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

One of our favorite lukewarmers, Matt Ridley, was invited by the Global Warming Policy Foundation to give its 2016 Annual Lecture. He certainly did not disappoint. While Matt titled his speech “Global Warming Versus Global Greening” that title only suggested part of what he had to say. We offer “The Hows and Whys of Lukewarming” to be a more apt descriptor:

These days there is a legion of well paid climate spin doctors. Their job is to keep the debate binary: either you believe climate change is real and dangerous or you’re a denier who thinks it’s a hoax.

But there’s a third possibility they refuse to acknowledge: that it’s real but not dangerous. That’s what I mean by lukewarming, and I think it is by far the most likely prognosis.

I am not claiming that carbon dioxide is not a greenhouse gas; it is.

I am not saying that its concentration in the atmosphere is not increasing; it is.

I am not saying the main cause of that increase is not the burning of fossil fuels; it is.

I am not saying the climate does not change; it does.

I am not saying that the atmosphere is not warmer today than it was 50 or 100 years ago; it is.

And I am not saying that carbon dioxide emissions are not likely to have caused some (probably more than half) of the warming since 1950.

I agree with the consensus on all these points.

I am not in any sense a “denier”, that unpleasant, modern term of abuse for blasphemers against the climate dogma…. I am a lukewarmer.

And from there, Ridley goes on to do a laudable job of laying out the case that future climate change from human activities will prove to be towards the low end of climate model projections—but squarely within the bounds of consensus expectations. As Matt puts it:

…I am not disagreeing with the consensus on climate change.

There is no consensus that climate change is going to be dangerous. Even the IPCC says there is a range of possible outcomes, from harmless to catastrophic. I’m in that range: I think the top of that range is very unlikely. But the IPCC also thinks the top of its range is very unlikely.

Be sure to check out the whole thing for a great review of why carbon dioxide emissions are not the civilization-ending monster that many climate activists would have you believe (plus there are a few surprises in there that you won’t want to miss).

If Matt’s arguments are not enough to convince you that urgent actions to mitigate carbon dioxide-induced climate change are not required, then, perhaps, Dave Roberts’ piece for Vox should at least illustrate to you why they are not working.

In his in-depth article “The Left vs. a Carbon Tax,” Roberts describes the goings-on in Washington state where Initiative 732, a revenue neutral carbon tax (of the type featured by many pitches to conservatives), is on the ballot this year, but is garnering very little support from environmental organizations. Roberts illuminates the many alliances and allegiances among the various climate activist groups operating in the state and the complicated reasons why, by and large, they oppose I-732. Probably the biggest reason is that it is revenue neutral—a feature that was supposed to be its main selling point. It seems rather than give the money collected through a carbon tax back through a combination of corporate tax cuts, a reduction of the state sales tax, and tax rebates for low income households, most activist organizations want to spend the money on their particular pet projects—green energy initiatives, climate justice, clean water, healthy forests, etc. (however they define those things). Consequently, they have pulled (or never even offered) their support.

Here’s a teaser:

Here’s the situation. There’s a carbon tax on the ballot in Washington this November, meant not just to put the state on the path to its climate targets but to serve as an example to other states.

The measure, called Initiative 732, isn’t just any carbon tax, either. It’s a big one. It would be the first carbon tax in the US, the biggest in North America, and one of the most ambitious in the world.

And yet the left opposes it. The Democratic Party, community-of-color groups, organized labor, big liberal donors, and even most big environmental groups have come out against it.

Why on Earth would the left oppose the first and biggest carbon tax in the country? How has the climate community in Washington ended up in what one participant calls a “train wreck”? (Others have described it in more, er, “adult” terms.)

That turns out to be a complex and ill-fated story, revealing divisions among climate hawks — over who pays, who benefits, and who decides — that will not long stay confined to the West Coast. The future of climate politics is playing out in Washington state, and it is not pretty.

The full article is a remarkable story and provides further evidence for our view that a carbon tax is a bad idea, both in theory and in practice.

Restricting carbon? No. But what about restricting hydrofluorocarbons (HFCs)?

An amendment to the Montreal Protocol (which phased out ozone destroying chlorofluorocarbons, CFCs) was agreed to at a U.N. meeting in Kigali, Rwanda last week. Under the agreement, HFCs—manmade chemicals primarily used in refrigeration systems and air-conditioners, and which are safe for the ozone layer but which are powerful greenhouse gases—are to be phased down over the next several decades.

Some future projections suggest rapid growth in HFC use in developing countries as air conditioning systems become more affordable, and cheap, reliable energy becomes more available. Recent estimates of the amount of global warming that will result from the projected expansion of HFC use range from near 0.0°C up to about 0.5°C by 2100.  Unsurprisingly, the 0.5°C number is the one touted by the amendment’s supporters—but the closer we look, the more this figure is a bald-faced exaggeration. It basically assumes that HFCs come to dominate the refrigerant market in developing countries by 2050, and continue to do so to 2100. It also assumes the sensitivity of temperature to a doubling of carbon dioxide is about 3.0°C.

More recent analyses (as we have described in this series) indicate that the sensitivity is perhaps half of that value, which drops the top temperature change to around 0.25°C. And the assumption that HFCs will be everyone’s go-to refrigerant through 2100 is ludicrous.

There are already a number of refrigerants available that can do many of the jobs that HFCs do; several are cheaper, more efficient and simple. Ammonia, for example, used to be the refrigerant of choice but it was replaced by chlorofluorocarbons because of occasional leaks and fires. Use of these ozone-damaging chemicals was cheaper and easier than making a disaster-safe cooler, which nonetheless is certainly possible. Good old carbon dioxide is another viable replacement for some applications and can provide a double benefit.  It requires a much higher pressure which makes the compressor quite hot—and those clever Norwegians are already selling combined units where that heat is then used to provide hot water. What’s not to like? And there are others (see here for a rundown).

So the 0.25°C maximum temperature reduction is itself high, depending on what comes along to replace HFCs with or without the Kigali amendment.     

What we’re saying here is pretty much in agreement with a recent post by Oren Cass of the Manhattan Institute:

Here, the chosen baseline appears to be a 2013 study in Atmospheric Chemistry and Physics that rejected previous forecasts for HFC growth and introduced a much higher one. The authors acknowledged this and explained their scenario was “not necessarily a more accurate forecast of future HFC emissions than other scenarios, but a projection of what can happen if developed countries continue current practices in [adopting] HFCs and if developing countries follow this path as well.” Generally, their model discounted “technological and economic developments,” which are already leading to adoption of HFC alternatives in the developed world. It assumed HFC use, still in its infancy today, would be ubiquitous and still growing alongside GDP by the end of the twenty-first century.

Now, all of our analyses could be wrong and the world is just going to opt in to HFC-only refrigeration.  But given the behavior of technological development over the past 100 years, we doubt it.

Having said all that, there’s one reason to support the largely  irrelevant  Kigali amendment:  It has to be approved by a two-thirds majority of the U.S. Senate.  And when that comes up, how about the House and the Senate declare last December’s Paris agreement on climate change to be precisely what it is—another treaty requiring the same treatment in order to have the force of law.

If that sounds like faint praise, it is!

Recent reportage in the Wall Street Journal by Matt Wirz, Carolyn Cui, and Anatoly Kurmanaev states that Venezuela’s annual inflation rate is 500 percent. The authors fail to indicate the source for that 500 percent figure. Knowing that the most accurate estimate of Venezuela’s current annual inflation rate is 55 percent, I concluded that the Journal was way off and set out to determine the source for its incorrect figure. The most likely candidate turned out to be the International Monetary Fund’s (IMF) October 2016 World Economic Outlook (WEO), which contains an estimate for Venezuela’s annual inflation. This report projects Venezuela’s annual inflation to average 475.8 percent for 2016, a far cry from my current estimate of 55 percent. The IMF’s figure, though, gives the appearance of a finger-in-the-wind approach because no methodology accompanies the IMF’s October report. The 95% rule reigns – 95% of what you read in the financial press is either wrong or irrelevant. 

