish and wildlife.

The Hammonds shouldn’t have lit the 2006 fire without coordinating with the BLM. The federal government shouldn’t have prosecuted them for prescribed burning using an anti-terrorist law. The Bundys shouldn’t have occupied the Fish & Wildlife Service office.

Property rights advocates who want to change public views need to find ranchers more appealing than the Bundys, who want to overgraze other people’s land without paying for the right to do so, or the Hammonds, whose unauthorized fire on federal lands threatened firefighters’ lives. Without better representatives–preferably ones willing to pay their own way and not rely on taxpayer subsidies–they won’t be able to capture the hearts and minds of the American people, which means the future of ranchers who depend on federal lands is dim.

A standard argument for outlawing drugs is that such substances are “addictive.”  As a matter of science, this claim is often over-stated: using alcohol, caffeine, cigarettes, or heroin a few times does NOT generate physiological or psychological dependence; such effects kick in only after repeated, long-term use (and even then, far from universally).  That said, all these substances - and many more - can indeed be addictive.

But a crucial question is: so what?  Take the caffeine example. Hundreds of millions of people around the globe - perhaps billions - are addicted to tea, coffee, or diet coke, yet few consider this an issue for health or policy.  Why? Because long-term, heavy use of caffeine does not seem to have major undesired side effects.  Indeed, much of the world celebrates its coffee and tea habit, praising the culinary enjoyment and social interaction that accompanies or even arises from this addiction.

So for those who believe government should  ban “harmful products,” the question should not be whether a substance is addictive but whether long-term, heavy use harms health, productivity, or other aspects of life.  I will not discuss this issue here for alcohol, tobacco, or heroin, other than to suggest that the two substances with the worst sides effects from regular use (cirrhosis for alcohol and lung cancer for cigarettes) are currently legal while heroin, with much less obvious or dramatic side effects, is not.  So much for rational public policy.

Instead, as illustration of misguided thinking about addiction, consider this passage from a recent New York Times article:

DELRAY BEACH, Fla. — Three shaky months into recovery from heroin addiction, Dariya Pankova found something to ease her withdrawal. A local nonalcoholic bar sold a brewed beverage that soothed her brain and body much as narcotics had. A perfect solution — before it backfired.

Ms. Pankova grew addicted to the beverage itself. She drank more and more, awakened her cravings for the stronger high of heroin, and relapsed. Only during another stay in rehab did Ms. Pankova learn that the drink’s primary ingredient, a Southeast Asian leaf called kratom, affects the brain like an opiate and can be addictive, too.

Nowhere does the article cite evidence that Kratom addiction has large or common side effects; rather, the article takes as given that addiction is undesirable per se.  That makes no sense, as the caffeine example shows.

So if some people prefer Kratom addiction to heroin addiction - or vice versa - why should policy interfere?

After years of embarrassing trade litigation and the threat of imminent sanctions by Canada and Mexico, Congress has finally repealed federal country of origin labeling regulations for meat.  Disguised as a way to help consumers, the COOL law was actually designed to protect a small segment of the U.S. cattle industry at the expense of everyone else.  But as this unfortunate episode comes to an end, it’s important to remember that disguised regulatory protectionism remains a major problem in the United States.

In the olden days, uncompetitive U.S. industries seeking protection from import competition would just lobby Congress for higher tariffs.  It works differently than that today in part due to international trade rules but also because there’s a broad consensus among economists and intellectuals that trade barriers harm our economy.  Still, our government is run by politicians who will always be willing to sacrifice the good of the public to help special interests.

Since transparent pleas for protection have gone out of vogue, businesses achieve the same aim by lobbying in favor of public interest regulation that disproportionately disadvantages their competitors.  This dynamic where altruistic motivation meets rent-seeking cronyism can be a powerful driver of public policy.  And when the biggest losers are foreign businesses, there’s very little organized resistance. 

The consequences of disguised regulatory protectionism are the same as imposing tariffs—higher prices and less variety for consumers, less opportunity and lower wages for workers.  While it may be impossible to count up all instances of regulatory protectionism, the pernicious nature of the problem can be seen clearly if we look at a few high-profile examples.

Dolphin-Safe Fraud

American consumers rely on “Dolphin Safe” labels to ensure that their tuna purchases don’t contribute to harmful fishing practices.  By defining what “dolphin safe” means, the federal government ostensibly ensures that the label is reliable.  In reality, the regulations benefit three major U.S. tuna companies by making it nearly impossible for their Mexican competitors to sell tuna in the United States. 

Hidden within the regulations is a double standard that gives those U.S. companies access to the label without having to meet stringent reporting or verification requirements.  It also prohibits the Mexican tuna companies from using any label that makes claims about how their fishing methods impact dolphins.  The law actually makes it illegal to provide consumers with information that some special interests don’t want them to have.

Big Tobacco’s Favorite Anti-Smoking Law

The 2009 Family Smoking Prevention and Tobacco Control Act greatly expanded federal control over people who smoke.  One of the law’s key features was a ban on flavored cigarettes, which anti-smoking activists claimed were designed to entice “children” to take up smoking. 

At the time the law went into effect, there were in fact only two kinds of flavored cigarettes on the market—menthols, which are predominantly made in the United States by American companies, and clove cigarettes, which come from Indonesia.  The law exempted menthols from the ban, so that the only cigarettes taken off the market were foreign.  The flavored cigarette ban actually benefited the very same tobacco companies that campaigners constantly malign by cementing their dominance of the flavored cigarette market.

To get a sense of just how senseless the menthol exception is from a tobacco control standpoint, it’s worth noting that 30% of American smokers regularly smoke menthols, while cloves are a niche product with miniscule market share.  Every other country with a ban on flavored cigarettes has included menthols.

Both of these protectionist regulations have been the subject of international disputes at the World Trade Organization.  In fact, just like with COOL, the United States lost these cases.  The threat of retaliation from Canada and Mexico prompted Congress to fix the worst parts of its court-of-origin labeling law, but the prospects are not as bright for the others.  Indonesia lacked the economic clout to impose sanctions on the United States, so when Washington refused to comply, Indonesia agreed to “settle” the case by dropping its complaint in exchange for nothing.  The WTO will soon determine the level of sanctions Mexico can impose in retaliation since the United States refused to comply in the tuna case.

Crony Catfish

Perhaps the most obvious example of disguised protectionism in recent years has been the process of moving catfish inspection from the Food and Drug Administration to the U.S. Department of Agriculture.  Why does this matter?  Because the USDA’s inspection service would place a moratorium on catfish imports until it certifies individual farming facilities.  That inspection can take years.  Consumers would face drastically higher prices.  And there’s no evidence that this new catfish inspection regime will improve the safety of catfish, which are not especially unsafe. 

Aside from the lack of scientific justification, what makes the catfish regulations a particularly obvious example of protectionist regulation is that its most ardent supporters are politicians from states with lots of catfish farms.  Those catfish farmers don’t like having to share the U.S. market with their Vietnamese and Chinese counterparts, and they’re willing to undergo more rigorous testing of their own facilities if it keeps out the competition. 

