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The word “daunting” comes to mind when considering the task before U.S. and EU trade negotiators, who are meeting in Miami this week for the 11th round of the Transatlantic Trade and Investment Partnership negotiations, which commenced in late spring of 2013.  If a TTIP deal is eventually reached, the 11th round may only be remembered as part of the early era of the negotiations. Not only are there so many issues on the table, but the number of issues that have drifted from low-hanging fruit to difficult, and from difficult to intractable, seems to be growing.

One seemingly intractable issue is the matter of “Geographic Indications,” (GIs) and what protections, if any, they should be afforded. EU negotiators consider GIs to be intellectual property deserving of robust protection, which includes proscribing use of words like “Champagne,” “Parma” ham, and “Muenster” cheese (yes, GIs could just as aptly signify gastrointestinal issues) unless the product is made in the named region using processes and standards traditional in the region.  It’s a priority issue for the EU negotiators, but the U.S. negotiators aren’t buying it at all.

My colleague Bill Watson has immersed himself in the details of the geographic indications issue and, in his Cato Online Forum essay (published in conjunction with last week’s Cato TTIP conference), describes the conflicting EU and U.S. positions and explains why there is very little room for compromise. Bill does offer up some possible solutions, but he’s not betting the house that it will work:

The United States has demands of its own in the TTIP negotiations that are at least as unpopular in Europe as is GI protection in the United States.  American negotiators have been tasked with the near impossible mission of opening up Europe’s market to genetically modified crops and meat from hormone-treated cattle, ractopamine-fed swine, and chlorine-washed chicken.

It may be possible that TTIP could include a grand bargain in which some combination of these agricultural demands are met along with a commitment for stronger GI protection in the United States.  For traditional trade barriers like tariffs and quotas, that kind of bargain would be a welcome outcome and, indeed, is the basic way that reciprocal agreements work to liberalize trade.  

In the regulatory sphere, however, this sort of political horse-trading raises questions of democratic legitimacy and is, in any event, not a way to arrive at well-reasoned policies.  Many regulatory policies that impede market access are motivated by non-economic interests.  And the benefits for foreign producers that stem from changing those policies aren’t going to mollify irate domestic constituencies.  

The tradeoff strikes at the heart of the difference in American and European cultural approaches to agriculture.  It’s difficult to imagine that TTIP negotiators could strike a deal that overcomes the European desire to protect traditional foods and ways of life or America’s ingrained preference for high-tech production and innovation.

Read Bill’s essay here.  Read all of the Cato Online Forum essays here.



Americans “don’t make anything anymore,” said Donald Trump on Fox on Sunday with Chris Wallace, lamenting what he sees as the death of U.S. manufacturing. “I just ordered 4,000 television sets. You know where they come from? South Korea … I don’t think anybody makes television sets in the United States anymore.” Actually, America still makes televisions. More importantly, Trump’s insinuation that trade has destroyed U.S. manufacturing is fundamentally mistaken.

The truth is that U.S. manufacturing is thriving, although the industry employs fewer people, mainly because of automation—not trade. Would Trump undo technological progress and massive savings to bring back manufacturing jobs?

The rumors of American manufacturing’s death have been greatly exaggerated. Sales revenues and output are rising. In 2014, value-added by the industry set a new record. While it’s true that manufacturing is a smaller share of the U.S. economy than it once was, that’s not because it isn’t growing—other sectors of the economy are simply growing faster.

The reason that so many goods found in a U.S. convenience store say, “Made in China,” is because U.S. manufacturing has shifted towards high value-added products like aerospace equipment, not because the U.S. has stopped “making things.”

Despite growing revenues and output, manufacturing employs fewer Americans than it once did. Technological advancement has led to gains in efficiency, and it is primarily automation, not trade, that has reduced demand for workers in manufacturing.

In fact, the U.S. manufacturing industry added jobs in the years immediately after the North American Free Trade Agreement was passed. Trade restrictions sometimes even inflict harm on domestic manufacturing. Tariffs on manufacturing inputs (e.g., hot-rolled steel) may protect U.S. workers making that specific product, but harm all the U.S. manufacturers who need those inputs to create other products (e.g., airplane parts) further down the production line. On the whole, trade enriches us.

While manufacturing employs fewer Americans than it did in Donald Trump’s youth, total U.S. employment has risen, as more Americans find work in other sectors of the economy. If Trump would give up gains in efficiency solely to boost employment in manufacturing, then he may want to consider this famous piece of advice attributed to Milton Friedman: 

Milton recalled traveling to an Asian country in the 1960s and visiting a worksite where a new canal was being built. He was shocked to see that, instead of modern tractors and earth movers, the workers had shovels. He asked why there were so few machines. The government bureaucrat explained: “You don’t understand. This is a jobs program.” To which Milton replied: “Oh, I thought you were trying to build a canal. If it’s jobs you want, then you should give these workers spoons, not shovels.”

Does the Donald want America to build things, or does he want us digging with spoons?

The Transatlantic Trade and Investment Partnership is about much more than reducing border barriers.  In fact, the largest economic gains from a prospective deal are expected to come from “coherence” or “harmonization” of regulations and regulatory processes. Think about the added savings that could be passed on in the form of lower prices, higher R&D expenditures, and more investment if producers didn’t have to comply with two (or more) different sets of regulations implemented to achieve the same health, safety, or environmental outcomes. Regulatory coherence is not a race to the regulatory bottom (as the European Left likes to say) or global government enshrining the growth-strangling regulations preferred by Europeans (as the American Right likes to say). It is, in theory, smarter regulation.