 

So, how does one make an accurate estimate of inflation in countries experiencing elevated inflation levels? The Johns Hopkins-Cato Institute Troubled Currencies Project calculates reliable inflation estimates. These are based on changes in black market (read: free market) exchange rates. The principle of purchasing power parity (PPP) is used to translate exchange rate changes into estimates of implied inflation rates. When inflation is elevated, this method provides deadly accurate estimates.

In the third and final debate last week, Hillary Clinton tried to flex her fiscal responsibility bona fides by vowing  that she “will not add a penny to the debt” on three separate occasions. That must mean she has comprehensive reforms to address entitlements, rein in other spending, and reduce our commitments abroad, if she is not going to add a penny to the current gross debt of $19.7 trillion, right? No, not really.

She is only promising not to make things worse relative to the current baseline, which projects the debt increase to $28.2 trillion over the next decade. To be fair, her plans would add less to the debt than Donald Trump’s, although that’s almost entirely due to an array of new taxes. Even with those hikes, the debt would increase a lot more than a penny were she to win, and neither major party candidate has put forward a substantive plan to address the problems with the country’s fiscal health.

And that’s just the projection over the next decade. The long-term fiscal picture is even bleaker. In the baseline scenario from the most recent Long-Term Budget Outlook from the Congressional Budget Office, federal debt held by the public will almost double by midcentury, from around 77 percent of GDP to more than 140 percent by 2046. Kicking the can down the road, which is effectively the plan by for both candidates in the debate due to their lack of an actual plan, would only increases the magnitude of the changes that will eventually be needed.

Clinton may have meant that her specific proposals are paid for, but even that is not accurate, as the Committee for a Responsible Federal Budget (CRFB) estimated that her proposals would add $200 billion to it, even with the assumption that she would be able to help shepherd immigration reform through Congress and attributing that positive fiscal impact to her. If she were to stabilize the debt to GDP ratio and restrict herself to her preferred method of hiking taxes on high earners (eschewing spending cuts or entitlement reform), she’d have to raise the top tax rate all the way to 61 percent, which would impose significant new disincentives and economic distortions. 

She is not promising that she would not “add a penny to the debt” or at least that can’t be what she means, unless she wants to set herself up to break that promise shortly after taking officer were she to win. She’s promising not to further accelerate our movement down the unsustainable fiscal path we’re on now, which is hardly comforting. Neither of the candidates at the debate last week has put forward any substantive plan to do anything to address the debt or our fiscal trajectory, despite what promises they may have made. 

Last Friday, I gave the opening remarks at the International Finance Corporation’s annual FinTech CEO Summit — a meeting of many of the top executives involved in developing cutting-edge alternatives to conventional means for raising capital and making payments, among other things. Because the event wasn’t recorded, I thought I’d share the remarks with you here.

***

I’m honored to be able to address an audience consisting of many of the world’s leading financial-market innovators. I don’t often get invited to speak on the subject of financial technology. That’s probably because the most advanced piece of financial technology concerning which I possess any real expertise is the steam-powered coining press that James Watt and his business partner Matthew Boulton designed a bit more than three centuries ago.

Still I know enough about more recent developments to realize that, so far as the future progress of financial innovation is concerned, these are critical times. Never has there been a more crying need for financial innovation — innovation to overcome the infirmities, not only of conventional private-market sources of capital and payments services, but also of the world’s official monetary systems. Yet never has the threat government regulators and their academic advisors pose to the unfolding of such innovations been so obvious.

Consider Harvard (and former IMF) economist Ken Rogoff’s proposal for doing away with official paper money, as presented in his new book, The Curse of Cash, which I happened to be reading when I was asked to speak to you today. A decision by the Fed to quit issuing paper currency would ordinarily create new opportunities for private-market innovators to supply new and perhaps superior substitutes for cash.  But so far as Rogoff is concerned, for his plan to succeed in cutting back on crime and tax evasion, the government would have to be “vigilant about playing Whac-a-mole as alternative transaction media come into being,” by making it difficult if not impossible for retailers and financial institutions to accept them. That sort of talk sends chills up my spine; it ought to scare you as well.

Or consider this remark, also from Rogoff’s book:

As currency innovators have learned over the millenia, it is hard to stay on top of the government indefinitely in a game where the latter can keep adjusting the rules until it wins. If the private sector comes up with a much better way of doing things, the government will eventually adapt and regulate as necessary to eventually win out.

For some reason Rogoff doesn’t seem to mind this. Yet surely it ought to be obvious that, when governments “win-out” by suppressing “much better ways of doing things,” the public as a whole — and not just or mainly drug dealers and tax evaders — looses.

But the more serious consequences of a “Whac-a-mole” approach to financial innovation consist, not of its immediate costs to consumers, but to the downstream innovations that it prevents.

As economist Israel Kirzner puts it in an excellent essay, “The Perils of Regulation,” while regulations of the sort Rogoff favors are only supposed to block particular innovations that may have some undesirable features, those regulations also end up blocking desirable innovations that haven’t been foreseen by anyone, including the regulators. What’s more, the same regulatory interference is instead likely to “set in motion a series of entrepreneurial actions that … may well lead to wholly unexpected and even undesirable final outcomes.”

In any event, Rogoff is surely mistaken in claiming that governments are bound to prevent financial innovations from taking place even when they are desirable. Whether they do so or not depends on public opinion.

It’s true that the public has mixed feelings about financial innovation; it has seen both good and bad consequences of such. But there are good reasons for believing that unhindered financial innovation, whatever its risks, is ultimately a lot safer than heavy-handed government interference in the financial sector. Those reasons are necessarily based on the historical record, since no one, except perhaps some of you, can know just what sorts of financial innovations the future may offer.

Consider U.S. experience. Contrary to conventional wisdom, unwise regulations have  been responsible for most if not all of the 19th-century woes of the U.S. financial sector, from wildcat banking and counterfeiting prior to the Civil War to recurring banking crises afterwards. I would regale, or more likely bore you, with the details if I had time. But instead I must settle for pointing out that Canada, with its then-identical gold dollar, avoided practically all of them. Yet Canadian banks were less, not more, heavily regulated than their U.S. counterparts. Nor did Canada establish a central bank until 1935. (Can anyone guess how many of its banks failed during the 1930s?)

When regulations cause trouble, private-market financial innovation sometimes comes to the rescue. Those crises that rattled the U.S. economy in the decades before the Fed’s establishment were due in large part to government regulations that made it very costly, if not impossible, for banks to issue enough paper currency to meet their customers’ needs. Crises happened when customers, anticipating shortages, rushed to get cash before the banks ran out. In response, private clearinghouses in New York City and elsewhere began supplying their own emergency currencies to supplement banks’ supplies. In all they issued hundreds of millions of dollars worth of “clearinghouse certificates” which, believe it or not, was a lot of money back then — enough to make the panics a lot less destructive than they might have been otherwise.

Regulatory solutions to crises are, in contrast, often less reliable to private market ones. During the Great Depression, when bank failures once again threatened to trigger a rush for cash, some old-timers from the New York Clearinghouse begged for permission to issue clearinghouse certificates again. But Fed officials wouldn’t let them. “We’re in charge now,” they said. “And we can issue all the genuine currency that’s needed.” I suppose you know how well that went.

In response to crises the root causes of which are often traceable to misguided past regulatory interference, regulators also tend to erect further barriers to desirable financial innovations. Yet where one sort of innovation is prevented, other, sometimes far more dangerous innovations, often take root.

To take an extreme case, in the very earliest days of banking in the U.S., many states and territories, chose to ban banks altogether. As banking historian Bray Hammond put it, people back then were convinced that, because banks were dangerous monopolies, it was best to have as few of them as possible!

