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Reports are circulating that President Trump is convening a gathering at the White House this morning to announce, in the interest of national security, his plan to impose restrictions on imported steel and aluminum.  Though the details of his plan remain unclear as of this moment, Commerce Department reports published last month concluded that steel and aluminum imports “threaten to impair the national security” of the United States and recommended a range of remedies to the president.

For steel, the Commerce report recommends moderate to highly restrictive quotas, and tariffs ranging from 24 to 53 percent; for aluminum, the recommendations are also for moderate to highly restrictive quotas, and tariffs ranging from 7.7 to 23.6 percent.  But the president can more or less do whatever he wants here.

In Forbes this morning, I go into some detail about what could happen and what’s at stake:

Media report that President Trump intends to announce import restrictions on steel and aluminum at a press conference or signing ceremony today. Where exactly that leads is anyone’s guess, but it is certain to be a place less stable, less predictable, and less cooperative than the place we are right now.

In reports published last month, the U.S. Department of Commerce concluded that steel and aluminum imports “threaten to impair the national security” of the United States and recommended a range of remedies to the president. Those reports were the culmination of two investigations conducted under Section 232 of the Trade Expansion Act of 1962, a seldom used statute that authorizes the president to respond to perceived national security threats with trade restrictions.

For steel, the Commerce report recommends moderate to highly restrictive quotas, and tariffs ranging from 24 to 53 percent; for aluminum, the recommendations are also for moderate to highly restrictive quotas, and tariffs ranging from 7.7 to 23.6 percent.  But the supposed “cure” of these restrictions would prove far worse than the disease.

According to the Commerce Department reports, trade restrictions would induce U.S. producers to build and use more domestic capacity, which would reduce U.S. dependence on foreign—potentially hostile—sources of supply of materials deemed critical to national defense.  Oddly, the reports say nothing about the adverse effects of steel and aluminum restrictions on the U.S. producers who purchase those basic inputs to manufacture the very materials deemed critical to national defense.  Those U.S. producers would be weakened by trade restrictions, exposing them to competition from foreign rivals with lower production costs capable of offering lower prices in the U.S. market.

Of course, the problems wouldn’t end there. Any U.S. decision to restrict imports based on the argument that an abundance of low-priced raw materials from a diversity of sources somehow threatens national security would lower the bar so significantly as to invite every other member of the World Trade Organization to invoke national security to protect favored industries.

Under WTO rules dating back to the establishment of the General Agreement on Tariffs and Trade in 1947, member governments are permitted to raise trade barriers for purposes of protecting national security without obligating them to demonstrate that their rationale conforms to some agreed definition of national security or national security threat.  While the GATT’s original contracting parties were well aware of the importance of trade openness to the goals of economic growth and goodwill among nations, they were also in agreement that attending to the security and protection of their citizens was government’s primary obligation. So, Article XXI of the GATT—the “National Security Exception”—was weaved into the agreement with the expectation that it would not be invoked without the most compelling of reasons.  So far those expectations have been met.

Should President Trump deviate from the norm and impose restrictions on imported steel or aluminum under Section 232, the presumption is that—if challenged by another member as a WTO violation—the United States would invoke its privileges under Article XXI.  However, most international trade law scholars believe the likelihood of the WTO Dispute Settlement Body issuing a rebuke of the U.S. government’s rationale for concluding that its national security is threatened or impaired is pretty close to zero.  The DSB is already deferential when facts aren’t clearly established or when obligations aren’t clearly delineated.  But on matters of national security, which necessarily require subjective risk assessments and nuanced analyses of murky gray areas, maximal deference would likely prevail.

Trade partners ill-affected by the measures could invoke GATT Article XXIII, claiming that the benefits due to them under the agreement have been “nullified or impaired,” but the lengthy duration and uncertain outcome of that approach might encourage members to invoke their own national security rationales to block certain imports.  Beijing certainly sees its dependence on foreign semiconductors and other technologies to represent a threat to China’s national security.  Trump’s restrictions on steel or aluminum could give license to the Chinese government to harass, compel technology transfer, and discriminate against foreign companies on a grand scale under the rubric of protecting national security.  That, in turn, could subvert any solutions that may be incubating as a result of the U.S. Section 301 investigation into Chinese technology and intellectual property policies.

Likewise, the 232 remedies could give India’s protectionist government justification for quotas on imported wheat and rice in the name of food security.  Brussels might respond by adopting rigid restrictions on data flows in the name of information security, kneecapping U.S. companies like Google and Amazon.