In his Cato Online Forum essay (submitted in conjunction with last week’s Cato TTIP conference), international law professor Alberto Alemanno gets into some of the details of this important part of the negotiations. While he applauds the prospect of regulatory discussions yielding greater awareness of the extraterritorial impact of regulations, and hence opening the door to best practices and restraint, he also worries that the agreement will inevitably entail some limitations on regulatory autonomy.


Canadian federal elections yesterday ousted the ruling Conservatives under Stephen Harper and replaced them with the Liberals under Justin Trudeau. The Liberals have promised to increase taxes on high earners, ramp up spending on government infrastructure, and purposely run deficits to supposedly stimulate the economy.

It appears that two decades of fairly sensible and fiscally conservative government is ending at the federal level in Canada. Under the Liberals (1993-2006) and then the Conservatives (2006-2015), Canada cut spending, privatized government activities, cut tax rates, and slashed government debt. The reforms are discussed here.

The extended run of spending restraint and pro-growth policies by the Canadian federal government was impressive, and it contributed to a strong economy and rising incomes. Now the democratic pendulum has swung back to the left. The country may be in for another experiment in Santa Claus economics, which it suffered from during the 1970s under prime minister Pierre Trudeau, the father of the newly elected prime minister.

The chart shows federal spending in Canada and the United States over the past five decades. You can see that soaring outlays under Pierre Trudeau (1968-1984) outpaced even the high spending of Nixon, Ford, and Carter south of the border.

But you can also see that the Canadian restraint since the 1990s has been remarkable, especially compared to the spendthrift policies since 2000 under Bush and Obama in the United States. Canadian federal spending plunged from 23 percent of GDP in 1993 to just 14 percent by 2015. By contrast, U.S. federal spending in 2015 was 21 percent of GDP. While U.S. spending used to be lower than Canadian spending, it is now almost 50 percent higher relative to the size of the economy.


Canadian federal budget data is here. U.S. data is here.

About 5000 migrants have drowned in the Mediterranean on their way to Europe in 2014 and 2015.  Although drownings are moderating, the danger remains.  Illegally crossing the Mediterranean to Europe claims the lives of about 2 percent of all migrants who attempt the voyage.  The United States’ southwest border is also dangerous but less so.

Migrant Deaths along Southwest Border


Source: U.S. Customs and Border Protection      

Based on data from Customs and Border Protection (CBP), 6336 people died crossing the border from 1998 to 2014 (2015 data is unavailable).  The peak year of recorded deaths) was 2005 with 492 deaths.  In 2014, there were 307 deaths.  From 1998 to 2014, deaths averaged 0.04 percent of all apprehensions – a proxy measurement for the size of the unlawful immigrant flow.  2012 was the most dangerous year to cross when the number of deaths was equal to 0.13 percent of all apprehensions.  The most dangerous border sector during the whole period was Del Rio with deaths as a percentage of apprehensions at 0.046 percent that resulted in 458 deaths.  The Tucson sector’s death rate was 0.045 percent but there were 2507 deaths during the entire time period.     

Border Deaths and Apprehensions on the Southwest Border

Source: U.S. Customs and Border Protection      

Migrant deaths by border sector is correlated with the number of migrants apprehended at each sector.  Places where migrants tend to cross are those where they also tend to die in the attempt. 

Dying of thirst in the Southwestern desert while trying to immigrate was not written about (as far as I’ve looked) and was probably very rare prior to the Chinese Exclusion Act of 1882.  In that year Chinese immigration was banned, diverting many Chinese immigrants into the black market where they first went to Canada or Mexico before entering the United States instead of just landing legally in San Francisco.  Erika Lee’s wonderful book At America’s Gates documents this.  This problem was so widely discussed that Harper’s New Monthly Magazine even published this brutal drawing in March, 1891:

“Dying of Thirst in the Desert,” Harper’s New Monthly Magazine, March 1891.   

Chinese immigrants died crossing the Southwestern desert in pursuit of the American Dream when the Chinese Exclusion Act was in effect.  Today, Mexicans and Central Americans are dying while trying to enter because our legal immigration system has made no room for them.  No doubt there are many bodies in the desert that have not and will not be discovered. 

More immigration enforcement would deter some of them from trying to immigrate or rescue many who are dying but it would also drive many of the more desperate ones to take riskier trips in more dangerous terrain, possibly increasing the death rates.  The deaths of Chinese immigrants more than a century ago and most of those who are crossing today would be easily prevented by allowing them to enter legally. 

Yesterday morning I was very pleased to encounter, in The Wall Street Journal, a report by Brian Blackstone on deflation in Switzerland. In it Blackstone observes that the Swiss case appears to contradict the widespread belief among economists (“as close to an economic consensus as you can get,” he says) that deflation is necessarily a bad thing.

Blackstone’s report pleased me because, as many readers will know, I’ve been banging the drum for “good” deflation for decades. I started doing so with The Theory of Free Banking (1988), when I imagined that I’d made a new discovery. There I observed, among other things, “that a fall in prices in response to reduced per-unit costs is, not only consistent with, but essential to the maintenance of equilibrium” (p. 99) and that “What is needed is a policy that prevents price changes due to changes in the demand for money relative to income without preventing price changes due to changes in productive efficiency” (p. 101). Not quite a decade later, in Less Than Zero: The Case for a Falling Price Level in a Growing Economy , I developed the same arguments, defending what I then called a “productivity norm” ideal for price-level movements, at much greater length. By then I’d also learned that, despite the consensus to which Blackstone refers, the idea I was defending was anything but new: in fact, until the Keynesian revolution came along, economists who accepted it outnumbered those who didn’t.[1]

Although the “long deflation” of 1873-1896 was roughly consistent with a productivity norm, albeit one adhered to more by accident than by design, and more specifically with “good” deflation, one rarely witnesses good deflation these days. The Swiss case appears to be a rare exception. As Mr. Blackstone reports,

evidence of deflation’s pernicious side effects—recession, weak employment, rising debt burdens—is pretty much nonexistent in Switzerland. Its economy is expected to expand this year and next, albeit slowly, in the 1% to 1.5% range. Unemployment was just 3.4% in September. Government debt is low.