How did that go? Instead of having their own banks to turn to, and no local currency they could rely on, the citizens of those places were compelled to use the notes of far-away banks — or what they imagined to be such. For they quickly became the favorite victims of counterfeiters, who supplied them with fake currency purporting to be from the best of New England banks; and not having those banks nearby to root out the fakes, they fell for it all too often. (Those same fakes were, on the other hand, never seen in New England itself, where alert bank tellers would have spotted them in no time.)

Nor have things changed much. In the 30s, regulators decided they might protect bank customers by preventing bankers from paying interest on deposits. It took some time, and plenty of inflation, but by the mid 80s that step had given rise to Money Market Mutual Funds, which eventually came to play a central part of the “shadow banking system” the collapse of which marked ground zero of the recent financial crisis. The point isn’t that Money Market Funds are necessarily a bad thing; its simply that regulators are not very good at anticipating the ultimate consequences of the regulations they impose. Regulation weaves a tangled web, indeed.

Financial systems, like economies generally, are organic entities. They must be allowed to flourish in a natural way.  Financial innovations will, no doubt, lead to occasional troubles even absent government interference. But those troubles will in turn sponsor further innovations aimed at correcting them. Over time, a stable and highly efficient system tends to develop. That’s what happened in Canada, while its system was relatively free; and it is what happened in numerous other countries.

With your help, if we let it, it may finally happen here.

Thanks very much.

[Cross-posted from Alt-M.org]

This video, “Playground” [YouTube, Facebook] makes quite an impression. It shows a scene of schoolyard bullying but takes the side of the jeering, taunting mob – in the name of voting. It is one of a series of 30 second videos put out by a group calling itself Civic Innovation Works, encouraging a vote in the general election on November 8 and seemingly intended as public service announcements.  The others in the series appear to be similar in message, but lacking in this one’s outrageousness (although one does present a fantasy about publicly shaming a non-voter).  

On the off chance that Civic Innovation Works was someone’s idea of an elaborate parody I looked them up. I found that Fenton, the well-known progressive/”social change” public relations agency, takes credit for one of the other videos in the series.

So it would look as if they are on the level. It is almost as if they were trying with “Playground” to convince viewers that electoral politics makes people worse.

Sweden punches way above its weight in debates about economic policy. Leftists all over the world (most recently, Bernie Sanders) say the Nordic nation is an example that proves a big welfare state can exist in a rich nation. And since various data sources (such as the IMF’s huge database) show that Sweden is relatively prosperous and also that there’s an onerous fiscal burden of government, this argument is somewhat plausible.

A few folks on the left sometimes even imply that Sweden is a relatively prosperous nation because it has a large public sector. Though the people who make this assertion never bother to provide any data or evidence.

I have five responses when confronted with the why-can’t-we-be-more-like-Sweden argument.

  1. Sweden became rich when government was small. Indeed, until about 1960, the burden of the public sector in Sweden was smaller than it was in the United States. And as late as 1970, Sweden still had less redistribution spending that America had in 1980.
  2. Sweden compensates for bad fiscal policy by having a very pro-market approach to other areas, such as trade policy, regulatory policy, monetary policy, and rule of law and property rights. Indeed, it has more economic freedom than the United States when looking an non-fiscal policies. The same is true for Denmark.
  3. Sweden has suffered from slower growth ever since the welfare state led to large increases in the burden of government spending. This has resulted in Sweden losing ground relative to other nations and dropping in the rankings of per-capita GDP.
  4. Sweden is trying to undo the damage of big government with pro-market reforms. Starting in the 1990s, there have been tax-rate reductions, periods of spending restraint, adoption of personal retirement accounts, and implementation of nationwide school choice.
  5. Sweden doesn’t look quite so good when you learn that Americans of Swedish descent produce 39 percent more economic output, on a per-capita basis, than the Swedes that stayed in Sweden. There’s even a lower poverty rate for Americans of Swedish ancestry compared to the rate for native Swedes.

I think the above information is very powerful. But I’ll also admit that these five points sometimes aren’t very effective in changing minds and educating people because there’s simply too much information to digest.

As such, I’ve always thought it would be helpful to have one compelling visual that clearly shows why Sweden’s experience is actually an argument against big government.

And, thanks to the Professor Deepak Lal of UCLA, who wrote a chapter for a superb book on fiscal policy published by a British think tank, my wish may have been granted. In his chapter, he noted that Sweden’s economic performance stuttered once big government was imposed on the economy.

Though the Swedish model is offered to prove that high levels of social security can be paid for from the cradle to the grave without damaging economic performance, the claim is false (see Figure 1). The Swedish economy, between 1870 and 1950, grew faster on average than any other industrialised economy, and the country became technologically one of the most advanced and richest in the world. From the 1950s Swedish economic growth slowed relative to other industrialised countries. This was due to the expansion of the welfare state and the growth of public – at the expense of private – employment.57 After the Second World War the working population increased by about 1 million: public employment accounted for c. 770,000, private accounted for only 155,000. The crowding out by an inefficient public sector of the efficient private sector has characterised Sweden for nearly half a century.58 From being the fourth richest county in the OECD in 1970 it has fallen to 14th place. Only in France and New Zealand has there been a larger fall in relative wealth.

And here is Figure 1, which should make clear that what’s good in Sweden (rising relative prosperity) was made possible by the era of free markets and small government, and that what’s bad in Sweden (falling relative prosperity) is associated with the adoption and expansion of the welfare state.

But just to make things obvious for any government officials who may be reading this column, I augment the graph by pointing out (in red) the “free-market era” and the “welfare-state era.”

As you can see, credit for the chart actually belongs to Professor Olle Krantz. The version I found in Professor Lal’s chapter is a reproduction, so unfortunately the two axes are not very clear. But all you need to know is that Sweden’s relative economic position fell significantly between the time the welfare state was adopted and the mid 1990s (which presumably reflects the comparative cross-country data that was available when Krantz did his calculations).

You can also see, for what it’s worth, that Sweden’s economy spiked during World War II. There’s no policy lesson in this observation, other than to perhaps note that it’s never a good idea to have your factories bombed.

But the main lesson, which hopefully is abundantly clear, is that big government is a recipe for comparative decline.

Which perhaps explains why Swedish policymakers have spent the past 25 years or so trying to undo some of those mistakes.

One of the main arguments proponents of Medicaid expansion make, at least on the fiscal side, is that it would save money as people gaining Medicaid coverage would reduce their use of expensive visits to the Emergency Department (ED). An earlier study from the Oregon Health Insurance Experiment threw some cold water on that theory, as it found that getting Medicaid actually increased the number of ED visits by 40 percent. Some analysts postulated that this increase was only temporary because it was due to either pent-up demand for health care services, or because new enrollees did not have established relationships with doctors. The thinking was that after enrollees became familiar with their coverage or addressed long-gestating health problems, the reductions in ED use and the associated cost savings would materialize.

A new report analyzing a longer time horizon finds that this is not the case, and there is “no evidence that the increase in ED use due to Medicaid coverage is driven by pent-up demand that dissipates over time; the effect on ED use appears to persist over the first two years.” This is another blow to the oft-repeated claim that Medicaid expansion will lead to significant savings from reduced Emergency Department utilization, and the effect actually seems to work in the other direction.

The Oregon case is important because it is one of the few instances of random assignment in health insurance, as the state wanted to expand Medicaid but had funding constraints, so it employed a lottery to determine who would get coverage. 

In this new update, the researchers see if there are any time patterns or signs of dissipation when it comes to the impact of Medicaid percent of the population with an ED visit or the number of ED visits per person. They expand upon the earlier utilization study to analyze the two years following the 2008 lottery and break up into six-month segments to see if there are any signs of the effects dissipating.

As they explain, “there is no statistical or substantive evidence of any time pattern in the effect on ED use on either variable.” In the first six-month tranche Medicaid coverage increased the number of ED visits per person by about 65 percent relative to the control group, and the estimates for the following three periods were similar and mostly statistically indistinguishable from each other. They also find that Medicaid increases the probability of an ED visit in the first period by nine percent, and the impact in the subsequent periods does not differ significantly. 