The good news is that the Obama Administration may have solved the catfish problem by agreeing to allow a grace period for Vietnamese catfish as part of the as part of the Trans-Pacific Partnership negotiations.  The grace period will let catfish imports continue for 18 months while the inspections take place.  This significantly reduces the possibility of a “catfish cliff” that would’ve caused a dramatic disruption for U.S. consumers and retailers.  It may also prevent the United States from having to defend another ridiculous regulation in a WTO dispute settlement case, which it would likely lose.

Finding a Solution

Unfortunately, these examples show how political forces are naturally aligned to disadvantage consumers.  When companies are asking Congress to regulate their own industry, you can be certain the result will not benefit consumers.  Trade negotiations and dispute settlement can surely help eliminate some forms of regulatory protectionism, but the results are mixed. 

Regulatory protectionism will persist until the public develops a greater skepticism for regulatory solutions to problems better dealt with in a free market.  Labeling laws impose a monopoly on definitions where competition among different labels would be more beneficial.  Paternalistic product bans are more likely to force consumers to expend extra energy to get what they want than to alter behavior.  And consumers are in a much better position than governments to respond reasonably to potential food safety scares.

As Sallie James and I wrote in our 2012 Cato Policy Analysis about the threat of regulatory protectionism:

Policymakers, commentators, and the public must be more willing to look past altruistic defenses of regulatory proposals to find the true winners and losers. When the winner is not consumers, then it must serve other ends; when the end is consumers, the regulation is probably unnecessary anyway.

On Wednesday January 13 at noon, Leif Wenar will be at Cato to discuss his new book, Blood Oil: Tyrants, Violence, and the Rules that Run the World. The book explores one of the great moral challenges of our time. That is, the massive benefits from development and global connectedness—in which we are all inescapably complicit—also enriched, enabled, and emboldened people who systematically made the lives of others desperate and miserable.

This cycle rolls on seemingly unabated. Indeed, the world’s dependence on oil and other natural resources continues to fuel violent conflicts and fund a large fraction of the world’s autocrats. But Wenar provides hope. After detailing the myriad negative consequences of resource wealth, Blood Oil outlines how “citizens, consumers, and leaders can act today to avert tomorrow’s crises — and how we can together create a more united human future.”

An important and timely book, Blood Oil has caught the eye of highly distinguished scholars. Angus Deaton of Princeton University and the 2015 Nobel Prize Winner in Economics, stated that “Wenar has written the indispensable guide, combining politics, economics, and ethics to tell us just how and why we are all involved, and what we ought to do to make the world a better place.” Harvard’s Steven Pinker, author of The Better Angels of Our Nature, called Blood Oil “one of those rare manifestos that awaken people to a pressing ethical issue by changing the way they see the world.” And while noting that “philosophers rarely write big books that could change the world,” Princeton’s Peter Singer finds that “Blood Oil is such a book.”

Wenar, who is Chair of Philosophy and Law at King’s College, will be joined by Bruce W. Jentleson of Duke University and the Library of Congress, and my Cato colleagues Ian Vasquez and Christopher Preble. The forum is open to public, and we hope that you can join what is sure to be a lively and informative discussion.

Click here to register or to learn more.

Last week, The National Interest (Online) published a critique of U.S. grand strategy in Asia by my friend and colleague John Glaser. Harry Kazianis, a former editor at TNI who now divides his time between the Potomac Foundation and the Center for the National Interest, posted a rejoinder and Glaser has since responded here.

Together, the pieces reveal a useful debate over primacy, writ large, and all three are worth a careful read.

Calling Glaser’s idea “Unthinkable,” Kazianis asked:

And what’s so bad about America’s so-called primacy in Asia in the first place? Glaser, at least in my view, makes it sound like the Asia-Pacific is some large American vassal state that it should relinquish control of. It should be clear for anyone to see that Washington is the provider of many important net public goods—like those all-important security alliances, nuclear umbrellas and protected sea lanes that allow trade to thrive.

His clinching argument, it seems, is that we should continue with our present grand strategy in Asia (and elsewhere, implicitly) because it’s the strategy that we have, and it’s worked fairly well. Why change now?

Kazianis quotes former Under Secretary of Defense for Policy Eric Edelman who, in 2010, offered up this fairly typical defense of U.S. grand strategy. “The concept of Primacy,” Edelman wrote, in a paper (.pdf) for the Center for Strategic and Budgetary Assessments:

has underpinned U.S. grand strategy since the end of the Cold War because no other nation was able to provide the collective public goods that have upheld the security of the international system and enabled a period of dramatically increased global economic activity and prosperity. Both the United States and the global system have benefitted from that circumstance.

I would take issue with two of Edelman’s claims, and, by extension, those of Kazianis and other of primacy’s defenders:

1) Correlation is not causation. While it is true that the long peace has coincided with U.S. primacy, that does not prove that U.S. primacy was the sole (or even main) cause of it. Some attempt should be made to account for the other possible explanations for the absence of great power war since 1945, e.g. nuclear weapons, economic interdependence, and the end of formal empires.

2) Circumstances change. Even if it were true that U.S. primacy was the main factor explaining the security of the international system during the last quarter century, to describe what we have done for the roughly 25 years since the end of the Cold War does not, by itself, justify what we should do for the next 25 years, or more. The U.S. share of global economic output has fallen sharply since the end of the Cold War. When looking at GDP by Purchasing Power Parity in the IMF’s most recent data set, for example, the U.S. share stood at 22.5 percent in 1989; the estimate for 2015 is 15.9 percent. Whatever statistic one chooses to use, it is clear that the burden is growing heavier on a single country. And those trends are unlikely to reverse themselves. The U.S. share is expected to dip below 15 percent by 2020.

I will stipulate that no single country could have done what the United States did in terms of providing global public goods in 1995 – or 1975 or 1955, for that matter. I doubt that a single country – including the United States – can do it forever. Forever is a long time.

It may be true that some number of countries – be it 5 or 10 or 50 – might be able to collectively muster comparable capabilities in the future to ensure that the burdens of global governance don’t fall exclusively on the shoulders of American troops and American taxpayers.

We are unlikely to reach that possible alternative future of greater burden sharing, however, if the United States clings to its present grand strategy and continues to discourage other countries from defending themselves and their core interests.

Nearly 40 years ago, the Supreme Court held in Wooley v. Maynard (1977)—the famous “Live Free or Die” case from New Hampshire—that the First Amendment protects against being compelled to convey a message displayed on a state-issued license plate. Nevertheless, the Denver-based U.S. Court of Appeals for the Tenth Circuit recently held that someone could not object to an image on Oklahoma’s license plate of the Scared Rain Arrow statue, which depicts a young Apache warrior shooting an arrow into the sky as a prayer for rain.