Nor have Swiss wage earners had to tighten their belts:

Although wage growth has slowed in Switzerland, it was 0.6% on an annual basis in the second quarter, which combined with falling prices means strong real pay gains, boosting spending power.

Precisely. Even if the number of Swiss Francs Switzerland’s workers take home isn’t increasing all that rapidly, the fact that prices are falling means that their real wages may be improving at a healthy clip. And if prices are falling because unit costs are falling — if cuckoo clocks, chocolate bars, and watches cost less but are also cheaper to produce than before — Swiss industry is none the worse for it.

Concerning the crucial distinction between “good” and “bad” deflation, Mr. Blackstone quotes Swiss economist Alexander Koch. “You have to distinguish between good and bad deflation,” Koch told him. “There’s no crash, no strong increase in unemployment in manufacturing and as there are no bursting bubbles in other sectors, domestic demand and the labor market are quite resilient.” A few B.I.S. economists, Blackstone notes, have also “challenged some of the conventional wisdom on deflation’s pernicious effects.”

Toward the end of his article Mr. Blackstone asks, quite appropriately, “So why aren’t central banks embracing the Swiss example?” “Analysts note,” he writes in answering the question, “that it’s difficult to distinguish between good and bad deflation until it’s too late.” However, that answer simply won’t do, because distinguishing between good and bad deflation is as simple as noting whether or not nominal spending (NGDP or domestic final demand or their equivalents) are growing at healthy rates.

Finally, Mr. Blackstone reports that it may not be easy for the Swiss to keep up their regimen of good deflation, and particularly so if the ECB further eases its own policy. I hope he’s wrong, or at least that the Swiss manage to keep their experiment going long enough to erase any lingering doubts concerning both the practical possibility of benign deflation, and its merits as a monetary policy objective.

[Cross-posted from Alt-M.org]

The town of Red Wing, Minnesota, has passed a resolution urging that assaults on police be made a hate crime, a position urged for some years by the Fraternal Order of Police (FOP) union. How bad an idea is this? A very bad one indeed, I argue in an op-ed for the Minneapolis Star-Tribune:

Critics argue that [existing hate-crime] laws in effect play favorites, departing from the spirit of equal protection under law that aims at treating all victims of personal assault as equally important.

Because they seem to put an official public seal on a narrative of oppression, such laws are also lobbied for in me-too fashion by other groups that rightly or wrongly see themselves as oppressed….

Not only are lethal assaults on police declining, I note, but the vast majority of them do not arise from any supposed prejudice or animus against cops, nor do such crimes go neglected and unprosecuted. Besides, most states already allow sentence enhancements on other grounds for crimes against police:

…what would [such a change in law] symbolize? The merely absurd proposition that police in the U.S. today are an oppressed minority group? Or the downright dangerous proposition that the law should step in to chastise and rectify the attitudes of a public that may not be as supportive of police wishes and demands as cop advocates would like?

Read the whole thing. Incidentally, the town council voted last week to let its Human Rights Commission review the resolution, a possible step toward reconsidering it. Some earlier Cato commentary on hate-crime laws hereherehere, and here.

One of the joys of working on the subject of human progress is learning about the many ways in which the world is becoming a better place. Keeping up with all of the scientific and technological breakthroughs is, of course, impossible. And so, here is a sliver of the good news that caught my eye last week.

We are one step closer to solving the problem of organ shortages

Harvesting organs from animals may provide the solution to the shortfall of human donors. However, two technical obstacles need to be overcome before animal-human transplants can become a medical reality. One is that human immune systems often reject foreign tissue. The second problem comes from the risk of disease transfer. According to George Church of Harvard Medical School, genetically engineering pigs may provide the key to overcoming this second problem.

Due to their size, pigs are natural candidates for animal-human transplants, but their DNA is naturally rife with dangerous PERVs, or porcine endogenous retroviruses. An innovative gene-editing technique known as CRISPER/Cas9 has the capacity to identify and delete specific sequences out of the genome. Upon discovering that a single porcine gene enables PERVs to infect human hosts, Dr. Church and his colleagues turned CRISPER/Cas9 against the culprit. Initial results suggest that this procedure may be a success, preventing human infection without compromising the pig cells.

Dissolving stent for heart arteries is coming to the hospital near you  

The Absorb stent, a dissolvable heart stent that is already marketed in Europe, has passed its first major test in a large study, paving the way for FDA approval in the United States. Heart stents are tiny cages inserted into an arterial passage to keep blood vessels from reclogging after specific angioplasty procedures. While metal stents are already available in the United States, they sometimes result in long term complications such as inflammation. In contrast, Absorb stents are designed to stay intact for a certain period, and then harmlessly dissolve, resulting in fewer such complications in the long-term. 