Recently, Beijing initiated investigations into imports of U.S. sorghum under China’s antidumping and countervailing duty laws. Although use of those laws is permissible under WTO rules, provided that they are written and implemented in accordance with those WTO rules, it is widely assumed that the cases against sorghum amount to de facto retaliation for the recent U.S. decision to impose tariffs on solar panel components under the U.S. Safeguard law.  American soy exports could be targeted next.  As a major importer of agricultural products and among the largest export markets for many American commodities, U.S. farmers and agribusinesses could suffer the brunt of any Chinese retaliation.

Alternatively, some governments might choose to bypass the formalities and go straight to retaliation against U.S. exporters. The Europeans might target citrus from Florida, tobacco from Kentucky, textiles from North Carolina, or dairy from Wisconsin in order to arouse strategic U.S. opposition to the steel and aluminum restrictions.

How government’s react—and what happens to the trading system as a result—will largely be determined by the nature, duration, and magnitude of the U.S. remedies.  The more modest the restrictions, the less the collateral damage.  But the bottom line is that once Trump opens Pandora’s Box by rationalizing protectionism as a national security imperative, the durability of the rules based trading system will be tested like never before, with global economic security hanging in the balance.

The amount of future warming is predicated on the amount of emitted greenhouse gases and the sensitivity of earth’s surface temperature to changes in their concentrations. Here we take a look at the emissions component.

The U.N. currently entertains four emissions scenarios, all expressed as the change in downwelling radiation (in watts/meter-sq, nominal year 2100) towards the surface that results from an increase in the atmospheric concentration of certain greenhouse gases. They are called “representative concentration pathways,” or RCPs.

As can be seen in Figure 1, there are four, given as 2.6, 4.5, 6(.0) and 8.5. The ranges of associated warming for over 1000 total scenarios are given on the right axis.

Figure 1. Approximately 1000 scenario runs for four RCPs. From Fuss et al., 2014.

It’s not surprising that those making the case for climate action most frequently reference the highest (RCP8.5), embedding it in most climate scenarios, assessments, and international agreements (the Paris Agreement being a prime example). Here is a summary of Google Scholar citations for the different RCPs, published on February 9 by Eric Roston in Bloomberg:

Figure 2. Although increasingly untenable, RCP8.5 draws the most attention.  

RCP8.5 is obsolete. It was obsolete when it was first published in the journal Climate Change by Riahi et al. in 2011. By then the shale gas revolution was underway, as can be seen from the plot below of shale gas production. By 2011, abundant shale gas had begun a wholesale displacement of coal for electrical generation, increasing natural gas’s portion of our energy portfolio and decreasing that of coal.

Figure 3. U.S. shale gas production, 2007–2016, according to the U.S. Energy Information Administration.

The Riahi et al. RCP 8.5 continues to be the favorite for analysts. It completely dominates the draft of the upcoming fourth “National Assessment” of climate change, created by our U.S. Global Change Research Program. Here is the fanciful “wedge chart” for various energy sources in RCP8.5:

Figure 4. Energy contributions (in Joules X 1018, or EJoules) in RCP 8.5.

There are at least two notable errors in RCP8.5, which both serve to exaggerate its radiative forcing. The first is an incorrectly modest growth in natural gas use, and the second is the massive growth in coal combustion. According to the International Energy Agency (2017):

The global natural gas market is undergoing a major transformation driven by new supplies coming from the United States to meet growing demand in developing countries and industry surpasses the power sector as the largest source of gas demand growth…[emphasis added]

The evolution of the role of natural gas in the global energy mix has far-reaching consequences on energy trade, air quality and carbon emissions…

Global gas demand is expected to grow by 1.6% a year…China will account for 40% of this growth.

British Petroleum (BP) recently estimated the global fuel mix through 2040 in its 2018 Energy Outlook. Under their “Evolving Transition” assumption, natural gas usage passes coal worldwide around 2030, and oil use levels off at the same time. A comparison to RCP 8.5 (above) shows how wrong it is, even in the near future.

Figure 5. British Petroleum’s fuel outlook from its most recent (2018) Energy Outlook. Note the color scheme is somewhat different than in Figure 4, with natural gas now red, instead of blue.