Estimated Effect of Medicaid Coverage on Emergency Department Use over Time

Source: Finkelstein et al., New England Journal of Medicine (2016).

A similar analysis for hospital admissions comes to the same result: “no evidence statistically or substantively of a time trend in the impact of Medicaid on having a hospital admission or on the number of days in the hospital.”

They also fail to find evidence that Medicaid coverage makes doctor’s visits and ED use more substitutable, and again, if anything the effect works in the other direction. The authors suggest that this could be due to differences in how people respond to gaining access to Medicaid, or it could be that Medicaid increases the complementarity of these different dimensions of health care.

Whatever the underlying mechanism, there is no evidence here that Medicaid coverage leads to reductions in utilization in other dimensions. In fact, Medicaid coverage makes people more likely to visit the Emergency Department, and increases their number of visits relative to their baseline. This new study confirms that these effects were not temporary and do not dissipate, at least over the two year period they were able to analyze. Expanding Medicaid coverage will not lead to reductions in inefficient, inexpensive Emergency Department visits, and there will be no associated cost savings, undermining one of the common fiscal arguments for expansion. 

The Seattle Post-Intelligencer says it has found the best Seattle homes for Millennials. Judging by the former paper’s suggestions, Seattle Millennials should move to Houston. Houston may not have Mt. Rainier, but it has beautiful lakes, a sea coast that is just about as nice as Washington’s (though not as nice as Oregon’s), and most important, it doesn’t have urban-growth boundaries which means it has much more affordable housing.


Click any photo to go to the listing for that property.

The P-I’s first suggestion is a 720-square foot, two-bedroom, one-bath home on a 5,000-square-foot lot. On the plus side, the living room has hardwood floors. On the minus side, the asking price is $259,950–and if Seattle’s housing market is anything like Portland’s, it will go for more than that. At the asking price, the cost is $361 per square foot.

As an alternative, allow me to suggest this 720-square-foot home in Houston’s University Area, not too far from downtown. It has new paint and an updated kitchen and, like the Seattle home, it is on a 5,000-square-foot lot. Unlike the Seattle home, the cost is just $86,500, just under a third of the Seattle house. That’s just $120 per square foot–and the sellers will probably accept a little less.

The P-I’s next suggestion is this cute little home in North Seattle. At 770 square feet, it is only a little larger than the first one, but has hardwood floors throughout, plus a covered patio and a firepit in the backyard. The lot is about 6,500 square feet. The owners are asking a mere $349,000, which–if you can get it for that–is $453 a square foot.

As an alternative, consider this 3-bedroom, one-bath home in East Houston that is 902 square feet and sits on a 8,265-square-foot lot. At $108,000, it is less than $120 per square foot.

If 770 square feet isn’t going to do it for you and you really do have $350,000 to spend, how about this beautiful 4-bedroom, 3-1/2-bath, 3,458-square-foot home in Humble, a suburb just north of Houston? Sitting on a 9,000-square-foot lot that is just steps away from Lake Houston, the owners are asking $349,000, or $101 per square foot.

Or perhaps you don’t mind living in a smaller house, but like the idea of getting away to a lake now and then. If so, buy a smaller home in Houston for $100,000 or so and then also buy this home on Lake Tristan, which is about two hours from downtown Houston–perfect for weekend getaways.

The house is 716-square-feet with two bedrooms and two baths and has its own dock on the lake, as shown above. While it looks like the gazebo over that dock could use a little work, the house itself is in great shape and being offered for just $99,500, or $139 per square foot. This plus either of the less expensive home in Houston would cost far less than the least expensive home suggested by the P-I.

The Post-Intelligencer has one more suggestion, this condominium that has been carved out of what looks like a remodeled apartment building in the popular Capitol Hill neighborhood. It has hardwood and tile floors, and it includes a free exercise program: since it is on the top floor, you get to do stair climbs every day. The 1-bedroom, 1-bath condo is just 499 square feet, so you won’t have to do a lot of housekeeping, and it comes with a parking space–for your bicycle. The price is only $285,000 ($571 per square foot), plus annual maintenance fees of $356.

If you like the idea of a condominium near downtown, let me suggest this beautiful loft in Houston’s Eado (east of downtown) neighborhood, which claims to be the “Art & Soul of the City.” At 1,449 square feet, plus carport parking that’s actually big enough for your car, the two-bedroom, two-bath loft is nearly three times as big as the one on Capitol Hill. The kitchen features granite and stainless steel while the bathroom is also granite. Maintenance fees are slightly higher at $403 per year, but that’s more than offset by the lower price of $249,500 ($172 per square foot).

The good news is that Seattle Millennials don’t have to move to Houston to find affordable housing. All they have to do is convince the Washington legislature to repeal the state’s growth-management law and King County to repeal its growth-management plan and urban-growth boundary. Once that is done, Seattle prices will soon be as affordable as Houston’s.

Puget Sound Millennials who don’t want to wait the millennium or so that it will take for that to happen but who just have to live near the mountains might consider Boise, Colorado Springs, or another Rocky Mountain location. According to Coldwell Banker, a 4-bedroom, 2-bath, 2,200-square-foot home in Houston costs about $274,000, while in Seattle it is $726,000. The same-sized home in Boise would be $273,000; Colorado Springs is $252,000; and Logan, Utah is $188,000. For about the price of the 770-square-foot house in Seattle, you could buy a $179,000 home that is three times that large in Casa Grande, Arizona and another in Great Falls, Montana, and enjoy Montana winters and Arizona summers, or, if you prefer, the other way around.

As Donald Trump doubled down on his anti-immigration message in last night’s debate, Republican candidates for Senate across the country are not adopting his lines. In fact, they are overwhelmingly going the other way, rejecting mass deportation and endorsing legal immigration and various forms of legalization for those immigrants illegally in the United States. Here are what the candidates in the tightest races are saying:

1. Arizona – John McCain

It comes as little surprise that Sen. McCain, a longtime proponent of immigration reform and coauthor of the Senate 2013 reform bill, should be running on an openly pro-immigrant platform. He touted his accomplishment at his Senate debate last week. “I was able to get immigration reform through the United States Senate,” he said. “That is the very big difference between having working groups and talking about it and legislative accomplishment, and I promise you that the Dreamers were part of immigration reform.”

2. Florida – Marco Rubio

Sen. Rubio also coauthored the 2013 reform bill that passed the Senate. Although he has backed away from that approach, he continued to take a pro-immigration position at his debate. “I personally know people, children included, who are in this country out of status, illegally brought here at a very young age, and I see the sadness that they’re going through. I want to fix the problem,” he said. “The second step would be to modernize our legal immigration system so that it’s not as bureaucratic, and it works better. … Republicans would support doing something very reasonable with people that are not criminals, that have been here a long time.”

3. Illinois – Mark Kirk

Sen. Kirk who voted for the 2013 reform bill defended his pro-immigrant position during his campaign. In a campaign ad in Spanish, he said, “When Donald Trump says bad things about immigrants, I have spoken out against him. I don’t support Trump. I’ve worked with Republicans and Democrats to reduce gang violence in Chicago. And I support immigration reform so families can stay together.”

4. Indiana – Todd Young

Rep. Young has previously endorsed a form of legal status for the unauthorized immigrants in the country. In his race, he appears to have backed off this position a bit, while still taking a much more pro-immigrant position than Trump. “Immigration should be attractive to Americans so long as immigrants come to our country to contribute to our economy and society. I strongly support legal immigration,” he said in response to questions from a local news outlet. “I would consider proposals which require those who have entered the U.S. illegally to apply for their visas from their home countries and not from within the US…. Congress should work to find a rational middle ground between granting an automatic path to citizenship for every illegal immigrant and a program of mass deportation.”

5. Nevada – Joe Heck

Congressman Heck supported a form of legalization during the 2013 immigration reform debate and has maintained his pro-immigration stance in his current race for Senate. “When someone goes through the legal system,” he said at his debate, “they shouldn’t have to wait ten to twelve years to bring their spouse or family over.  Let’s develop a robust guest worker program…. Dreamers… should get a path to citizenship…. I have never talked about deportation, and I believe that when we talk about the 11 to 12 million undocumented, outside of the dreamers, those that have a criminal past should be deported. However, those who have been working should be given some kind of path to legal status.”