Looking to the animal kingdom for cancer cure

Two animals, elephants and naked mole rats, experience dramatically lower rates of cancer, which may provide inspiration to cancer researchers looking to tackle the problem in humans.  Since cancer is the result of errors in cell division, one would expect larger organisms with longer lives to experience higher cancer rates. Contrary to these predictions, elephants die from cancer in much lower rates than humans. A gene responsible for repairing DNA, TP53 gene is likely responsible for this disparity. While Elephants posses 20 copies of the TP53 gene, human only posses 1.

Naked mole rats also provide potential insights for fighting cancer since they apparently never develop it. Researchers discovered a polymer between naked mole rat cells, called hyaluronan. Experiments suggest that hyaluronan prevents cancer growth through regulating whether a cell grows or not.

Machine upgrades for the brain?

Cathy Hutchinson lost control of limbs due to brain-stem stroke at age 53, but advances in computer/brain interfacing have returned her ability to lift things on her own. As a research subject for the company Cyberkinetics, Cathy had a pill-sized brain implant inserted that enables her to control robotic limbs. This procedure works through converting the brain’s neural signals into a language comprehensible to computers. Computer/brain interfacing has the potential to link the brain to countless digital environments such as internet browsers and computerized exoskeletons.

Genetically modified cassava could help combat Vitamin B6 deficiency

Cassava is a staple of the sub-Saharan African diet, yet this plant contains woefully low levels of vitamins. As a consequence, vitamin B6 deficiency is prevalent in sub-Saharan Africa, which results in higher rates of cardiovascular and nervous diseases. However, a group of Swiss plant scientists claim to have engineered a genetically modified cassava with a several-fold increase in B6 levels over natural varieties. These scientists identified the two enzymes responsible for B6, PDX1 and PDX2, and introduced genes to augment their production. Field tests of these modified cassava plants resulted in stable yields under a variety of growing conditions, thereby confirming is potential efficacy as a means of reversing sub-Saharan Africa’s widespread B6 deficiency problem.

The front page of today’s New York Times contains reportage by William Neuman and Patricia Torres on the ravages of Venezuela’s inflation. The headline writer produced a very catchy title for Neuman and Torres: “In Venezuela, Even Thieves Prefer Dollars.” While the reporters turned up some colorful anecdotal evidence, they came up short when they attempted to deal with the hard facts.

Neuman and Torres claim that there is no estimate for inflation in war-torn Syria. This is not true. The Johns Hopkins-Cato Troubled Currencies Project, which I direct, produces reliable implied annual inflation rates for Syria each day. I have recently written about Syria’s inflation in the Huffington Post, and was interviewed about it on Bloomberg TV last Friday. At present, Syria’s annual inflation rate is 79.8 percent.

As for Venezuela, Neuman and Torres report that the International Monetary Fund “has predicted that inflation in Venezuela will hit 159 percent this year (though President Nicolás Maduro has said it will be half that)…” Well, our Johns Hopkins-Cato Troubled Currencies Project is not predicting inflation’s course in Venezuela, we are accurately estimating where it is now. At present, Venezuela’s implied annual inflation rate is 717 percent. That’s four-and-a-half times higher than the New York Times reportage.

When it comes to countries with troubled currencies and high inflation rates, The New York Times should do its homework.

Harvard University Center for European Studies fellow John Gillingham doesn’t exactly make the case that the European Union is worth saving, but he argues in his Cato Online Forum essay that a successful Transatlantic Trade and Investment Partnership agreement is essential to its survival. Among last week’s Cato conference participants, Dr. Gillingham was perhaps the most skeptical that the EU would be able to get its act together and achieve success, arguing that TTIP’s fate will hinge less on the deal’s specifics and more on the politics of the EU, which are poisonous.

Put quite simply, the adoption of TTIP, as it is presently conceived by the negotiating parties, would put the EU back onto a course of liberalization, from which it swerved in the mid-1990’s, and thereby bring it abreast of the concurrent globalization process being driven by China and the United States. Within Europe, the Single Market, something only half-complete, would become a reality. State interventionism would be sharply reduced and international competitiveness restored. Will this happen?

To help answer that question, check out the collection of essays from Cato’s TTIP conference participants.

It’s baaaaaack.

In today’s issue of The Hill, the Heritage Foundation’s “dangerous” director of economic policy Paul Winfree and I explain that King v. Burwell makes repealing ObamaCare about nine Senate votes easier:

As early as this week, the House could consider a reconciliation bill that repeals only parts of ObamaCare, leaving many of its taxes in place. Not only do more Americans oppose that approach than oppose ObamaCare itself, but the Supreme Court’s recent King v. Burwell ruling shows why a full-repeal bill is more likely to reach the president’s desk. Indeed, unlike partial repeal, Senate leaders can all but guarantee that full repeal can pass the Senate with just 51 votes…

A full-repeal bill, by contrast, would recognize that ObamaCare creates a single, integrated program of taxes and subsidies that work in concert to expand coverage, and would eliminate that entire program as a whole. Its primary effect would be budgetary. According to the Congressional Budget Office (CBO), full repeal would eliminate $1.7 trillion of spending and “would reduce deficits during the first half of the decade.” Retaining ObamaCare’s spending cuts would ensure that repeal reduces deficits in perpetuity…

The Senate Budget Committee can further clarify that these provisions create one integrated program. First, it can ask CBO to score ObamaCare as it scored President Clinton’s essentially identical proposal in 1994, with “all payments related to health insurance policies…recorded as cash flows in the federal budget.” Second, it can adopt that score as the baseline against which the Senate considers reconciliation. Using that baseline would show ObamaCare’s regulations are merely components of a larger program, that all financial effects of repeal would be budgetary, and that Congress may repeal those regulations via reconciliation just as it can repeal rules regulating any other government spending Congress zeroes-out through that process.