The court’s decision turned on drawing a line between speech in the form of words and other kinds of expression. Keith Cressman had objected to the Oklahoma tag because of the history and origin of the Sacred Rain Arrow statue. The Tenth Circuit held that Cressman’s objection was not entitled to full First Amendment protection because images are not “pure speech” and must be analyzed under the less rigorous “symbolic speech” test.

The term “symbolic speech” may be an unfortunate misnomer—it doesn’t mean speech via symbols—but the Supreme Court has only ever used the phrase to refer to “expressive conduct.” That is, “symbolic speech” is conduct that conveys a message, such as burning one’s draft card in protest of war.

The Supreme Court has always regarded non-conduct forms of expression as “pure speech.” And that’s exactly as it should be: Government has no more ability to ban bumper stickers displaying a cross than ones referencing “John 3:16,” and the same must be true for ones depicting Da Vinci’s painting “The Last Supper.” Despite the Court’s consistency on this point, lower courts are split. While the Ninth Circuit has extended full First Amendment protection to tattoos and even the process of making them and the business of tattooing, other circuits have suggested that “pure speech” is limited to words. And of course the Tenth Circuit has now said that the First Amendment protects as symbolic speech at best.

But the Tenth Circuit’s ruling did even more harm to the First Amendment than that, because the court also held that, regardless of what kind of speech the image was, the First Amendment didn’t support Cressman because he didn’t object to the actual message Oklahoma was sending; his understanding of the image didn’t align with the state’s. That holding is particularly problematic when the speech at issue is visual art, which is inherently open to interpretation and has no authoritative interpretation.

Consider, for example, Cloud Gate—better known as the Chicago Bean—whose sculptor sought to convey themes of immateriality, spirituality, and the tension between the masculine and the feminine. But most people who take selfies in front of the Bean have no idea what it’s meant to convey, or might think it has to do with distorted reflection and the like. The freedom of speech—even the freedom to think—would be threatened if compelled-speech cases hinged on whether plaintiffs “really” disagreed with the “actual” message the government was sending and thus could be compelled to speak because they opposed it for their own “wrong” reasons.

In the quintessential compelled-speech case, West Virginia State Board of Education v. Barnette (1943), the Supreme Court held that the First Amendment protected Jehovah’s Witnesses having to salute the American flag and recite the Pledge of Allegiance. Surely the Constitution would have likewise protected an atheist who opposed the flag salute because the stars represent the heavens and man’s divine goal—even though most people today don’t know that history.

But the Tenth Circuit’s decision said otherwise: The First Amendment would have protected Cressman if he objected to Oklahoma’s Native American message but did not protect him when his objection was based on what it considered to be a misunderstanding about the Sacred Rain Arrow statue. As in religious-freedom cases, courts shouldn’t evaluate the reasons behind an objection to compelled speech.

Mr. Cressman has asked the Supreme Court to review his case, and Cato has filed an amicus brief making the above arguments in support of that petition. 

BEIRUT—“Syrians are everywhere,” an aid worker told me. “Everybody is poor now.” Well over a million Syrians are scattered across Lebanon, many in small “tented settlements.” Almost half live in sub-standard housing; many lack fuel and warm clothes for winter.

Jordan hosts even more Syrians at greater cost. (So does Turkey, though it is much larger and wealthier.) Six of every seven refugees live in poverty.

Almost five years of civil war have killed a quarter of a million Syrians, wrecked the country, created economic catastrophe, displaced millions, and left virtually no one unaffected. As many as five million people have fled to surrounding countries.

Thus, the stampede of Syrian migrants to Europe should not surprise the rest of the world. Americans traditionally have offered sanctuary to those fleeing repression and war. But, apparently, not now.

Private relief groups offer the best means for Americans to help Syrians in need. There are many worthy organizations. Earlier this year, I traveled with International Orthodox Christian Charities to Lebanon and Jordan to view several aid projects. Since 2012, the charity has helped more than 3.2 million Syrians throughout the Middle East.

Much of IOCC’s work is conducted in Syria. More than half Syria’s population now is estimated to require outside aid.

Assistance runs the gamut, starting with emergency food, infant care, clothing, and bedding. IOCC repairs sanitation and water systems, helps provide shelter, and supports education.

Alas, the longer the war rages, the greater the destruction. One aid official lamented: “Buildings can be rebuilt. You cannot rebuild human beings.”

In Lebanon, I visited a project focused on mother-child nutrition, from conception up to five years of age. The “public health system was overwhelmed by refugees,” explained Rana Hage of IOCC.

Children are screened, regularly measured and weighed, and provided with nutritional supplements, high-protein foods, and milk. Tens of thousands of children have been screened and hundreds have been rescued from malnutrition.

I visited a community kitchen, one of two that helps feed 1750 people. IOCC underwrote a large, efficient cooking facility and hired local women to cook. Pots of food are distributed to needy refugee and resident families.

The charity also runs the Water, Sanitation, and Hygiene program (WASH) at two refugee encampments with more than 7,500 people. I went to one of the settlements where IOCC is seeking to develop efficient and safe water and waste systems.

The agency also was establishing water/wash facilities while providing hygiene education to reduce disease. Here, as elsewhere, the IOCC hires staff from areas being served. Unfortunately, the job is never done. Another aid worker said that the camp is “constantly changing as more people come.”

Jordan may be less fragile than Lebanon, but it suffers greatly as well. Some 80,000 people are crowded into Jordan’s Zaatari Refugee Camp, sitting only a few miles from Syria.

IOCC runs a program to prevent and treat lice, especially affecting children. The charity has distributed anti-lice kits to more than 20,000 kids. There’s nothing glamorous about this sort of work, but it meets a critical need. Health coordinator Samer Makahleh explained: “To fill gaps we go to outside partners like IOCC.”

With most refugees living outside the camps, IOCC works outside as well, even making home visits for those unable to travel. The group provides everything from school uniforms—required to attend Jordanian schools—to infant supplies and household items. IOCC also provides vocational training and English instruction.

IOCC’s identity is Christian, but it serves the needy without discrimination. In the Middle East, the charity mostly aids Muslims.

Of course, even the best humanitarian efforts can only do so much. One top IOCC official worried: “Funding is going to diminish next year. Donors are not going to be there.”

As I wrote in Forbes: “Unless more Americans and other people of good will around the world step up to address Syria’s humanitarian disaster. Centuries ago Christ called on his listeners to help the ‘least among us.’ We must meet that challenge today.”

(WASH)

Christians in America remain free to celebrate Christmas, but not tens or perhaps hundreds of millions of believers abroad. Murder by groups such as the Islamic State and Boko Haram topped pervasive persecution and discrimination in many nations.

On Christmas Eve, senator and presidential contender Marco Rubio penned an article decrying the lack of “attention paid to the plight of these Christian communities in peril.” He criticized the Obama administration and called for action.

Undoubtedly, Rubio’s concern is genuine. However, the GOP’s policies have hurt and will continue to hurt Christians around the world.