The substitution of shale gas for coal continues to drive down the “carbon (dioxide) intensity” of developing and developed economies. This is the amount of carbon (dioxide) emitted per unit of GDP, usually normalized to 2010 dollars adjusted for their purchasing power in a given economy. In the United States, in the quarter-century beginning in 1990, the drop was a remarkable: from 0.9kg of carbon dioxide/dollar to 0.35, or over 60%.

The imminent dethroning of King Coal is obvious in the BP data, which leads to another problem: Justin Ritchie and Hadi Dowlatabadi from University of British Columbia recently found there simply isn’t enough coal to support RCP8.5. Nor were they conservatively looking at so-called “recoverable” reserves; instead, they toted up all geologically identified coal around the planet.

They then adjusted RCP8.5 for the twin errors of increasing carbon (dioxide) intensity by a huge growth in coal use over natural gas (recall that IEA indicates large scale industrial as well as electrical switchover), and the fact that there isn’t enough coal, and modified RCP8.5 to look like this: 

By comparing the contribution of oil, coal, and natural gas (the greenhouse gas sources) between RCP8.5 and what is likely to happen, we can estimate the total downwelling radiation change: it drops from 8.5 watts to roughly 5.1. (Recognizing there is a lot of fine print—this is certainly a ball-park number.)

It is the nature of climate models to scale global warming with percentage changes in emissions; i.e. a quadrupling of emissions has almost exactly the effect of doubling prospective warming. Reducing emissions by 40%, which is the difference between Rihai’s RCP8.5 and Ritchie’s modification, similarly reduces total warming.

There’s the further problem of model overprediction of warming that we recently documented in our public comments on the upcoming Fourth National Assessment of Climate Change. Generally speaking, we find the data-based sensitivity of temperature to be about 56% of the average of the 105 climate models in the UN’s most (2013) science summary.

Multiplying everything through, we take the mean 20th and 21st century RCP8.5 warming of 4.3⁰C, adjust by 60% to get the difference with the modified RCP, and then adjust for the 56% sensitivity and we find a 21st century warming a teense under 1.5⁰C—very, very close to the sensitivity just calculated by University of Alabama-Huntsville’s Roy Spencer.

REFERENCES

British Petroleum 2018 Energy Outlook at https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/energy-outlook/bp-energy-outlook-2018.pdf

Fuss, S., et al, 2014.  Betting on Negative Emissions.  Nature Climate Change 4, 850-853

IEA, 2017. IEA Sees Global Gas Demand Rising to 2022 as US Drives Market Transformation. https://www.iea.org/newsroom/news/2017/july/iea-sees-global-gas-demand-rising-to-2022-as-us-drives-markettransformation.html

Riahi, K., Rao, S., Krey, V. et al. Climatic Change (2011) 109: 33. https://doi.org/10.1007/s10584-011-0149-y

Ritchie J and Dowlatabadi H 2017.  The 1000 GtC coal question: are cases of vastly expanded future coal combustion still plausible? Energy Econ. 65 16–31.

Roston, E., 2017, at: https://www.bloomberg.com/news/articles/2017-05-24/misleading-coal-estimates-may-have-skewed-climate-projections

Ryan Maue of Cato’s Center for the Study of Science provided important background material for this post.

It seems no amount of evidence can make political leaders disabuse themselves of the misguided notion that the nation’s opioid overdose crisis is caused by doctors getting patients hooked on prescription opioids. A group of eight senators unveiled the CARA(Comprehensive Addiction and Recovery Act) 2.0 Act on February 27, targeting the opioid crisis. It would impose a 3-day limit on all opioid prescribing for patients in acute and outpatient postoperative pain.

But the movement to restrict prescriptions is not evidence-based, as prominent experts have pointed out. The politicians base their proposal on the 2016 opioid guidelines put out by the Centers for Disease Control and Prevention. The guidelines stated:

When opioids are used for acute pain, clinicians should prescribe the lowest effective dose of immediate-release opioids and should prescribe no greater quantity than needed for the expected duration of pain severe enough to require opioids. Three days or less will often be sufficient; more than seven days will rarely be needed.

The guidelines pointed out that the above recommendations were based on “Type 4” evidence:

Type 4 evidence indicates that one has very little confidence in the effect estimate, and the true effect is likely to be substantially different from the estimate of the effect.

It further described Type 4 evidence as being based upon “clinical experience and observations, observational studies with important limitations, or randomized clinical trials with several major limitations.”