 6. New Hampshire – Kelly Ayotte

Sen. Ayotte also voted for the reform bill in 2013 and has continued to tout her record during her race. “I supported the bipartisan immigration bill in the Senate because I want to solve this problem,” she said at her debate last month. “For the people who want to be part of this country to work… have a better legal system that is fair…. Sometimes I take some heat because of this from my own party, but I’m for solving this.” 

7. North Carolina – Richard Burr

Sen. Richard Burr voted against the Senate immigration reform bill in 2013, but in this election, he has endorsed expanding legal immigration and giving temporary visas (which may or may not be renewable) to unauthorized immigrants. “Immigration reform… starts with fixing the legal system,” he said at his Senate debate last week. “Individuals who haven’t committed a crime in this country should have a legal status that’s temporary.”

8. Ohio – Rob Portman

Sen. Portman also voted against the Senate bill in 2013 due to enforcement concerns, but he has also favored a form of legalization and an expansion of legal immigration at the time. “We do need to do something with people who are here, who are living in the shadows. It’s wrong,” he said at the Senate debate this week. “We’re a country of immigrants. For those who are here, who have roots in the community, and are willing to come forward, pay a fine, and pay any back taxes – and if they have any criminal record of course they should be deported – but the others should have a path to legalization…. We ought to continue to bring refugees and immigrants who enrich our country.”

9. Pennsylvania – Pat Toomey

Sen. Toomey voted against the reform bill in 2013, but is a long-time proponent of expanding legal immigration. In this race, he appears to have maintained a broadly pro-immigration stance and rejected mass deportation, while staying vague on how he’d keep immigrants here. According to CBS Pittsburgh’s voter guide, “Toomey supports a guest worker program and increasing spending on border security. Toomey says Donald Trump’s proposal to build a wall along the U.S.-Mexico border is simplistic and says Trump’s plan to deport every immigrant living illegally in the United States is not realistic.”

10. Wisconsin – Ron Johnson

Sen. Johnson who voted against the 2013 bill but has favored giving work permits to unauthorized immigrants since 2013 continued to advocate for this approach during his race. “My concept of a border security bill would have a robust guest worker program pretty well governed by the states. They can set the number of people,” he said at his debate. “My guest worker program would actually address the people in this country, in Wisconsin milking cows…. Until you secure the border, you’re not going to have the public willingness to accept some kind of legalization, and I’m happy to do that. Once we secure the border, we will treat the people… with real humanity.”

Other Members

Roy Blunt of Missouri appears to be the only candidate in a close race that had virtually nothing positive to say about immigration in his recent debate. For members in less competitive races, it was harder to get details on their views. There are eight other incumbents running for reelection this year who voted against the 2013 reform bill and have not—as far as I could tell—adopted a pro-legalization stance for unauthorized immigrants, although that doesn’t mean they are anti-legal immigration.

On the other side, Sens. Lisa Murkowski in Alaska and John Hoeven of North Dakota voted for the 2013 bill, and Sens. James Lankford of Oklahoma and Rand Paul of Kentucky have advocated for legalization since 2013, and Sen. Paul has done so even during his presidential run this year. Chris Vance, the GOP candidate in Washington, also touts support for immigration reform on his website.

Overall, most serious GOP candidates are taking much more pro-immigration positions in the 2016 election despite the rise of Trump. As I explained during the week in which Trump considered reversing his immigration stance, this could be because Trump lost the argument with voters, even with Republican voters, a majority of whom favor legalization over deportation.

This weekend, I sat down with Senator Mike Lee (R-UT) for the Cato Daily Podcast. We discussed executive power, criminal justice reform, the Electoral College and this strange, disappointing election year. Here’s a portion of our discussion:

Caleb Brown: President Obama has said he’s concerned, and I have a bit of a hard time taking some of what he says seriously, he’s concerned about leaving a loaded gun around in the White House for the next President, which is, it’s almost comical.

Senator Mike Lee: That’s wonderful. If that is a deathbed repentance, it’s better than no repentance at all. I would like to see what he means by that. I hope he means the same thing that you or I would mean if we made that kind of a statement, which people like you and I do, say things like that all the time. Look, this President has, in fact, taken a lot of steps in the direction of consolidating power in the Executive Branch. And this has been one of the consistent refrains that you’ve heard from some members of Congress. One of the consistent themes that I’ve tried to follow, is pointing out to Republicans and Democrats alike, in both Houses of Congress, look, regardless of how you feel about this President’s policy, regardless of how you feel about this President’s political orientation, this is a bad practice. This is something that ought to scare the daylights out of any Republican or any Democrat or Libertarian or person of any other political stripe, because this is not American. This is not how we do things.

We don’t live in a kind of government where Presidents can appropriately say if Congress won’t act, I will. That’s kind of scary. Scary because of what it says about the consolidation of power in the minds of the chief executive, in the minds of the American public as far as they regard the executive, it’s also scary for the simple reason that in many respects the law allows them to do precisely that. Because we’ve got so much buildup from so many decades of broad, amorphous, quasi lawmaking, where we basically say we shall have good law in area X, and we hereby delegate to department or agency Y the power to make good law in area X. Well guess who controls department Y? The President, and those he chooses, who normally serve at the pleasure of the President. So, in many respects, Congress has enabled this. Congress has created this monster. And it’s time for Congress to tame the monster once again.

Brown: Is there any appetite to do that this year?

Lee: There is a strong appetite on the part of some members of Congress to do that. I don’t, frankly, sense a lot of appetite from the White House. In fact, aside from this statement which was made very recently and has yet to be followed up by anything substantive that I’m aware of, you don’t ever hear that from the White House. And shockingly, you don’t hear it very much from very many members of Congress. That is starting to change, and I’m going my best to change that, but most members of Congress have become strangely, bizarrely content with allowing for this delegated lawmaking trend to continue. And in fact I wrote a book called Our Lost Constitution, it just came out in paperback, and in Our Lost Constitution I explain that even though our Founding Fathers thought that each branch of government would have a strong, compelling interest to guard jealously its own power, what we see is that in the last few decades the opposite has been true for Congress. Congress has been eager to delegate more and more.

Why? Well, as I explain in Our Lost Constitution, I think it has a lot to do with the fact that the Holy Grail for most politicians, most members of Congress in particular, is to avoid criticism, avoid negative publicity, and take credit for doing good things, avoid credit for doing hard things. And so when we attack a law by saying we shall have good law in area X and let’s delegate the task of deciding what that means to commission Y or agency or department Y, we take credit for what’s good and we avoid criticism for what’s hard. That’s wrong and we’ve got to turn that around.

On the Electoral College …

Brown: Do you believe that presidential electors in the Electoral College are bound by anything except their own conscience?

Lee: No. There are some states that have these faithless elector laws. The constitutionality of them has been called into question and the constitutionality of them has not really been upheld or challenged or tested in court. Basically, electors have some discretion. Now, I think they are honor bound to do what’s right. I don’t think they ought to depart from what they are expected to do for light and transient reasons, but I think one of the reasons why our Founding Fathers put in place the Electoral College was to put an additional layer of protection there in case something really bad was going to happen. That’s how I read it.

Listen to or subscribe to the Cato Daily Podcast.

Wednesday’s Wall Street Journal contains a great page 3 article on how stricter land use regulations are slowing the growth of housing in areas that need it most. Laura Kusisto reports on a developer’s fight to build middle-class housing in downtown San Francisco, but she notes that similar problems can be seen in wealthy communities from New York and Connecticut to San Diego and Portland, Ore. She also cites academic research on the topic:

According to research by Daniel Shoag, an associate professor of public policy at Harvard University, and Peter Ganong, a postdoctoral fellow at the National Bureau of Economic Research, a decadeslong trend in which the income gap between the poorest and richest states steadily closed has been upended by growth in land-use regulations.