No single action was as injurious to Middle Eastern Christians as the invasion of Iraq. American intervention triggered a sectarian conflict which displaced hundreds of thousands of Christians, spawned a new al-Qaeda organization which morphed into the Islamic State, and tolerated ruthless Shia rule which encouraged Baathists and Sunnis to support ISIL. Absent George W. Bush’s Iraq folly, backed by Rubio and most of his competitors, the Islamic State wouldn’t exist.

Most of the usual GOP suspects, starting with Rubio, also backed the Obama administration’s decision to intervene in the Libyan civil war. This misbegotten policy left two competing governments and multiple armed militias in its wake. Worse still, it left a vacuum partly filled by the Islamic State, which publicly murdered Egyptian Copts who were working in Libya.

Syria is engulfed by a hideous civil war. Bashar al-Assad is a secular dictator who uses fear of potential religious persecution for his political benefit. But Christians and other religious minorities have good reason to be terrified about Syria après Assad. After all, many of them fled Iraq where they’ve seen the ending of the movie: it isn’t pretty.

Should Rubio & Co. succeed in ousting Assad, the likely fate of Christians is grim. The State Department noted: In Syria “ISIL required Christians to convert, flee, pay a special tax, or face execution in territory it controls, and systematically destroyed churches, Shia shrines, and other religious sites.”

On a recent trip to Jordan and Lebanon, I met with several Christian aid workers active in Syria. Most complained about U.S. policy targeting Assad. One said simply, “You Americans don’t know what you are doing.”

Washington’s reflexive support of ruthless Islamic regimes throughout the Middle East–endorsed by Rubio and the rest of the GOP presidential gaggle–is almost as bad. For instance, despite complaining about foreign blasphemy laws, Rubio declared that the U.S. must “reinforce our alliances.” Some of his Republican competitors are even more insistent.

Yet Saudi Arabia is essentially a totalitarian state, without a single operating church (or synagogue or temple) for non-Muslims. The State Department wrote, “the government harassed, detained, arrested, and occasionally deported some foreign residents who participated in private non-Muslim religious activities.”

Coptic Christians remain victims of persecution, discrimination, and violence in Egypt, even after the military ouster of the Muslim-dominated government of Mohamed Morsi.

I wrote in Forbes, “Americans should remember the plight of Middle East Christians. At the same time, voters should remember that Republican support for promiscuous military intervention and Islamic dictators did much to bring down disaster upon Middle Eastern Christians.”

Unfortunately, doing more of the same in the Mideast, as Rubio proposed, would only yield the same result. He should put helping persecuted Christians before promoting misbegotten neoconservative crusades.

, endorsed by Rubio and the rest of the GOP presidential gaggle,

In this past summer’s controversy over whether Alexander Hamilton’s image should be replaced on the $10 bill, outraged commentators made many extravagant claims on behalf of Hamilton’s wisdom in matters of money and banking policy. For example, Ben Bernanke blogged that “Hamilton was without doubt the best and most foresighted economic policymaker in U.S. history,” citing among other evidence that “over the objections of Thomas Jefferson and James Madison, Hamilton also oversaw the chartering in 1791 of the First Bank of the United States, which was to serve as a central bank and would be a precursor of the Federal Reserve System.”

Now that the controversy has cooled we can take a more informed perspective. There is no denying Hamilton’s importance and influence, or that his life story is compelling, as evidenced by the sold-out hip-hop musical Hamilton currently running on Broadway. But the wisdom of his policy advice, and the merits of the First Bank of the United States (BUS), are another matter.

To describe Hamilton’s Bank accurately, one should note that Congress owned one fifth of its shares, and chartered it exclusively, that is, made it the only bank allowed by law to branch nationwide. (State governments chartered banks, but each state denied entry to banks with charters from other states.) The BUS monopoly franchise was among the chief of the objections of Jefferson and Madison, and deservedly so. One nationwide bank is better than none, but many is better than one. Creating a legal monopoly where open competition could and should prevail is hardly a mark of good or foresighted economic policy.

Many modern-day historians miss this point, and laud Hamilton as a man of unerring financial genius. Robert E. Wright and David J. Cowen, in their 2006 book Financial Founding Fathers: The Men Who Made America Rich, write of Hamilton’s “creative genius, as he became the architect and chief advocate of a powerful national bank.” They claim that “Hamilton’s thought was often far in advance of that of most of his contemporaries,” as when he was early to advocate a national bank. They quote Hamilton’s 1781 statement that “in a National Bank alone we can find the ingredients to constitute a wholesome, solid and beneficial paper credit,” and add: “He was correct.” They call Hamilton’s 1790 Report on the Bank “a masterpiece that cogently explained the importance of banks in a capitalist economy.” They credit Hamilton with the following argument, as though it made good sense: “Next, he stressed that all the great powers of Europe possessed public banks and were indebted to them for successful trade and commerce. The implications of the comparison were clear: if young America wanted to join the ranks of the elite powers, it too would have to create a banking infrastructure.” In much the same way, Hamilton would elsewhere argue that if the leading European nations have protective tariffs, we should have them too. The error should be plain.

Hamilton modeled the Bank of the United States after the Bank of England. But in truth, the monopoly privileges of the BOE and other national banks of Europe were badges of mercantilism, and drags on financial and economic activity by comparison with free competition in banking services. A more wholesome, solid, and beneficial credit system could be observed in Scotland at the time, with free entry into nationwide branch banking. Hamilton’s “masterpiece” was oblivious to the benefits of competition in banking, much less the separation of banking and state. In his banking policy views, as in his tariff policy views, Hamilton was a retrograde mercantilist.

Wright and Cowen note that in drafting his plan for the Bank, “Hamilton also drew on Adam Smith’s seminal work, An Inquiry into the Nature and Causes of the Wealth of Nations, where financial matters, including the advantages of banks and bank money, were amply and ably discussed. Hamilton must have brimmed with excitement as he read Smith declare that ‘the trade of Scotland has more than quadrupled since the first erection of the two publick banks at Edinburgh.’” They should also have noted that in his able discussion Smith — the penetrating Scottish critic of mercantilism — did not defend monopoly privileges in banking, but argued for free competition (see below). The “publick” banks of Edinburgh were chartered non-exclusively (note that Smith refers to the two earliest; later there would be a third plus dozens of non-chartered joint-stock banks that were similarly sized and equally branched nationwide), and were completely privately owned. Nor were they great engines of the state, as the Bank of England was according to Smith. Unlike the BOE or the BUS, which were created in large part to lend the national government money, the Bank of Scotland was actually prohibited by its 1695 charter from lending to the government.

The policy conclusion of Smith’s chapter on banking (Book II, chapter II of the Wealth of Nations) bears quoting here:

The late multiplication of banking companies in both parts of the United Kingdom, an event by which many people have been much alarmed, instead of diminishing, increases the security of the public. … By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things, must sometimes happen, becomes of less consequence to the public. This free competition, too, obliges all bankers to be more liberal in their dealings with their customers, lest their rivals should carry them away. In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so.