In their introductory comments, the guidelines stated:

Clinical decision making should be based on a relationship between the clinician and patient, and an understanding of the patient’s clinical situation, functioning, and life context. The recommendations in the guideline are voluntary, rather than prescriptive standards. They are based on emerging evidence, including observational studies or randomized clinical trials with notable limitations. Clinicians should consider the circumstances and unique needs of each patient when providing care.

When health care providers read and interpret these guidelines, they understand them to be informational, nonbinding, and inconclusive. But that’s not how politicians “do science.”

It doesn’t seem to matter that studies have shown the addiction potential of opioids prescribed for acute pain to be extremely low, including a January 2018 study published in BMJ of more than 568,000 postoperative patients receiving opioids between 2008 and 2016 who were found to have a “misuse” rate (using all “misuse” diagnostic codes) of 0.6%. It doesn’t matter that Cochrane systematic studies in 2010 and 2012 demonstrated a roughly 1% addiction rate in chronic non-cancer pain patients.

The National Survey on Drug Use and Health reports that less than 25% of nonmedical opioid users received a doctor’s prescription, and a November 2017 study found that heroin was the gateway drug in 33.3% of opioid addicts entering rehab in 2015 (as opposed to 8.7% in 2005).

There has been a 41% drop in high-dose opioid prescriptions since 2010, yet overdose rates continue a steady climb, with more than 60% due to heroin and fentanyl. In fact, the CDC notes the fentanyl overdose rate has been increasing at a clip of 88% per year since 2013; the heroin overdose rate has gone up 33% per from 2010–2014, and 19% per year since 2014. Meanwhile the prescription overdose rate has been increasing at a stable rate of 3% per year since 2009. With the advent of abuse-deterrent prescription opioids (ADFs) in 2010, opioids diverted to the black market have become increasingly useless to nonmedical users.

All the evidence points to the overdose crisis being primarily the result of nonmedical users accessing drugs in the black market. The restrictive, supply-side approach of present-day opioid policy has driven these users to more dangerous, but cheaper and readily available, fentanyl and heroin. And the majority of opioid overdoses involve multiple drugs. New York City recently reported that 75% of the overdoses in 2016 were due to heroin and fentanyl, and 97% of overdoses involved multiple drugs—46% of the time it involved cocaine. This is not an opioid crisis—it’s a fentanyl and heroin crisis. And the deaths are due to drug prohibition: the result of nonmedical users accessing drugs in a black market.

If CARA 2.0 passes as written, look for more patients to suffer in agony. As a surgeon who prescribes postoperative opioids to my patients for pain control, I will no longer be able to individualize my prescriptions to my patients. This will probably mean I will have to see many of my patients for their postoperative visit 3 days after surgery, rather than the 10–14 days that is usually the case, so that I can prescribe a refill of their pain prescription. And because I am being surveilled by my state’s Prescription Drug Monitoring Program, the pressure will be on me to limit those refills.

Meanwhile, not one intravenous heroin user will be moved to pull the needle out of their arm as a result of this policy.

To its credit, CARA 2.0 has provisions to liberalize the prescription of buprenorphine which, like methadone, is a form of medication-assisted treatment, a proven type of harm reduction. And it provides increased funding in order to make the overdose antidote naloxone more available. But it doesn’t go far enough: naloxone should be available over-the-counter.

The damage and death resulting from drug abuse will continue unabated as long as drug prohibition continues unabated. Meanwhile, policymakers should drop their focus on doctors treating patients in pain and place their efforts squarely on reducing harm. Medication-assisted treatment, syringe services programs, and naloxone distribution are good places to start. The current restrictive approach will only further drive up the death rate.

Yesterday, Public Affairs published a compelling new book by Cato alum Radley Balko and his co-author Tucker Carrington entitled The Cadaver King and the Country Dentist. The book chronicles the horrific and sordid tale of how the State of Mississippi railroaded innocent men for heinous crimes with the help of Dr. Steven Hayne, a medical examiner, and Dr. Michael West, a dentist.

Those who have followed Radley’s career over the years may be familiar with his investigations into Hayne and West, particularly their repeated use of deeply flawed forensics and preposterous testimony. We are proud to welcome Radley and Tucker to Cato to talk about the remarkable story that is garnering praise across literary and criminal justice circles. Already named by Amazon.com as a “best nonfiction book” selection, it should be a smashing success and we couldn’t be happier to have both authors share their work with us.

The event will be held Thursday, March 15, at 4pm here at Cato. For those unable to attend in person, the event will be livestreamed on cato.org/events and facebook live. You can register here.