Read the whole thing.

A San Jose ordinance requires developers to set aside 15 percent of their units for sale at an “affordable housing cost.” Those affordability restrictions remain in effect for 45-55 years. If developers don’t want to set aside affordable housing units, they have the option to build affordable units elsewhere, pay a fine, dedicate land for affordable units, or acquire or rehabilitate existing affordable units.

However laudable it is to construct affordable housing, the city is essentially appropriating part of the developers’ property for its own uses or conditioning the issuance of permits on paying out large amounts of money. The California Building Industry Association (CBIA) filed suit, arguing that the city’s restrictions violate the Fifth Amendment’s Takings Clause, which prohibits the government from taking private property for public use without just compensation.

Previous Supreme Court decisions, including Koontz v. St. Johns River Water Management District from 2013 (which Cato supported), held that such conditions on building permits can violate the Takings Clause if the exaction—whether a fine or a requirement to set aside affordable housing—is unrelated to the proposed building project. It would thus be unconstitutional to condition a permit for a housing development on the construction of a new library, because the library has nothing to do with the proposed building project.

In the CBIA case, however, the California Supreme Court ruled that, because the conditions in San Jose derive from a legislative act rather than an ad hoc permitting condition, the U.S. Supreme Court’s clear precedents don’t fully apply. The CBIA has asked the U.S. Supreme Court to set the California Supreme Court straight by making clear that the Takings Clause prohibits such permitting conditions whether they come from a legislature or a discretionary permitting process.

Cato, joined by the Reason Foundation, has filed a brief in support of the CBIA’s petition. We argue that there’s no basis in the Takings Clause for distinguishing between legislative conditions and ad hoc permitting conditions. To the landowner or the developer, the effect is the same: the government imposes onerous conditions before allowing them to use their land. Moreover, legislatively imposed conditions are worse because they have broader effects, thus magnifying the unconstitutional harms to property owners.

Finally, there’s no reason to expect less abuse from the legislature than from permitting officials. Legislatures are prone to being captured by special interests who demand all sort of exactions from and conditions on landowners. Government officials, whether they are legislators or permitting clerks, often see taking property without compensation as a way to get something for nothing.

The Supreme Court should take this case and say that this ain’t okay, San Jose.  

David Nakamura of the Washington Post recently described the Trans Pacific Partnership (TPP) as an “expansive free trade and regulatory deal.” That’s a good way of putting it. There will be plenty to say on the regulatory side, particularly after the text of the agreement is released, and the two aspects will have to be weighed and balanced somehow, but for now let me emphasize some of the free trade side. USDA just released some explanations of the liberalization, related to 20 or so agricultural products, that the TPP partners will promise to grant to each other.  Here are some randomly selected highlights:

  • “Under the TPP agreement, Vietnam will eliminate tariffs on all potatoes and potato products, currently as high as 34 percent, within six years. It will eliminate the 13-percent tariff on frozen French fries in four years.”
  • “The United States’ tariffs on peanuts and peanut products, currently as high as 163.8 percent, will be eliminated within 10 years.”
  • “Malaysia’s duties for wine, ranging from 7-108.50 Ringgits (approximately $2.08-$25.58) per liter will be eliminated in 16 years. For beer, Malaysia’s duties at 5 Ringgits (approximately $1.18) per liter will be eliminated in 16 years.”
  • “Japan’s tariffs on carrot juice, tomato paste, and tomato juice, currently ranging from 7.2-29.8 percent, will be eliminated in six years.”

Again, I don’t know yet how to weigh and balance everything in the TPP. But looked at on its own, the trade liberalization aspect of it could be pretty good (although a little slow to take effect in some cases).

Does the government need to offer you a good reason when it restricts your liberty? Most Americans would likely answer “yes.”  But what’s a “good reason?” Must the government’s allegedly “good” reasons be supported with evidence or should courts just give the government the benefit of the doubt?

Both progressives and conservatives often do ask judges to put a thumb on the judicial scales in the government’s favor. Progressives see government as generally a force for good (except when certain preferred rights are threatened, as defined by progressive elites), while conservatives want judges to defer to the elected branches (except when Obamacare or other disfavored federal programs are at issue). Thus we have the twin scourges of judicial adventurism and minimalism – rewriting or ignoring inconvenient constitutional or statutory provisions – instead of unblinkered judicial enforcement of the law. 

In other words, both progressives and conservatives miss the boat when they focus on judicial modes (whether a ruling is “activist,” an empty term meaning that its user disagrees) rather than interpretative theories (originalism vs. living constitutionalism, textualism vs. purposivism). Indeed, even people who care about judicial modes should want judges who apply their preferred interpretive theory without regard to extra-legal considerations and without adopting biases towards the government or any other type of party. The nomenclature is less important than the substance, but “judicial engagement” is increasingly becoming the name for the alternative to the wholly unsatisfactory debate about judicial “activism” and “restraint.”

Judicial engagement is a term coined by the Institute for Justice (IJ) to describe the judicial mode that focuses on interpretive theories rather than whether a judge is “active” or “passive.” It’s an approach to judicial review that provides a means of ensuring that Americans receive an honest, reasoned explanation in court whenever they allege a plausible abuse of government power.

Judicial engagement involves a genuine, impartial search for the truth concerning the government’s means and ends, grounded in reliable evidence. An engaged judge will place the burden on the government to demonstrate that its actions are justified by a constitutionally proper end. IJ’s Center for Judicial Engagement – led by my friend Clark Neily, whose deputy is former Cato legal intern Evan Bernick – has published its first annual review of the judiciary’s performance, “Enforcing the Constitution”, explaining the concept of judicial engagement as well as its opposite, judicial abdication, and summarizing cases decided over the past year that vividly demonstrate the difference between meaningful and meaningless judicial review.