In light of Smith’s clarity and correctness here, it is actually a telling criticism of Hamilton to note that he read Smith on banking, because it means that he ought to have known better when he promoted monopoly privileges. Although Hamilton’s Report on the Bank alludes to Smith’s understanding of how banking promotes the wealth of a nation, Hamilton either didn’t understand Smith’s policy message — the more banks competing the better — or rejected it as not helpful to his own mission of empowering the federal government, for which his chosen means was to forge an alliance between the government and a new privileged financial elite.[1] Smith’s policy here was wise, and Hamilton’s not.

In brief, contrary to what is nearly the conventional wisdom, Alexander Hamilton was not “far in advance” of contemporary thinking on banking. He was decidedly retrograde in pushing for an exclusive nationwide bank with a sweetheart government deal. He was not a creative policy genius so much as a persuasive second-hand dealer in discredited mercantilist ideas.

____________________________
[1]
Here I draw upon a dissertation chapter, unfortunately not available online, by Nicholas Curott.

[Cross-posted from Alt-M.org]

Shortly before Christmas, the Department of Homeland Security (DHS) released a report detailing deportations (henceforth “removals”) conducted by Immigration and Customs Enforcement (ICE) during fiscal year 2015.  Below I present the data on removals in historical context – combined with information from the Migration Policy Institute and Pew.  See my previous writing on this topic here, here, and here.       

ICE deported 69,473 unauthorized immigrants from the interior of the United States in 2015, down from a peak of 188,422 in 2011.  Removals from the interior are distinct from removals of recent border crossers.  Removals from the interior peaked during the Obama administration and have since fallen to a level similar to that of 2005 and 2006. 

Source: MPI and DHS.

The number of interior removals during the last six years of the Bush administration (the first two years are unavailable so far) was 475,103. The Obama administration has removed unauthorized immigrants about 1,019,637 from the interior of the United States during the seven full years of his administration.  

President Bush’s administration removed an average of about 276,000 unauthorized immigrants per year for the years available and an average of 79,000 of them annually were interior removals.  President Obama’s administration has removed an average of 381,101 unauthorized immigrants a year, an average of 145,662 of them annually were interior removals.  There were a large numbers of unknowns during the Bush administration that decreased as the years progressed. 

 

Source: MPI and DHS.

The Obama administration’s expansion then slashing of interior enforcement is not the whole story.  The best way to measure the intensity of immigration enforcement is to look at the percentage of the unauthorized immigrant population removed in each year.  Based on estimates of the total size of the unauthorized immigrant population that I updated to reflect Pew’s most recent estimates, 0.61 percent of that population was removed from the interior of the United States in 2015 – down from 0.9 percent in 2014.  Interior removals as a percent of the unathorized population peaked at 1.64 percent in 2011.  That is a substantial decrease in interior removals down from President Obama’s previous high. 

Source: MPI, Department of Homeland Security, Pew, Author’s Calculations.

For every year for which data was available, the Bush administration removed an average of 0.71 percent of the interior unauthorized immigrant population.  President Obama’s administration has removed an average of 1.29 percent of the interior unauthorized immigrant population every year of his presidency – less than twice the rate as under the Bush administration.  Even when focusing on interior removals, President Obama’s entire administration has out-deported President Bush based on the data available. 

The unauthorized immigrant population increased under the Bush administration from 9.4 million in 2001 to a peak of 12.2 million in 2007 and then declined to 11.7 million in 2008.  During Obama’s administration, the number of unauthorized immigrants has, so far, stayed at or below 11.5 million.   The slow economy during the Obama years as well as a shift of would-be unauthorized Mexican immigrants onto temporary work visas stopped the growth of the illegal population. 

Obama’s interior removal statistics show a downward trend beginning in 2012 through to 2015 with the number of interior removals falling by over 63 percent.  The Obama administration has also focused immigration enforcement on criminal offenders (not all unlawful immigrants are criminals).  During the Obama administration, 56.7 percent of all removals have been those convicted of a criminal offense, including immigration crimes.  In 2015, 92 percent of criminal removals were either priority 1 (threats to national security, border security, and public safety) or priority 2 (misdemeanants or new immigration violators).  Many of those “criminals” removed fit the strict legal definition of the word but hardly comport with the popular image of criminals.

Only the last year of the Bush administration is available for comparison but it shows that only 31 percent of those removed were criminals in 2008. 

The Obama administration has cut interior immigration enforcement down to the level of enforcement that existed from 2005 to 2006 but has refocused removal efforts to target criminals.  President Obama’s expansion of interior immigration enforcement effort that peaked in 2011 has reversed and is returning to Bush-era levels.         

I wrote yesterday that governments want to eliminate cash in order to make it easier to squeeze more money from taxpayers.

But that’s not the only reason why politicians are interested in banning paper money and coins.

They also are worried that paper money inhibits the government’s ability to “stimulate” the economy with artificially low interest rates. Simply stated, they’ve already pushed interest rates close to zero and haven’t gotten the desired effect of more growth, so the thinking in official circles is that if you could implement negative interest rates, people could be pushed to be good little Keynesians because any money they have in their accounts would be losing value.

I’m not joking.

Here’s some of what Kenneth Rogoff, a professor at Harvard and a former economist at the International Monetary Fund, wrote for the U.K.-based Financial Times.

Getting rid of physical currency and replacing it with electronic money would…eliminate the zero bound on policy interest rates that has handcuffed central banks since the financial crisis. At present, if central banks try setting rates too far below zero, people will start bailing out into cash.

And here are some passages from an editorial that also was published in the FT.

…authorities would do well to consider the arguments for phasing out their use as another “barbarous relic”…even a little physical currency can cause a lot of distortion to the economic system. The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy.

Meanwhile, Bloomberg reports that the Willem Buiter of Citi (the same guy who endorsed military attacks on low-tax jurisdictions) supports the elimination of cash.

Citi’s Willem Buiter looks at this problem, which is known as the effective lower bound (ELB) on nominal interest rates. …the ELB only exists at all due to the existence of cash, which is a bearer instrument that pays zero nominal rates. Why have your money on deposit at a negative rate that reduces your wealth when you can have it in cash and suffer no reduction? Cash therefore gives people an easy and effective way of avoiding negative nominal rates. …Buiter’s solution to cash’s ability to allow people to avoid negative deposit rates is to abolish cash altogether.

So are they right? Should cash be abolished so central bankers and governments have more power to manipulate the economy?

There’s a lot of opposition from very sensible people, particularly in the United Kingdom where the idea of banning cash is viewed as a more serious threat.

Allister Heath of the U.K.-based Telegraph worries that governments would engage in more mischief if a nation got rid of cash.

Many of our leading figures are preparing to give up on sound money. The intervention I’m most concerned about is Bank of England chief economist Andrew Haldane’s call for a 4pc inflation target, as well as his desire to abolish cash, embrace a purely electronic currency and thus make it easier for the Bank to impose substantially negative interest rates… Imagine that banks imposed -4pc interest rates on savings today: everybody would pull cash out and stuff it under their mattresses. But if all cash were digital, they would be trapped and forced to hand over their money. …all spending would become subject to the surveillance state, dramatically eroding individual liberty. …Money is already too loose - turning on the taps would merely further fuel bubbles at home and abroad.