The headline is a quote from this BookPage review by Deborah Mason.

Illegal immigrants who can’t work are more likely to commit crimes in order to support themselves, according to a superb new paper by Matthew Freedman, Emily Owens, and Sarah Bohn that is forthcoming in the American Economic Journal: Economic Policy.  They examined administrative data from Bexar County, Texas and found an increase in felony charges filed against residents who were most likely to be illegal immigrants after the Immigration Reform and Control Act made it unlawful for illegal immigrants to work in the United States.   

Their finding is especially relevant for the current debate over E-Verify, an electronic eligibility for employment verification system that is supposed to exclude illegal immigrants from the workforce.  The goal of E-Verify is to turn off the wage magnet that attracts illegal immigrants to the United States and open up jobs for American workers.  Although E-Verify fails to lower unemployment and only has a very small effect on dimming the wage magnet, the paper by Freedman et al. points to another possible unintended consequence of mandating E-Verify: higher crime.

Arizona provides a wonderful opportunity to test whether an E-Verify mandate affected crime.  In March 2007, the Arizona House passed the Legal Arizona Workers Act (LAWA).  The state Senate passed it in May and governor Napolitano signed it in July.  Among other things, LAWA mandated E-Verify for all new employees beginning on January 1, 2008. 

We used Arizona Department of Corrections (ADC) data on the number of entries into the prison system by month by citizenship.  The ADC data does not allow us to separate prisons by nativity or legal immigration status so we used the proxy of non-citizens, many of whom are likely illegal immigrants and would be affected by mandatory E-Verify.  Although this is a grave imperfection in the data that makes us hesitant to continue, the effect we find is large enough to report in the hopes that future researchers will be able to actually identify illegal immigrants who are incarcerated.  We interpolated Arizona population data to the monthly level using a cubic spline to better capture any non-linearity in population trends. 

First, we consider the flow of non-citizens into Arizona prisons as a fraction of the Arizona population multiplied by 100.  The vertical bars correspond to March 2007 and January 2008 when E-Verify first passed the Arizona House and was effective, respectively.  To smooth trends in this series, we overlay a locally weighted polynomial regression line computed for three periods: before E-Verify passed the House, after E-Verify passed the House and before its implementation, and after the E-Verify mandate took effect.[1]  There is a significant discontinuity and uptick in the flow of non-citizens into Arizona prisons relative to the total population after E-Verify passed in March 2007 up until it became mandatory in January 2008 (Figure 1).

Figure 1

Monthly Flow of Non-Citizens into Arizona Prisons

 

Source: Authors’ interpretation of Arizona Department of Corrections data.

Figure 2 shows a sharp increase in the share of non-citizen entries into Arizona prisons relative to all new entries after E-Verify laws were passed.  To determine whether these relations are simply due to chance, we also consider a simple regression model with controls for other state-level economic factors. 

Figure 2

Monthly Share of Non-Citizen Admissions into Arizona Prisons as a Percentage of All Admissions

 

Source: Authors’ interpretation of Arizona Department of Corrections data.

In order to add a regression to our suggestive graphs, we created indicator variables denoting the level of E-Verify law activation with one variable for the period after the law was passed and before its activation and one after E-Verify was activated.  This allowed us to examine both the reaction to the LAWA’s passage and what happened when it took effect.  Results for this specification indicate a statistically significant change in the average flow of non-citizens to Arizona prisons by approximately 3.2 percent after passage and 1.9 percent after implementation (Table 1, Column 1).  Since the series are likely to be serially autocorrelated, we compute Newey-West (1987) standard errors corrected for six lags of autocorrelation for each specification.

To control for variation in prisoner flows based on economic factors, we collect employment and unemployment data from the Bureau of Labor Statistics, median income and poverty rates from the Census Bureau’s Small Area Income and Poverty Estimates program, and personal income from the Bureau of Economic Analysis.[2]  Since many of these variables are likely to be highly correlated, we employ a Lasso regression framework to identify and remove redundant regressors.[3]  Results for this model with Lasso-selected covariates are in Column 2 of Table 1 and show a similar pattern of significant increases in the share of non-citizen flows into Arizona prisons of nearly 2.8 percent after E-Verify passed and 5.1 percent after it went into effect.