Moving to a wealthier area in search of job opportunities has historically been a way to promote economic equality, allowing workers to pursue higher-paying jobs elsewhere. But those wage gains lose their appeal if they are eaten up by higher housing costs. The result: More people stay put and lose out on potential higher incomes.

For on-the-ground reporting, you need newspapers. But you could have read about that paper twice in Cato Institute publications. Regulation magazine editor Peter Van Doren wrote about it in Winter 2013-2014 in his “Working Papers” column on new research (page 78). 

And just two months ago a summary version of the paper appeared in the Research Briefs in Economic Policy series edited by Jeff Miron, director of economic studies. 

I hope state and local policymakers will take note of the findings in this paper.

Stay tuned to the Cato Institute for more ahead-of-the-curve ideas.

Obama administration officials were outraged when Russian and Syrian government planes recently attacked rebel positions in and near the city of Aleppo.  Such raids were a humanitarian atrocity, President Obama charged, when they struck civilian targets.  But Washington had little patience even for assaults directed against military targets.  Those attacks, U.S. officials contended, played into the hands of ISIS by damaging insurgent elements opposed to that extremist group and even creating incentives for moderates to make common cause with ISIS.  The regime of Bashar al-Assad and its Russian allies responded with the assertion that they were not targeting moderates, but were in fact attacking either ISIS units or other “terrorists.

Whatever the merit of Washington’s criticism in that case, it has been severely undermined by the latest action of America’s “loose-cannon” NATO ally, Turkey.  The Turkish military just launched attacks against forces of the YPG, the Kurdish People’s Protection Units, in positions north of Aleppo.  According to Turkish authorities, the raids killed some 200 Kurdish fighters.  Ankara insists that the YPG is affiliated with the outlawed Kurdistan Workers Party (PKK), a violent separatist movement in Turkey itself.  YPG leaders deny such a connection, and Washington continues to regard Kurdish forces as a crucial component of the anti-ISIS coalition.

This latest incident underscores three points.  First, Turkey is an increasingly unreliable ally that pursues its own narrow agenda regardless of Washington’s wishes.  Second, regardless of Ankara’s probable motive, which apparently was to stem growing Kurdish power in both Syria and Turkey, the attack objectively strengthened ISIS by damaging one of its most effective military adversaries.  Third, the Syrian civil war is incredibly complex.  It is not a simple melodrama featuring the evil Assad regime versus noble, freedom-seeking rebels.  The insurgents themselves are extensively fragmented, with agendas ranging from genuine Western-style democracy to Saudi-style Islamic fundamentalism.  Outside parties, especially Russia, Turkey, Iraqi Kurdistan, Iran, and Saudi Arabia, all back certain Syrian factions to advance their own geopolitical objectives. 

To its credit, the Obama administration has refrained from full-scale involvement—a “big footprint” military intervention–in Syria’s civil war.  But U.S. efforts to encourage Assad’s ouster helped create the ongoing tragedy, and even Obama’s “light footprint” strategy has entangled the United States far too deeply in a murky and ultimately unwinnable struggle.   One hopes that the next president will have the wisdom to extricate the United States from this beckoning quagmire and let the Turks, Russians, Saudis, and others deal with the headache of the Syrian civil war.  

In last night’s third and final presidential debate we were treated, finally, to a brief discussion of what should have been a central issue in these debates—the meaning of the Constitution and the role of the Supreme Court under it. Unfortunately, the discussion got off on the wrong foot right from the start when moderator Chris Wallace asked Secretary Clinton, “Where do you want to see the Court take the country?”

It’s not the role of the Court, of course, to take the country anywhere. Its role, rather, is to correctly read the law—constitutional, statutory, or regulatory—and apply it to the cases that come before it, period. Wallace quickly recovered, however, by asking how the Constitution should be interpreted—by reading the Founders words for what they say, or by reading it as a living document to be applied flexibly according to changing circumstances? That’s been the great jurisprudential question since Progressives prevailed on the New Deal Court to follow the second course, resulting in the Leviathan that surrounds us today.

Ever the Progressive, Clinton answered that “the Supreme Court needs to stand on the side of the American people, not on the side of the powerful corporations and the wealthy.” Read our basic legal document as carefully as you wish, you will find no such opposition between the people and the powerful. Clinton’s populist appeal was a prelude, of course, to her attack on the Court’s 2010 Citizens United decision, which upheld the First Amendment right of corporations and labor unions to make independent political expenditures—in that case, let’s remember, the right of a nonprofit corporation to advertise “Hillary: The Movie” in broadcasts within 30 days of the 2008 Democratic primaries. It’s personal.

For his part, Trump rambled, as usual, but when he finally got to the point, he at least called it correctly, promising that the judges he would “appoint” (the president nominates, not appoints; and Trump can hardly promise for others) “will interpret the Constitution the way the Founders wanted it interpreted.” Unfortunately, the discussion that followed—warring arguments over guns and abortion—was more politics than law, as doubtless is to be expected at this point in our constitutional history, when even extended judicial confirmation hearings reflect politics more than law, to say nothing of the Court’s Obamacare opinions, among others. We’re far removed from the Federalist Papers.

Class actions play a vital role in our legal system. These lawsuits are often the only vehicle for injured plaintiffs to receive compensation when a defendant’s wrongs are widely disbursed and it would be impractical for a single individual to sue.

Yet the process of settling these suits is subject to perverse incentives on the part of the lawyers representing the injured parties. Class counsel often will seek the largest portion of the settlement award for themselves—structuring the settlement to maximize attorney fees—at the expense of class members.

Sadly, this sort self-dealing on the part of class counsel is exactly what happened in Blackman v. Gascho. The case centers on a consumer class action filed against Global Fitness Holdings LLC, alleging that the between 2006 and 2012, the company sold gym memberships and incorrectly charged fees pertaining to cancellation, facility maintenance, and personal-training contracts. A group of plaintiffs sued Global Fitness over the fees, and the parties entered into a “claims-made” settlement.

This type of settlement allows the defendant to make a large amount of money “available” to class members, but in order for the members to collect, they must jump through the hoops of correctly filing claims. Because of the low response rate in such settlements, the defendants will end up paying much less than the funds made available. Indeed, of the $8.5 million made available to the class members, Global Fitness only paid $1.6 million—a payout of approximately 10 percent of the settlement funds. Despite this low payout to plaintiffs, class counsel are still paid a certain rate based on the funds that were made available—not the funds that were actually paid out—in some instances giving them attorney fees larger than the class members’ damages award!

The class counsel here were paid $2.4 million, nearly $1 million more than the class members collected. Josh Blackman, also a Cato adjunct scholar, just happened to be one of the class members. He challenged the settlement, arguing that the agreement was giving the class attorneys preferential treatment over the class members who did not collect. The district court approved the settlement, however, and the U.S. Court of Appeals for the Sixth Circuit agreed with the district court by a 2-1 vote.

Cato has now filed an amicus brief urging the Supreme Court to review the case. Federal Rule of Civil Procedure 23(e)(2)—and fundamental tenants of due process—require that a settlement that binds class members be “fair, reasonable, and adequate.” In this case, the Sixth Circuit upheld approval of a settlement that provided zero compensation for over 90 percent of class members, and in the process broke with the Third, Seventh, and Ninth Circuits. 

The Supreme Court will likely decide by the end of the year whether to take up Blackman v. Gascho.

The Saudis have just completed peddling their new $15bn bond issue (with more to come). One thing that’s been swept under the rug is a smoking gun. A smoking gun because it’s an indication of just how much trouble the Kingdom is in.

The most telling sign of the depth of the Saudi welfare state’s troubles is the fact that they switched from the lunar-based, religious Hijri calendar to the western Gregorian calendar on October 1, 2016. The reason for this radical change is simple economics.