Also writing for the Telegraph, Matthew Lynn expresses reservations about this trend.

As for negative interest rates, do we really want those? Or have we concluded that central bankers are doing more harm than good with their attempts to manipulate the economy? …a banknote is an incredibly efficient way to handle small transactions. It is costless, immediate, flexible, no one ever needs a password, it can’t be hacked, and the system doesn’t ever crash. More importantly, cash is about freedom. There are surely limits to the control over society we wish to hand over to governments and central banks? You don’t need to be a fully paid-up libertarian to question whether…we really want the banks and the state to know every single detail of what we are spending our money on and where. It is easy to surrender that freedom – but it will be a lot harder to get back.

Merryn Somerset Webb, a business writer from the U.K., is properly concerned about the economic implications of a society with no cash.

…at the beginning of the financial crisis, there was much talk about financial repression — the ways in which policymakers would seek to control the use of our money to deal with out-of-control public debt. …We’ve seen capital controls in the periphery of the eurozone… Interest rates everywhere have been at or below inflation for seven years — and negative interest rates are now snaking their nasty way around Europe… This makes debt interest cheap for governments…and it and forces once-prudent savers to move their money into the kind of risky assets that are supposed to drive growth (and tax receipts).

Amen. She’s right that low interest rates are good news for governments and not very good news for people in the productive sector.

Last but not least, Chris Giles wrote a column for the FT and made one final point that is very much worth sharing.

Mr Haldane’s proposal to ban cash has all the hallmarks of a public official confusing what is convenient for the central bank with what is in the public interest.

Especially since the central bankers are probably undermining long-run economic prosperity with short-run tinkering.

Moreover, the option to engage in Keynesian monetary policy also gives politicians an excuse to avoid the reforms that actually would boost economic performance. Indeed, it’s quite likely that an easy-money policy exacerbates the problems caused by bad fiscal and regulatory policy.

Let’s conclude by noting that maybe the right approach isn’t to give politicians and central bankers more control over money, but rather to reduce government’s control over money. That’s one of the arguments I made in this video I narrated for the Center for Freedom and Prosperity.

The $1.83 billion arms sale package to Taiwan that the Obama administration announced to Congress in mid-December won’t change the military balance across the Taiwan Strait. Hawkish American commentators criticized the arms sale for not doing enough to provide for Taiwan’s security, but this misses the point. The most important aspect of the arms sale is not the kind of equipment being sold but the message sent by the transaction.

From a military perspective, the equipment in the arms sale is nothing to get excited about. The most prominent items are two refurbished Oliver Hazard Perry-class frigates and 36 AAV-7 amphibious assault vehicles. Guided missiles, Phalanx ship defense systems, and communications equipment make up the rest of the package. None of these capabilities will significantly change the balance of power between Taiwan and mainland China.

What does it accomplish?

First, the timing of the arms sale announcement is important. On January 16th, voters in Taiwan will go to the polls to select a new President and legislators. The period of rapprochement between Taiwan and mainland China championed by President Ma Ying-jeou since 2008 will likely come to an end. It is too early to tell how the election will impact cross-strait relations, but announcing an arms sale so close to the election demonstrates a continued U.S. commitment to Taiwan’s defense.

Second, the modest size of the sale is a signal to Taiwan to get serious about self-defense. Taiwan’s military spending has increased in recent years after a deep decline in the late 1990s and early 2000s, but spending is well under three percent of GDP despite a 2008 campaign pledge by Ma to hit the three percent target. The Democratic Progressive Party (DPP), the presumptive winning party, has issued a series of policy papers outlining a wide-ranging plan to improve Taiwan’s defenses. The problem with announcing a large arms sale before these policies are implemented is that it could serve as a disincentive for the DPP to follow through with its defense policy.

Third, the arms sale signals the Obama administration’s willingness to push back against Chinese assertiveness in East Asia. America and its regional allies and partners are modestly balancing against the threat posed by China by increasing military spending, adding ships to their fleets, and increasing defense cooperation. The arms sale to Taiwan is a continuation of this trend. Whether or not pushing back is going to succeed is a different question, but the arms sale was likely announced with this trend in mind.

The December 2015 arms sale to Taiwan gives off more light than heat, but that light is significant. While the material side of the sale is modest, it sends a message to Taiwan and mainland China for Obama’s last year in office. In 2016, the United States will likely be more involved and more assertive in East Asia.

In a recent blog post, St. Louis Fed Vice President David Andolfatto suggests that central banks “consider offering digital money services (possibly even a cryptocurrency) at the retail and wholesale level.” His reasoning is straightforward. Bitcoin, he observes, offers a host of benefits, most of which relate to its role as a payment device. It enables individuals to transfer funds more cheaply than traditional payment mechanisms. But it also has shortcomings, the chief of which, Andolfatto claims, is its short-run price volatility.

As an alternative, Andolfatto points to “Fedcoin” — a central bank-issued cryptocurrency proposed earlier by J.P. Koning. In theory, Fedcoin would employ the same blockchain ledger technology as bitcoin to transfer funds between accounts. However, as Koning explains, “One user — the Fed — would get special authority to create and destroy ledger entries, or Fedcoin.” To what end? According to Koning, “The Fed would use its special powers of creation and destruction to provide two-way physical convertibility between both of its existing liability types — paper money and electronic reserves — and Fedcoin at a rate of 1:1.” Hence, Fedcoin would offer the payment system advantages of bitcoin — the ability to transfer funds cheaply — without its excessive purchasing power instability.

In an earlier post on the topic, Andolfatto goes even further by claiming that “the Fed is in the unique position to credibly fix the exchange rate between Fedcoin and the USD.” And, lest one think his claim applies exclusively to Fedcoin, he clarifies that “the Fed has a comparative advantage over some private enterprise” issuing a distinct cryptocurrency “backed by USD at a fixed exchange rate.”

Although Andolfatto is right to claim that the Fed — or any central bank for that matter — has a comparative advantage in issuing substitutes that are accepted at par with its other liabilities, it is certainly not in a unique position to issue a digital, P2P (peer-to-peer or person-to-person) cryptocurrency that is accepted at par. There are all sorts of par-valued, dollar-denominated private digital monies. In the US, private banks issue electronic balances that exchange at par with the dollar. There are also P2P monies that trade at par. The notes and coins issued by a currency board are P2P (in the sense of person-to-person and that they need not be cleared by a central authority). And, since an orthodox currency board holds sufficient reserves by definition, it will maintain par acceptance. Private banks in Scotland and Northern Ireland issue circulating notes that exchange at par with the British pound. Clearly, private providers are capable of supplying either a digital or P2P money that trades at par with an established official currency.