Judicial engagement sounds like something that judges should be doing already, but it’s the exception rather than the rule. At present, judicial engagement is reserved for a handful of constitutional cases implicating so-called “fundamental rights” that the Supreme Court has identified on an ad hoc basis over the years, or those involving suspect classifications. The Court has held, and lower courts have understood, the default standard – the so-called “rational basis test” – to require reflexive judicial deference to the government’s factual assertions and even oblige judges to invent justifications for the government’s actions if the government’s lawyers can’t do so on their own.

In other contexts as well, courts have bent over backwards to say “yes’ to government, refusing to invalidate government actions unless they are clearly, unambiguously prohibited by the constitutional text, without any reference to the Constitution’s core function: securing individual rights. Simply put, this is not adjudication – it’s an abdication of judicial responsibility – and it’s incapable of preventing illegitimate assumptions of power by the political branches.

Enforcing the Constitution” illustrates the concepts of engagement and abdication through 20 important cases decided in 2014 and 2015, 10 of which showcase the kind of judicial review that’s required if the courts are to serve as “bulwarks of liberty,” 10 of which saw judges abdicating their responsibility to keep the political branches in check. They come from state and federal courts, including the Supreme Court. They involve SWAT raids on barbershops, licensing schemes for tour guides, gun rights, gay marriage, raisin pilfering, and Obamacare SCOTUScare RobertsCare the Affordable Care Act. Each case tells a story; some offer inspiration, others serve as cautionary tales. To prepare readers for the journey, the report provides a taxonomy of engagement and abdication – I highly recommend this part, which is a timeless rubric by which to evaluate all judicial rulings – so readers can determine for themselves when judges are performing their duty, or neglecting it.  

The Constitution was written to empower government to secure our liberty, but then limit it to protect us against the government’s own excesses – recall the “if men were angels” bit in Federalist 51, which made it into my wedding – but those limits are meaningless unless judges enforce the Constitution and stop public officials when they overstep their bounds. Decades of judicial abdication have given us far more government than the Constitution permits, and far less freedom than it guarantees. Judicial engagement offers defenders of liberty an approach to judging that is capable of delivering on the Constitution’s unparalleled promise.

Yet another U.S. nation-building venture appears to be on the brink of failure.  Earlier this month, Taliban forces overran much of the northern Afghan city of Kunduz.  Although government troops eventually retook most of the city, they were able to do so only with substantial assistance from the U.S. combat units still in the country. 

General John Campbell, the U.S. commander, then urged President Obama to delay the planned withdrawal of the remaining 9,800 American troops and to keep a permanent garrison that is much larger than the president’s original plan for 1,000 military personnel, mostly operating out of the U.S. embassy in Kabul.   The president has now unwisely complied with that request, deciding to keep at least 5,500 troops past the original 2016 deadline. As I argue in a new article in the National Interest Online, Afghanistan threatens to become an endless nation-building quagmire for Washington.

Senator Rand Paul (R-KY) has asked the question that occurs to many Americans: why are we still in Afghanistan more than 14 years after the initial invasion in response to the Taliban regime’s decision to shelter al Qaeda?  There is almost no al Qaeda presence in that country any longer, and U.S. forces killed Osama Bin Laden more than four years ago.  Yet Washington continues to cite an alleged need to prop-up the Kabul government against the Taliban.  Senator Paul is absolutely correct that it is well past time for anti-Taliban Afghans to step up and defend their own country without relying on the United States.

Unfortunately, what is happening in Afghanistan is typical of the results of U.S. foreign policy initiatives over the past half century.  U.S. administrations seem to have a knack for picking corrupt, unmotivated foreign clients who crumble in the face of determined domestic adversaries.  The Obama administration’s fiasco of trying to train a cadre of “moderate” Syrian rebels to counter both Bashar al-Assad’s regime and ISIS is only the most recent example.  Despite spending more than $400 million, the scheme produced only a handful of trainees—many of whom defected to ISIS or at least turned over many of their weapons to the terrorist group or to al Nusra, the al Qaeda affiliate in Syria. That embarrassing training debacle, now wisely abandoned by the Obama administration, may well set a new record for expensive, ineffectual government boondoggles.

The events in Syria, though, were similar to the earlier fiasco next door in Iraq.  The United States spent a decade training and equipping a new Iraqi army at great expense (more than $25 billion) to American taxpayers. Yet when ISIS launched its offensive last year to capture Mosul and other cities, Iraqi troops seemed intent on setting speed records to flee their positions and let the insurgents take over with barely a struggle.  ISIS captured vast quantities of sophisticated military hardware that Baghdad’s troops abandoned in their haste.

That episode was reminiscent of the pathetic performance of the U.S.-backed ARVN—South Vietnam’s so-called army–in early 1975.  Although the Kennedy, Johnson, and Nixon administrations had waged a bloody war against both South Vietnamese communist insurgents and North Vietnam for more than a decade, which cost over 58,000 American lives, the results were dismal.  President Nixon’s Vietnamization program—training and equipping the ARVN and gradually transferring responsibility for the war effort to the South Vietnamese government–was a total failure.  When North Vietnam launched a major offensive in early 1975, the collapse of the ARVN was shockingly rapid and complete.  Indeed, it occurred so fast that the U.S. embassy in Saigon was barely able to evacuate its diplomatic personnel before North Vietnamese troops captured the city.