The Gregorian calendar has 10.9 more days than the Hijri calendar, meaning that the public sector can cut costs through the dilution of wages—same pay spread over more working days. In another move that touches on sensitive religious matters, the Kingdom has announced that it will increase visa charges for people completing their religious pilgrimage, the Hajj. Even in the Kingdom of Saudi Arabia, economics has trumped religion.

If the Saudis really wanted to embrace a calendar without any religious implications, and one that is superior from a logical, economic point of view, they should adopt a permanent calendar (read: the Hanke-Henry Permanent Calendar). The Hanke-Henry Permanent Calendar (HHPC) provides a comprehensive template for revising the contemporary Gregorian calendar. It adheres to the most basic tenet of a fixed (read: permanent) calendar—each year, each date falls on the same day of the week, and every year begins on Monday, January 1st.

The year is then divided into four three-month quarters. Each month begins on the same day (and date) each year. The first two months of each quarter are made up of 30 days; the third is made up of 31. So, each quarter contains 91 days, resulting in a 364 day year that is comprised of 52 seven-day weeks. This is a vital feature of the HHPC, because, by preserving the seven-day Sabbath cycle, the HHPC avoids the major complaints from ecclesiastical quarters that have doomed all other attempts at calendar reform.

Moreover, the HHPC accounts for the disparity between the necessary length of the HHPC (364 days) and the astronomical calendar (roughly 365.24 days, the duration of one full orbit of the Earth around the Sun) by simply tacking one additional full week to the end of every fifth or sixth year (specifically 2020, 2026, 2032, 2037, 2043, 2048, and so on). This keeps the calendar in line with the seasons — serving the same function as the leap year in the present Gregorian system.

If you wish to determine the day of the week your birthday will fall on forever under the HHPC, just look at the calendar below.

Hillary Clinton says that “we are dramatically underinvesting” in infrastructure and she promises a large increase in federal spending. Donald Trump is promising to spend twice as much as Clinton. Prominent wonks such as Larry Summers are promoting higher spending as well. But more federal spending is the wrong way to go.

To shed light on the issue, let’s look at some data. There is no hard definition of “infrastructure,” but one broad measure is gross fixed investment in the BEA national accounts. 

The figure below shows data from BEA tables 1.5.5 and 5.9.5 on gross investment in 2015. The first thing to note is that private investment at about $3 trillion was six times larger than combined federal, state, and local government nondefense investment of $472 billion. Private investment in pipelines, broadband, refineries, factories, cell towers, and other items greatly exceeds government investment in schools, highways, prisons, and the like.

One implication is that if policymakers want to boost infrastructure spending, they should reduce barriers to private investment. Cutting the corporate income tax rate, for example, would increase net returns to private infrastructure and spur greater investment across many industries.

Let’s drill down on the federal portion of infrastructure investment. The largest piece is investment in intellectual property at $88 billion, which mainly includes research spending by agencies such NIH and NASA. Terence Kealey argues against government research spending, but let’s put that aside for this blog.

The rest of federal investment spending is on structures and equipment, which includes direct federal investment of $32 billion (for items such as post office buildings) and aid to the states of $72 billion (for items such as highways). Note that total state and local investment spending would include the $72 billion plus the $280 billion that state and local governments funded themselves.

Now let’s switch to OMB data, which is more detailed but is measured a bit differently. The table below shows federal spending on “physical capital investment” broken out between direct spending and aid to the states.

I contend that most federal spending on physical infrastructure should be instead funded by state and local governments and the private sector. In the table, I indicate that about three-quarters of federal nondefense investment in 2016 ($92 billion out of $121 billion) should be handed over to the states and private sector.

Why devolve infrastructure funding? Experience shows that federal investments are often misallocated and mismanaged. Decentralized decisionmaking in the states and the marketplace is superior to central planning from Washington. Infrastructure investment has both costs and benefits, and so trade-offs need to be made. Those trade-offs can best be made by local decisionmakers directly responsible for both the financing and spending sides of the investment process.

These themes are explored in essays at Downsizing Government, such as here and here.

Whoever wins the election, we are likely to have a debate on infrastructure next year. I hope that we can get beyond simple cheerleading for more federal spending. Improving America’s infrastructure is about more than spending. It’s about efficiency, innovation, and sound management of investments, and when you consider those factors, a decentralized approach is the best way to go.  

ATLANTA - Support may be building in Congress for another round of military base consolidation. Some believe that leaders will reach agreement with the incoming administration early next year. It’s overdue. The Pentagon says it will have 22 percent excess capacity by 2019. But, of course, for many communities, base closure is a frightening prospect.

Some communities in and around former bases have begun the process of repurposing these properties. At the Association of Defense Communities’ Installation Reuse meeting here in Atlanta, attendees had a chance to visit two such examples: former Army bases Fort Gillem and Fort McPherson. Both have a pathway toward a successful transition to non-defense use since winding up on the 2005 BRAC commission’s cut list, but they have opted for quite different approaches.

Fort Gillem, an Army logistics hub opened in 1941, is now Gillem Logistics Center. It is already home to a 1-million square foot distribution center for Kroger, the popular food retailer. Proximity to a major highway, Interstate 285, proved a key selling point, and enabled Kroger to consolidate operations from five buildings into one. The new facility includes freezers and cold storage for everything from ice cream to fresh cut flowers, and employs about 1000 people. Kroger invested $243 million in the project, part of a 30-year commitment to the property, and they have room to expand.

There are other massive warehouses under construction elsewhere at the former Army base, including an 850,000 square foot facility that is nearing completion. Long-term plans call for 7–8 million square feet of warehouse space, plus another 1 million square feet of mixed-use and retail development. Atlanta boasts some of the lowest real estate costs of any major metropolitan area, and this makes it an attractive location for logistics hubs.

Fort McPherson is located about 11 miles away, northwest of Gillem, and situated between downtown Atlanta and the busy Hartsfield Jackson Airport. The base dates back to the late 19th century, and struggled in the first few years after closure. But it now has a unique and creative future. Tyler Perry, the actor, writer, director, and producer of a string of Hollywood and television hits, paid $30 million for 330 acres at the former site in June last year. His company wasted no time in converting the property. The portion of Tyler Perry Studios now housed in a former army headquarters building includes a variety of sets, everything from hospital rooms to bars to the Oval Office. We weren’t allowed to take pictures, but the Los Angeles Times took readers on a virtual tour here. On our driving tour of the rest of the property, we saw a few single family homes that looked like any typical American subdivision, except that they were built in the span of a few weeks, and can be quickly modified to look like any other typical American neighborhood. There’s a massive yacht perched awkwardly on a rise of land near the entrance to the property. It doesn’t float in real life, but can be made to look like it’s in the middle of the ocean through the magic of movie making. Tyler Perry Studios’ plans for the rest of the sprawling property include sound stages as well as open space. Perry’s forthcoming film “Boo: A Madea Halloween” was filmed at Fort Mac, including in and around the old base’s parade grounds. One of the brick homes featured in the movie, Quarters 10, was the base commander’s home (Colin Powell, among others, once lived there).

A major movie studio could be a big draw for the rest of Fort Mac. The McPherson Implementing Local Redevelopment Authority, more popularly known as the Fort Mac LRA, retains 145 acres of the former base, with frontage along two major thoroughfares, Lee Street and Campbellton Road. They are in negotiations to construct a new facility for a charter school, which could be a key draw for area residents. Brian Hooker, executive director of the Fort Mac LRA, explained to me that there are 250 employees at a Veterans Administration medical clinic and they have plans to expand. The key for future development will be to attract a mix of retail and commercial activity that will make this property a destination for more than movie extra zombies and grips. But the possibilities for this attractive plot of land seem promising. 

Regardless of whether Congress authorizes a round of base closures in the coming year, or pushes it down the road, the issue of over-capacity will be addressed, one way or another. But a base closing can mean businesses opening, if local policymakers and communities let go of the past and embrace the future. Look no further than Fort Gillem and Fort Mac for evidence of that.