Table 1

Effect of E-Verify on the Share of Non-Citizen Prisoner Admission in Arizona State Prisons                                                       

 

These relatively simple graphs and regressions do not provide evidence that E-Verify boosted the inflow of non-citizen prisoners into Arizona prisons.  However, they do show a clear, significant, and positive association between an E-Verify mandate and the fraction of non-citizens sent to prions in Arizona.  Other social scientists should take the research by Freedman et al. seriously and view state-wide E-Verify mandates as an opportunity to study how increased immigration enforcement affects crime.  The supporters of E-Verify should also consider that one possible result of mandating that system is higher incarceration and crime rates.

Andrew Forrester contributed mightily to the econometric portions of this post.

[1] We choose a bandwidth of 0.8 based on visual appearance of fit to the data series.

[2] Data for personal income, poverty rates, and median income were only available at the quarterly and yearly level and were interpolated to the monthly level using a cubic spline.

[3] For details on this procedure, see Belloni et al. (2014).

What should’ve been a slam-dunk win for those challenging Minnesota’s ban on “political” apparel at the polls was complicated by the plaintiffs’ counsel’s inability to draw clear lines between what the government can and can’t restrict. The voters’ lawyer began his argument by arguing, quite correctly, that Minnesota’s law was overbroad – sweeping in shirts and buttons supporting the Chamber of Commerce, NAACP, and AFL-CIO – and so several justices pushed him on the constitutionality of a more narrow rule, one restricting paraphernalia explictly referencing candidates and parties. Counsel hemmed and hawed but ultimately stated that he would make that “close call” by disallowing such a statute, though it would depend how the legislature worded it.

That unsuccessful attempt to play coy opened the door to discussions of how to draw the distinction between electioneering – which the Court 25 years ago correctly held could be banned within a certain distance of the polling booth – and what the law at issue proscribes. Chief Justice John Roberts and Justice Anthony Kennedy further expressed concern about the state’s interest in maintaining “decorum” and “solemnity” (which Justice Elena Kagan later made light of by suggesting that it likened a poll to a church). As Justice Kagan put it, “it’s hard to evaluate an overbreadth argument if we don’t know where to draw the line.”

This shouldn’t be so hard. Federal and state laws everywhere already prohibit intimidation, deception, disruption, and other attempts to interfere with the right to vote, so the rare t-shirt that does one of those things – for example, “Republicans vote tomorrow” or “Mexicans shouldn’t vote” – is already covered. As for the electioneering bit, a voter’s wearing a button is very different from an activist’s waving signs or distributing literature – or even that same voter’s going up to others in line and trying to convince them to vote for a particular candidate.

Moreover, Minnesota’s law is so broad and gives so much discretion to poll workers that its enforcement is arbitrary. When the lawyer representing the election officials tried to explain that a political message or insignia could only be restricted if it related to an issue that was part of the campaign – which seemed to be a change from his earlier litigating position – Justice Samuel Alito shut him down with a devastating line of inquiry. Alito asked whether shirts with the following text could be banned: Parkland Strong, NRA, “I Miss Bill [Clinton],” Reagan-Bush ‘84. Counsel struggled to answer, at which pointed Alito asked whether, in the current political climate, the text of the Second Amendment could be banned. The response was yes!

That’s about as much of a mic-drop moment as happens at the Supreme Court – and it was followed by Justice Ruth Bader Ginsburg’s concern that #MeToo apparel could be banned given that sexual harassment is very much an issue in contemporary discourse. “The [poll workers’] conversation about the shirt seems more disruptive” than the shirt itself, commented Justice Kennedy.

The challengers will still win their case – only Justices Stephen Breyer and Sonia Sotomayor appeared firmly on the state’s side, so I’m still confident the margin will be more than 5-4 – but it’ll be closer, and the opinion likely narrower, than it needed to be.

For more on Minnesota Voters Alliance v. Mansky, see this blogpost, Cato’s brief and my op-ed in today’s Wall Street Journal.

Concerns about Russia’s apparent interference in the 2016 U.S. presidential election are becoming deeper and more widespread.  The latest episode was the indictment of 13 Russian nationals as a result of Special Counsel Robert Mueller’s investigation.  The indictments allege that those individuals operated an internet “troll farm” producing propaganda to exacerbate America’s political and social divisions.  The alleged goal was to weaken Hillary Clinton’s electoral prospects (as well as those of Ted Cruz and Marco Rubio) and strengthen those of Donald Trump and Bernie Sanders.