These and other incidents confirm that U.S. leaders habitually choose foreign clients that are utterly inept.  They are characterized by thin domestic support, poor organization, and terrible morale.  Their domestic adversaries always seem to be better organized, more competent, and far more dedicated.  Given the extent of the failures in so many different arenas, Washington should realize that lavishing funds on preferred clients cannot make them credible political and military players in their countries.  And continuing to backstop such inept clients with U.S. troops merely wastes American lives.  Unfortunately, it appears that we are on the verge of being taught that lesson yet again—this time in Afghanistan.

The Republican congressional leadership has failed to articulate strong themes to counter the big-government policies of President Obama and the Democrats. People don’t know what the Republican Party stands for, partly because they rarely, if ever, see leaders such as John Boehner and Mitch McConnell on television presenting a coherent vision or a specific program of cuts.

Republicans have particularly dropped the ball on federalism, or the devolving of power back to the states and the people. Reviving federalism was a central theme of the Reagan administration, and it was also a focus of Republican reform efforts in the 1990s.

So I was pleased to see Ohio governor and presidential candidate John Kasich focus on federalism in his new fiscal reform plan. In the Washington Post today, he said:

Let’s start with infrastructure. The interstate system is long finished, and states already oversee their own highway design and construction. Americans don’t need a costly federal highway bureaucracy. I will return the federal gas taxes to the states, leaving only a sliver with the federal government for truly national needs. Then, I will downsize the Transportation Department and reassign it a smaller role, supporting states with research and safety standards. Federal spending would go down, resources available for highways and transit could go up, and states could work faster.

The Education Department will receive a similar approach. Washington isn’t America’s principal or its teacher. Education is a local issue, and decisions should be made by parents, our communities and our local educators. We need high standards, but they are not Washington’s business. I will bundle the department’s funds and send them back to the states with fewer strings attached. The department will be a research center and a local school booster, not a micromanager.

I’d go further than Kasich on many of his proposals, but the important thing is that he is articulating a clear approach to spending reform and reduction. But contrast, House Republicans just introduced a 543-page transportation bill that would increase federal highway and transit spending. The House GOP probably imagines they are being conservative because their spending on transportation would grow more slowly than Senate GOP spending. But the proper amount of federal spending on transit, for example, is not $9.6 billion or $10.6 billion, but zero.

Reviving federalism is a powerful idea for policy reform because it cuts across a vast swath of activities in just about every federal department. And it is a winning theme with the general public, as Emily Ekins and I discuss in this article.

Republican leaders ought to follow Kasich’s lead and explore federalism reforms. If they want to bone up on the advantages of decentralization, they can start with this essay at Downsizing Government. I’d also highly recommend A Less Perfect Union by Adam Freedman for an overview of the history, economics, and constitutional aspects of federal-state relations.

For the second year in a row, the Department of Health and Human Services (HHS) estimates that enrollment in the health insurance exchanges will come in far below earlier projections from the Congressional Budget Office (CBO).

According to the research brief released yesterday, HHS estimates that effectuated enrollment, or enrolled and paying premiums, will be in the range of 9.4 to 11.4 million at the end of 2016. In a conference call with reporters HHS Secretary Burwell said she believes “10 million is a strong and realistic goal… our target assumes something that is probably pretty challenging, which is that more than one out of every four of the eligible uninsured will select plans.” Effectuated enrollment of 10 million for 2016 would be an increase of only 900,000 over the department’s estimate for this year. The department now projects exchange enrollment to stagnate in the same year CBO estimated that average effectuated enrollment would almost double to 21 million. Part of this is due to a slower than expected shift from employer-sponsored insurance, but also due to difficulties in reaching some segments of the uninsured population.

People in the individual market could find themselves between a rock and a hard place next year. Uninsured people not covered by one of the exemptions from the individual mandate are forced to pay a penalty, and it is scheduled to increase significantly next year.

While people will face stiffer penalties for failing to buy health insurance, significant premium increases in many states mean they will likely end up paying a lot even if they do comply with the mandate. Some people may be able to minimize their increase by shopping around, but one report estimates a national weighted average premium increase around 13 percent, with some states like Minnesota seeing increases higher than 41 percent.

Stagnant enrollment could have adverse effects for premium increases and subsidy expenditures in the future. Around 87 percent of exchange enrollees receive subsidies, so far the exchanges have mostly succeeded in enrolling people who do not bear the financial burden of that enrollment because the government is subsidizing them. A recent study by Avalere found that the exchanges have had trouble attracting higher income enrollees: only 20 percent of the eligible people between 200 and 250 percent of the federal poverty level enrolled compared to 76 percent for those between 100 and 150 percent. 

Other studies have found that the earliest exchange enrollees “were older and used more medication than older enrollees.” Younger, healthier workers could be deterred from enrolling in the future, which could skew the risk pools and lead to higher premiums.

It would be surprising to see these minimal enrollment gains and only a quarter of the remaining uninsured enrolling in the exchange if the ACA was the unambiguous victory its supporters claim, but there are substantial, structural problems with the law. These flaws are part of the reason the ACA was unpopular when it was passed and remains unpopular today. One recent average of polls showed 48.4 percent of people opposed the law compared to 40.2 percent supporting it.

Exchange enrollment will be relatively flat going into next year, at the same time people will be hit by higher penalties or premiums. These factors, along with the persistent unpopularity of the law, reveal that there is still an opportunity for an alternative to the ACA, one with less emphasis on government intervention and more room for free markets.