A new report from the ACLU and Human Rights Watch details many of the harms associated with the criminalization of drug possession. The most striking finding from the report is that police in the United States arrest more people for marijuana offenses than for all violent crimes combined. The title of the report, “Every 25 Seconds,” refers to how often police arrest someone for drug possession in this country.

The full report can be found here, but other key findings include:

  • More than one out of every nine state-level arrests are for drug possession, amounting to 1.25 million arrests per year.
  • Nearly half of those arrests for marijuana possession.
  • While drug usage rates are roughly the same across racial lines, black adults are more than two-and-a-half times as likely as white adults to be arrested for possession.
  • More than 99% of drug possession convictions were the result of guilty pleas, rather than trial verdicts. The authors of the report describe this as “rendering the right to a jury trial effectively meaningless.”
  • The average bail amount for drug possession defendants was $24,000, meaning that poor defendants typically remained incarcerated while awaiting trial and had a strong incentive to plead guilty even if they believed they were innocent.
  • Defendants often did not understand the multitude of collateral consequences of a drug conviction.

When it comes to actual policy recommendations, the report urges legislators, judges, prosecutors, and police officers to de-emphasize the policing and prosecution of drug possession crimes, effectively calling for decriminalization of drug possession across the board.

While the authors stop short of recommending full legalization, even the decriminalization recommendation would be a positive step. We know this because in 2000, Portugal decriminalized all drugs. Despite predictions from critics that decriminalizing drug use would lead to massive spikes in addiction and prove a disaster, a 2009 Cato study by Glenn Greenwald put that speculation to rest. Decriminalization in Portugal has been a success, and there is no substantial movement today to return the country to prohibition.

Similarly, state experiments with legalized recreational marijuana in the U.S. are proceeding well. And the tide in favor of ending marijuana prohibition continues to grow. Next month, five more states (Arizona, California, Nevada, Maine, and Massachusetts) will vote on whether to legalize marijuana. Those states would join Alaska, Colorado, Oregon, Washington state, and Washington D.C. as jurisdictions that have renounced prohibition for marijuana.

Last month, a U.S. federal judge declared that the “principle casualty” of the war on drugs has been the U.S. Constitution. The ACLU/HRW report sheds new light on the truth of that declaration. It’s well past time to admit the failure of the drug war, allow the police to focus on actual crimes, ease the mounting tensions in over-policed communities, and restore our individual liberty.

I recently wrote a piece about the increase in guest workers and the remarkably consistent level of entries, legal and illegal, of workers and new lawful permanent residents. The main choice the U.S. government faces is whether the migrants who come here are legal or unlawful.  Excluded from my previous blog were J-1 visas for researchers, au pairs, and the like. 

About a third of unauthorized immigrants worked in service jobs in 2012, as well as 28 percent of foreign-born residents who are not naturalized, compared to just 16.7 percent of natives. Au pairs and child care are an important component of these economic sectors so including them is important to understand the shift from unlawful to lawful immigration (Figure 1).  

Figure 1: Guest Worker Visas Issued, Green Cards for New Arrivals, and Gross Illegal Immigrant Inflows

 

Sources: State Department, Department of Homeland Security, Bureau of Labor Statistics, and Pew.

The biggest decline in unlawful immigration has come from Mexico but the surge in Mexican J-1s by itself cannot possibly explain that. In 1997, 3,633 Mexicans were issued J-1 visas while only 9,044 were issued the same visa in 2015. Regardless, the change in the number of Mexican apprehensions since 1997 explains virtually all of the change in the total number of apprehensions with a correlation coefficient of 0.994. The inclusion of J-1s does not change the conclusion from my previous post. 

Rising wages in Mexican states that sent migrants to the United States, lackluster U.S. economic growth, and increased border security all played a role in shrinking Mexican unauthorized immigration. The increase in border patrol from 1997 to 2015 is closely correlated with the number of new guest worker visas issued to Mexicans and the unemployment rate. The numbers of Mexicans apprehended is negatively correlated with all three—with the number of border patrol agents coming in on top at -0.95, Mexican guest workers at -0.78, and the U.S. unemployment rate at -0.68. The adjusted R-squared for all the variables is 0.86. 

There is an impressive trade-off between the number of Mexican guest workers and apprehensions of them attempting to enter unlawfully (Figure 2). Figure 3 shows the same figures in a more dramatic, less technical graph. Increasing the number of guest workers for Mexicans is also much cheaper than hiring new border patrol agents. 

Figure 2: Guest Worker Visas for Mexicans and Mexican Apprehensions

Sources: State Department and Department of Homeland Security.

Figure 3: Guest Worker Visas for Mexicans and Mexican Apprehensions

Sources: State Department and Department of Homeland Security.

The number of guest worker visas issued to Hondurans, Salvadorans, and Guatemalans has flattened since 2005 while the number of apprehensions of them at the border has more than doubled. Expanding the number of guest worker visas and making more of them available to Central Americans would be a cheap, effective, and economically beneficial way to diminish the flow of unlawful immigrants from those countries and to expand control over the border.  

Guest worker programs do not have to replace every would-be unlawful entrant with a legal work visa. Each visa issued during the Bracero program of the 1950s and 1960s replaced about 3.4 Mexican unauthorized immigrants, on average. Legal migrant workers are preferred by American employers, the migrants themselves, and should be favored by policy makers too. 

On November 2nd, Cato will host a debate over whether libertarians should vote. On the “no” side will be me and my colleague Aaron Ross Powell. On the losing side will be our colleagues Jim Harper and Michael F. Cannon. You should come, that is, of course, unless you’re sensitive to the sight of public executions.

But Jim wants to start the debate early. Yesterday, he criticized the standard economist’s argument for why people (including libertarians) shouldn’t vote. “Given the exceedingly low likelihood that one person’s vote will sway the outcome,” as Jim describes the argument, “the time and effort spent on voting is pure waste.”

This is true under most circumstances: if you’re voting solely to change an election, then your voting is irrational. If you get no pleasure out of voting, if casting a vote gives you no sense of a duty fulfilled, yet you still wake up, stand in line on a cold November morning, and cast your vote merely because you want to change the outcome of the election, then you are behaving irrationally.

In nearly every circumstance, your vote doesn’t matter. It won’t change things. Every election that you’ve ever voted in or not voted in would have come out exactly the same if you had done the opposite. This is not an opinion, it is an inescapable mathematical truth.

Jim argues that this is only half the story. What the standard, voting-is-irrational model “really fails to account for is the effect that margins of victory have on the many, many political and social actors that will consume vote information after election day.” This is still wrong, and for the same reasons.

At the risk of creating a more difficult debate opponent on November 2nd, I must inform Jim that he’s consistently equating two fundamentally different concepts: 1) the trivially true idea that voting, en masse, matters; and 2) the idea that a single vote matters. Aaron and I will not be arguing that voting, en masse, doesn’t matter in the sense that it affects the world. Of course it does. And we will not be arguing that margins of victory, which are just an emergent phenomenon of en masse voting, don’t matter. That would be silly. But, under most circumstances, a single vote doesn’t meaningfully contribute to either an electoral victory or to the margin of victory. No winning politician has ever said, “well, I won by 4.000006 percent, but if I won by 4.000007 percent, that would have really been a mandate for action.”  

Finally, I told Jim in an email that I could refute him in a single sentence. Here it is:

A single vote’s contribution to a margin of victory is nearly as infinitesimal as its contribution to a victory, and, if margins of victory have consumable value as “vote information,” then so does voter turnout, so you’re better off staying home in order to marginally contribute to that data point.

Maybe that’s all Jim needed to soothe his troubled soul: a reason to not vote that will make him feel he is contributing to the system. Apparently Jim has a deep-seated need to be a part of a percentage, to be counted by some egg-head political data consultant. So stay home Jim, but do it with gusto rather than apathy. Know that you’re making a marginal contribution to the voter turnout numbers. On November 8th, stand up—or sit down, or sleep in—and get counted!

Come to the debate, or watch it online. It’ll be fun.

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