If such activities occurred with the approval of Vladimir Putin’s government (as is likely the case) Moscow has committed a serious breach of diplomatic norms.  However, angry Americans need to keep the offense in perspective.  The social media propaganda campaign was surprisingly crude and amateurish.  Even the Mueller indictment conceded that there is no evidence the efforts of the Russian trolls changed even a small number of votes, much less altered the outcome of the presidential contest.

However, as I point out in a recent National Interest Online article, the reaction in some American political and media circles to the “Russian meddling” scandal, even before the latest revelations, was shrill to the point of outright hysteria.  The most egregious manifestation is the determination of some critics of the Trump administration to compare Moscow’s behavior to an act of war akin to Pearl Harbor and 9-11.

There are numerous examples of such hyperbole.  At a March 2017 House Homeland Security Committee session, Rep. Bonnie Watson Coleman (D-N.J.) accused Russia of engaging in outright warfare against the United States. “I think this attack that we’ve experienced is a form of war, a form of war on our fundamental democratic principles.”  During House Intelligence Committee hearings that same month, several of Coleman’s Democratic colleagues made similar alarmist statements.  Rep. Jackie Speier (D-CA) insisted that Russia’s activities were “an act of war.”  Washington Democratic congressman Denny Heck explicitly compared Russia’s actions to the Japanese attack on Pearl Harbor and the 9/11 terrorist attacks.  Such threat inflation was not confined to House members. Sen. Ben Cardin (D-MD), the ranking Democrat on the Senate Foreign Relations Committee, similarly described the election meddling as an “attack” and likened it to a “political Pearl Harbor.”  More recently, Bernie Sanders asserted that “Russia’s attack on our democracy is of enormous consequence.”

Since the Mueller indictments, the comparisons to the Pearl Harbor and 9-11 attacks have become even more numerous and explicit.  Jerrold Nadler (D-NY), the ranking Democrat on the House Judiciary Committee, asserted flatly that the troll farm’s activities were “the equivalent of Pearl Harbor.”  New York Times columnist Thomas Friedman described the incident as “a 9/11 scale event. They attacked the core of our democracy. That was a Pearl Harbor scale event.”

There are several problems with such strident rhetoric.  First, the hypocrisy is a bit thick, since the Russian election meddling was merely an amateurish version of what the United States has done in dozens of countries, including democratic countries, for decades.  Indeed, U.S. operatives, some of whom had ties with Bill Clinton’s administration, played major roles in Russian President Boris Yeltsin’s 1996 re-election campaign.

Second, using the terminology and imagery of warfare seems to reflect a desire to trigger a second cold war with Moscow.  Such an approach is irresponsible.  Indeed, fomenting increased tensions with Russia, the one country with the nuclear firepower to destroy American civilization, clearly is unwise, since a cold war could always turn hot.  And to raise the risk level merely in response to mundane, ineffectual election meddling is utterly reckless.

Finally, equating Moscow’s conduct with the Pearl Harbor and 9-11 attacks is illogical and calls into question either the sincerity or judgment of those making the comparison.  The Intercept’s Glenn Greenwald highlights the obvious fallacy.

The only specific proposal one hears now when it comes to responding to Russian meddling is a call for “sanctions.” But if one really believes that Russia’s actions amount to Pearl Harbor or 9/11, then sanctions seem like a very lame — indeed, a woefully inadequate — response. To borrow their rhetoric, imagine if Roosevelt had confined his response to Pearl Harbor to sanctions on Japanese leaders, or if Bush had announced sanctions on Al Qaeda as his sole response to 9/11. If you really believe this rhetoric, then you must support retaliation beyond mere sanctions.

Such escalation, of course, would be tremendously dangerous.  Opponents of the Trump administration need to dial back their shrill accusations regarding the issue of Russia’s election meddling.  Even if all of the allegations made to date ultimately prove to be accurate (and that is far from certain), those misdeeds fall far short of constituting an act of war.  Introducing hysteria into the discussion serves no useful purpose.

Today the House votes on the Fight Online Sex Trafficking Act (FOSTA), a piece of anti-sex trafficking legislation. It follows and incorporates an earlier effort by the Senate, the Stop Enabling Sex Traffickers Act (SESTA). The bill at issue today is actually a last minute amendment by Representative Mimi Walters (CA) that brings the worst elements of SESTA into FOSTA, creating a hybrid bill far worse than the sum of its parts. This bill has grave consequences for an open, competitive internet and for some people who use it.