Swedish economist Fredrik Erixon, an authority on international trade policy, who heads up the Brussels-based think tank known as ECIPE (the European Centre for International Political Economy), was a big contributor to the discussions held this week in conjunction with Cato’s TTIP conference.  Among many other trade topics, Fredrik has written extensively on TTIP, the WTO, and how the former may impact the latter.

In his conference essay, Erixon agrees with alarmed, “pure” multilateralists that the TTIP will supplant the WTO as “the organising entity of future trade policy,” but explains why that is not necessarily a bad thing.  While he dismisses fears that the United States and European Union may be turning toward an arrangement that excludes the rest of the world, and explains how they will “leverage TTIP for global trade liberalisation,”  Fredrik does worry that TTIP – if it “succeeds” in the area of regulatory harmonization – will result in the export of failed regulatory policies to the rest of the world.

His concluding remarks on that topic: 

Currently, the differences between EU and U.S. regulations and regulatory approaches are far too wide for the TTIP to be a realistic candidate for setting the global rules in this area. But TTIP will likely push trade agreements further in the direction of prescriptive regulatory conditionality, making it harder for trade agreements in the future to advance global commercial freedom through deregulation and simple, transparent rules.

Read Erixon’s essay here; see him discuss the issues during this conference session; see all the conference essays here.

Today, the ACLU’s Border Litigation Project released a damning report on the Department of Homeland Security’s Customs and Border Protection “interior operations” that should serve as a wake up call for Washington policy makers.

Titled “Record of Abuse: Lawlessness and Impunity in Border Patrol’s Interior Enforcement Operations”, the 31 page report is supplemented by hundreds of pages of documents obtained through an ongoing Freedom of Information Act lawsuit. The ACLU Arizona chapter’s summary of the report noted the following: 

Border Patrol’s records contain recurring examples of agents terrorizing motorists far into the interior of the country; detaining and searching innocent travelers after false alerts by service canines; threatening motorists with assault rifles and other weapons; destroying personal property; and interfering with attempts to video record agents. These abuse records substantially outnumber the annual complaint totals DHS oversight agencies disclosed to Congress.

Border Patrol does not record stops of motorists that do not result in arrest, or false canine alerts that lead to searches of innocent suspects.  Substantive investigations into civil rights violations are rare and almost never result in disciplinary consequences. Despite numerous reports of abuse and corruption, the records contain only one example of disciplinary action of any kind.

Border Patrol’s own data undermines the agency’s public claims that checkpoints are efficient and effective: in 2013, Tucson Sector checkpoint apprehensions accounted for only 0.67 percent of the sector’s total apprehensions. The same year, Yuma Sector checkpoint arrests of U.S. citizens exceeded those of non-citizens by a factor of nearly eight (and in 2011, by a factor of eleven).

The discrepency between the complaint totals found in this report and those actually reported to Congressional oversight committees raise fundamental questions about the integrity of the DHS oversight and compliance process, both inside DHS and on Capitol Hill.

Details on several incidents contained in the press release accompanying the report are chilling: 

A Border Patrol agent in Green Valley, Ariz., followed a store employee into a parking lot, approached the individual with a service revolver drawn, ordered him to his knees, and handcuffed him. When other employees approached, the agent yelled, “Stay away or I’ll shoot you.” After ten minutes, the agent removed the handcuffs, released the employee, and drove away.

One complaint described multiple stops of the Tohono O’odham Community College school bus at the Highway 86 checkpoint, including one in which passengers were forced to disembark and submit to interrogation and searches of their personal effects before being released. Other records show Border Patrol monitoring Tohono O’odham community meetings and Know Your Rights events.

A Border Patrol agent reported a supervisor at Border Patrol’s Naco Station instructed agents to “stop any vehicle on the US/Mexican border road that is open to the public.” The supervisor allegedly “didn’t care if it was the Chief of the Border Patrol and the agent conducted a high risk traffic stop … at gun point” because he “would then know they were doing their job.”

The Nogales City Attorney’s Office reported racial profiling and abuse of authority after agents at the I-19 interior checkpoint relied on a claimed canine alert to detain and search the attorney. The complaint references a Deputy City Attorney detained and searched on other occasions on the basis of claimed or false canine alerts.

Tensions between residents of Arivaca, Arizona and CBP personnel manning the area checkpoint have resulted in civil disobedience protests and calls for the checkpoint to be shut down. As I reported earlier this year, the checkpoints are just one of the forms of surveillance and harrassment currently employed by CBP against motorists. Whether the publication of this latest ACLU report will result in meaningful Congressional oversight action remains to be seen.

Cato has released a brief study on the earned income tax credit (EITC). The EITC is a huge program. In 2015 it will provide an estimated $69 billion in benefits to 28 million recipients.

The EITC is administered through the tax code, but it is mainly a spending program. The EITC is “refundable,” meaning that individuals who pay no income taxes are nonetheless eligible to receive a payment from the U.S. Treasury. Of the $69 billion in benefits this year, about 88 percent, or $60 billion, is spending.

Articles by liberal and conservative pundits regarding the EITC often make it seem as if there are few downsides to the program. But there is no free lunch with subsidies. The EITC has major costs and shortcomings.

The program has a high error and fraud rate, and for most recipients it creates a disincentive to increase earnings. Also, because the refundable part of the EITC imposes a $60 billion cost on other taxpayers, it reduces their incentives to work, invest, and pursue other productive activities.

The study concludes that the costs of the EITC are likely higher than the benefits. As such, the program should be cut, not expanded.

EITC: Small Benefits, Large Costs