In fact, there is even today at least one dollar-based, privately-provided digital, peer-to-peer cryptocurrency. Billed as the world’s first stable digital currency, NuBits (an altcoin governed by the Nu protocol) has only deviated from its $1 par value by $0.025 or more on fourteen days — and only twice for two consecutive days — since it was launched on September 23, 2014. In other words, NuBits are remarkably stable in terms of the dollar. Figure 1 tells the whole story:

How does the Nu protocol maintain a fixed exchange rate between its NuBits and the dollar? In brief, its owners (“NuShareholders”) vote to adjust the supply of NuBits in circulation to equal current demand for NuBits at exactly $1. Those interested in all the details should consult the original white paper and discussion forum. I sketch out the basics below.

The Nu protocol relies on the premise that demand for NuBits will tend to grow over time. For a fixed-supply cryptocurrency, like bitcoin after it reaches the 21-million-coin cap, an increase in demand increases its price and market capitalization (i.e., price times quantity of coins). The increase in the market capitalization, or network value, of a fixed-supply cryptocurrency accrues to coinholders as their coins appreciate. For NuBits, in contrast, an increase in demand only increases the market capitalization — not the price. The increase in the market capitalization, or network value, of NuBits accrues to NuShareholders, who (through custodial grants) create and sell new NuBits for $1. Revenues generated through the sell of these newly created NuBits are used to cover operating expenses and pay dividends to NuShareholders. Hence, NuShareholders are residual claimants on the network value of NuBits and, as such, have an incentive to maximize the value of the NuBits network.

NuShareholders stand ready to create and sell NuBits anytime demand increases because it generates the revenue used to pay their dividends. In other words, we can be pretty confident there will be sell side liquidity in the market for NuBits. Any buyer will be able to find a seller at $1. But how and why would NuShareholders produce buy side liquidity? Or, to state the matter another way, how and why do they contract the supply of NuBits in circulation when demand decreases?

NuShareholders have several mechanisms to decrease the supply (or effective supply) of NuBits in circulation when demand decreases, thereby offsetting a reduction in price. Originally, NuShareholders would simply vote to pay interest to NuBit owners who agree to “park” a balance of NuBits for a period of time. When a user agrees to park a balance of NuBits, the balance is marked as parked on the blockchain and cannot be spent for the agreed upon park period. When the agreed park period expires, control of the balance is returned to the owner along with the interest earned. Park rates vary by duration and are adjusted regularly by NuShareholders to ensure that enough NuBits are effectively (if only temporarily) removed from circulation when needed.

Recent updates offer additional mechanisms to reduce the supply of NuBits. NuShareholders can vote to increase the transaction fee, which, rather than being distributed to participants (as is the case with bitcoin and most other cryptocurrencies), is permanently destroyed. They might also vote to convert some NuBits to NuShares. This process, known as “NuBits burning,” is described as follows:

In the event of parking rates being offered for a prolonged period of time, NuShareholders can vote to create new NuShares that are sold through auction. The proceeds from this auction would then be used to purchase NBT on the open market, at which point the purchased NBT would be destroyed permanently by the custodian. The net result would be a dilution of equity value for all NuShareholders in order to reduce the outstanding supply of NBT in circulation. This price support mechanism allows NuShareholders to reduce the supply of NBT to match periods of contracting demand.

With these mechanisms, NuShareholders are able to manage the supply of NuBits in circulation to maintain par acceptance with the dollar.

Why would NuShareholders incur the costs to maintain par acceptance in the face of a negative, transitory shock to the demand for NuBits? Essentially, NuShareholders believe that, as Nu protocol developer Jordan Lee states in the original white paper, “Temporarily losing peg will harm the value of the network.” They are surely right. After all, there are a lot of alternative cryptocurrencies available. The unique feature of NuBits is that it has a fixed exchange rate with the dollar. Abandoning that commitment would render NuBits no better than the competition. To boost the network value — and maximize their dividends — NuShareholders must protect the fixed exchange rate.

Is the Nu protocol the answer to all our monetary economic prayers? Absolutely not. First, it would not seem to meet the robustness standards of a “real monetary rule,” as outlined by George Selgin. Unlike the automatic (if crude) supply protocol of bitcoin and most other cryptocurrencies, the NuBits supply protocol depends on voting NuShareholders. Second, it can — by definition — be no more stable than the dollar. Widespread adoption of NuBits would provide no refuge from the Fed’s monetary mismanagement.

Nonetheless, one might appreciate that the Nu protocol offers the advantages of transferring funds with blockchain ledger technology, like bitcoin, without the disadvantages of bitcoin’s short-run price volatility. Although the Fed has a comparative advantage in issuing substitutes that are accepted at par with its other liabilities, it is far less likely, as Andolfatto acknowledges, to offer a permissionless, privacy-protecting cryptocurrency. The Nu protocol provides a pseudonymous cryptocurrency that trades at par with the dollar. In other words, it is already doing precisely what advocates of FedCoin hope a central bank-issued cryptocurrency would do.

[Cross-posted from Alt-M.org]

Politicians hate cash.

That may seem an odd assertion given that they love spending money (other people’s money, of course, as illustrated by this cartoon).

But what I’m talking about is the fact that politicians get upset when there’s not 100 percent compliance with tax laws.

They hate tax havens since the option of a fiscal refuge makes confiscatory taxation impractical.

They hate the underground economy because that means hard-to-tax economic activity.

And they hate cash because it gives consumers an anonymous payment mechanism.

Let’s explore the animosity to cash.

It’s basically because a cashless society is an easier-to-tax society, as expressed by an editorial from the U.K.-based Financial Times.

…unlike electronic money, it cannot be tracked. That means cash favours anonymous and often illicit activity; its abolition would make life easier for a government set on squeezing the informal economy out of existence. …Value added tax, for example, could be automatically levied. …Greece, in particular, could make lemonade out of lemons, using the current capital controls to push the country’s cash culture into new habits.

And some countries are actually moving in this direction.

J.D. Tuccille looks at this issue in an article for Reason.

Peter Bofinger of the German Council of Economic Experts…wants to abolish the use of cash… He frets that old-fashioned notes enable undeclared work and black markets… So rather than adjust policy to be more palatable to the public, he’d rather leave no shadows in which the public can hide from his preferred policies. The idea is to make all economic activity visible so that people have to submit to control. Denmark, which has the highest tax rates in Europe and a correspondingly booming shadow economy, is already moving in that direction. …the Danmarks Nationalbank will stop internal printing of banknotes and minting of coins in 2016. After all, why adjust tax and regulatory policy to be acceptable to constitutents when you can nag them and try to reinvent the idea of money instead?

By the way, some have proposed similar policies in the United States, starting with a ban on $100 bills.

Which led me to paraphrase a line from the original version of Planet of the Apes.

Notwithstanding my attempt to be clever, the tide is moving in the wrong direction. Cash is beginning to vanish in Sweden, as reported by the New York Times.

…many of the country’s banks no longer accept or dispense cash. Bills and coins now represent just 2 percent of Sweden’s economy, compared with 7.7 percent in the United States and 10 percent in the euro area. This year, only a fifth of all consumer payments in Sweden have been made in cash, compared with an average of 75 percent in the rest of the world, according to Euromonitor International. …Cash machines, which are controlled by a Swedish bank consortium, are being dismantled by the hundreds

Though the article notes that there is some resistance.

Not everyone is cheering. Sweden’s embrace of electronic payments has alarmed consumer organizations and critics who warn of a rising threat to privacy and increased vulnerability to sophisticated Internet crimes. …The government has not sought to stem the cashless tide. If anything, it has benefited from more efficient tax collection, because electronic transactions leave a trail; in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem. Leif Trogen, an official at the Swedish Bankers’ Association, acknowledged that banks were earning substantial fee income from the cashless revolution.

What matters, by the way, is not the degree to which consumers prefer to use alternatives to cash.

That’s perfectly fine, and it explains much of what we see on this map.

The problem is when governments use coercion to limit and/or abolish cash so that politicians have more power. And this is why the French (gee, what a surprise) are trying to crack down on cash.

Writing for the U.K.-based Telegraph, Matthew Lynn mentions the new policy and France and also explores some worrisome implications of this anti-cash trend.

France is banning the use of cash for transactions worth more than €1,000…part of a growing movement among academics and now governments to gradually ban the use of cash completely. …it is a “barbarous relic”, as some publications loftily dismiss it. The trouble is, cash is also incredibly efficient. And it is a crucial part of a free society. There is no convincing case for abolition. …When it comes to creeping state control, it is no surprise to find the French out in front. …A cashless economy would be far easier to both tax and control. But hold on. …cash is far too valuable to be given up lightly. …While terrorists and criminals may well use cash to buy weapons, or deal in drugs, it is very hard to believe that they would not find some other way of financing their operations if it was abolished. Are there really any cases of potential jihadists being foiled because they couldn’t find two utility bills (less than three months old, of course) in a false name to open an account?

Amen. Banning cash to stop terrorists is about as foolish as thinking that gun control will thwart jihadists.

In any event, we need to consider trade-offs. Chris Giles highlighted that issue in a piece for the Financial Times.

…an unfortunate rhetorical echo of Maoist China. It is illiberal… Some argue there would be beneficial side effects from abolishing notes and coins through the regularisation of illegal activities. Really? …Cash would have to be abolished everywhere and the BoE does not have those powers, thankfully. The anonymity of cash helps to free people from their governments and some criminality is a price worth paying for liberty.

Though I suppose we should grudgingly give politicians credit for cleverly trying exploit fear to expand their power.

But never forget we’re talking about a bad version of clever. If they succeed, that will be bad news for freedom.  J.D. Tuccille of Reason explains in a second article why a growing number of people prefer to use cash.

Many Americans happily and quietly avoid banks and trendy purchasing choices in favor of old-fashioned paper money. Lots of business gets done that way…the Albuquerque Journal pointed out that over a third of households in the city either avoid banks entirely (the “unbanked”) or else keep a checking account but do much of their business through cash, check-cashing shops, pawn shops, money orders, and other “alternative financial products” (the “underbanked”). A few weeks earlier, the Kansas City Star reported a similar local situation… Twenty-six percent cite privacy as a reason for keeping clear of banks – bankers say that increased federal reporting and documentation requirements drive many customers away. “A lot of people are afraid of Uncle Sam,” Greg Levenson, president and CEO of Southwest Capital Bank, told the Albuquerque Journal. …most people aren’t idiots. When they avoid expensive, snoopy financial institutions, it’s because they’ve decided the benefits outweigh the costs.

Very well said, though I’d augment what he wrote by noting that some of these folks probably would like to be banked but are deterred by high costs resulting from foolish government money-laundering laws.

More on that later.

Let’s stay with the issue of whether cash should be preserved. A business writer from the U.K. is very uneasy about the notion of a society with no cash.

…tax authorities have become increasingly keen on tracking everything and everyone to make absolutely certain that no assets slip under their radars. The Greeks have been told that, come 2016, they must begin to declare all cash over €15,000 held in safes or mattresses, and all precious stones, gold and the like worth more than €30,000. Anyone else think there might be a new tax coming on all that stuff? …number-crunchers…are maddened by the fact that even as we are provided with lots of simple digital payment methods we still like to use cash: the demand for £20 and £50 notes has been rising. …They are maddened because “as untraceable bearer instruments, it is not possible to locate where banknotes are being held at any one time”… Without recourse to physical cash, we are all 100% dependent on the state-controlled digital world for our financial security. Worse, the end of cash is also the end of privacy: if you have to pay for everything digitally, every transaction you ever make (and your location when you make it) will be on record. Forever. That’s real repression.

She nails it. If politicians get access to more information, they’ll levy more taxes and impose more control.

And that won’t end well.

Last but not least, the Chairman of Signature Bank, Scott Shay, warns about the totalitarian temptations that would exist in a cash-free world. Here’s some of what he wrote in a column for CNBC.

In 2010, Visa and MasterCard, bowed to government pressure — not even federal or state law — and banned all online-betting payments from their systems. This made it virtually impossible for these gambling sites to continue operating regardless of their jurisdiction or legality. It is not too far-fetched to wonder if the day might come when the health records of an overweight individual would lead to a situation in which they find that any sugary drink purchase they make through a credit or debit card is declined. …there is…a sinister risk…a cashless society would certainly give governments unprecedented access to information and power over citizens.

And, he warns, that information will lead to mischief.

…the U.S. government is already using its snooping prowess and big-data manipulation in some frightening ways. …the U.S. government is becoming very fond of seizing money from citizens first and asking questions later via “civil forfeiture.” Amazingly, the government is permitted by law to do this even if it is only government staff members who have a suspicion, not proof, of wrongdoing. …In recent years, it made it increasingly difficult for companies to operate or individuals to transact by adding compliance hurdles for banks wishing to deal with certain categories of clients. By making it too expensive to deal with certain clients or sending the signal that a bank should not deal with a particular client or type of client, the government can almost assuredly keep that company or person out of the banking system. Banks are so critically dependent on government regulatory approval for their actions… It is easy to imagine a totalitarian regime using these tools to great harm.

Some folks will read Shay’s piece and downplay his concerns. They’ll say he’s making a slippery slope argument.

But there are very good reasons, when dealing with government, to fear that the slope actually is slippery.

Let’s close by sharing my video on the closely related topic of money laundering. These laws and regulations have been imposed supposedly to fight crime.

But we’ve slid down the slope. These policies have been a failure in terms of hindering criminals and terrorists, but they’ve given government a lot of power and information that is being routinely misused.

P.S. The one tiny sliver of good news is that bad money laundering and know-your-customer rules have generated an amusing joke featuring President Obama.

P.P.S. If politicians want to improve tax compliance in a non-totalitarian fashion, there is a very successful recipe for reducing the underground economy.

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