Section 230 of the Communications Decency Act has long shielded internet service providers from liability for user generated content, facilitating the internet we know today. FOSTA would likely reduce these protections. FOSTA creates a new federal crime tied to the intent to promote sex trafficking using the internet. Alone, this might be considered an acceptable, narrowly tailored measure. However, the Walters amendment incorporates SESTA’s “knowingly” standard of liability, which withholds CDA Section 230 protections from sites “knowingly assisting, supporting, or facilitating” sex-trafficking. SESTA’s standard requires no intent to facilitate sex trafficking, relying upon the mere knowledge that one’s app or blog has been used by bad actors.

Preemptive action, driven by effective platform moderation and cooperation with law enforcement, remains the most efficient way to combat online sex trafficking. Unfortunately, FOSTA’s incorporation of SESTA’s “knowingly” standard would stymie this collaboration. If a platform attempts to prevent sex trafficking by removing and reporting offending user generated content, it risks establishing that it had knowledge of the content, rendering it liable for anything that might slip through the moderation process. Instead of encouraging platforms to combat sex trafficking, SESTA’s “knowingly” standard punishes private attempts to prevent the problem, and cripples broader attempts at effective content moderation.

A combined FOSTA/SESTA would benefit established social media platforms and trial lawyers at the expense of an open internet while doing little to prevent sex trafficking. Facebook may be well resourced enough cope with the increased legal risk imposed on hosts of user generated content, but their nascent competitors are not. Attempts to avoid running afoul of the “knowingly” standard will likely lead to greater reliance on automated filtering.

Other issues have not received the attention they merit. Libertarians (and others) often distinguish law from morality. What is immoral need not be illegal. American law in many jurisdictions does not honor that distinction and criminalizes exchanging sex for payment. Some members of Congress seem pleased this bill will better enforce those laws against people who voluntarily engage in such exchanges.

The consequence of doing so, however, should please no one. Members believe this bill will likely drive women who sell sex for a living off the internet. For them, that is a feature not a bug of the bill. But those engaged in the sex trade are unlikely to give up their work. Instead they will end up on the streets.  Why does this change of venue matter? Between 2002 and 2010, Craigslist introduced an “erotic services” section on its front page which was used almost exclusively to advertise illegal sex services. Three economists found that this section led to a 17.4 percent reduction in the homicide rate of the women in the relevant jurisdiction. They also noted “modest evidence” that the Craigslist section reduced female rape offenses. The economists concluded this reduction in violence came from the women moving indoors and matching more efficiently with safer clients. This potential increase in violence and murder should give pause to even those who deem selling sex immoral.

Congress has worked on these bills for some time through their committees. Now both bills have been thrown together, brought to the House floor, and are expected to become law, all in a week or so. Instead of this rush, the House Judiciary Committee could have finished its work, and the whole House debated and voted on the measure. The Senate and House then could have conferred and perhaps produced a bill acceptable to all. That would be “regular order” for Congress in lawmaking. It has once again been ignored.

In recent years, construction employers have complained about difficulty in finding skilled workers and asked Congress for reforms to the immigration system to address the issue. The data support their on-the-ground impressions. Since 2000, the labor market in construction has never been tighter than it was in 2017. Immigration reform would help employers find skilled workers and increase production in the construction industry.

Some commentators compare construction employment to other industries in order to evaluate its need for workers, but this is inappropriate. Construction projects are by their nature temporary and often seasonal, and so the natural rate of unemployment at any given time will always be higher for construction than other industries. For this reason, it is important to compare the construction labor market today to its labor market in prior years. This tells us how difficult it is for employers to fill jobs—how “tight” the labor market is—given the industry’s peculiarities. 

The best measure of labor market tightness is the unemployment rate relative to the job openings rate. Following the housing bust, the average unemployment rate in construction shot up to nearly 20 percent in 2009, while the number of job openings averaged less than 1 percent of all construction jobs in that year: the unemployment rate was 22 times higher than the openings rate. As Figure 1 shows, the unemployment rate was only 2.3 times higher than the job openings rate in 2017. In other words, the labor market was almost 90 percent tighter in 2017 than in 2009. No year on record had an average as low as 2016 and 2017 did.

Figure 1: Unemployment Rate Relative to Job Openings Rate, 2000* to 2017.

Sources: Bureau of Labor Statistics JOLTS Survey; Bureau of Labor Statistics, *Only December

Another way to view this information is to plot the unemployment rate and job openings rate for each month on a scatter plot. Figure 2 incorporates each month since 2001. In the figure, the further up and to the left a point is the tighter the labor market was in that month. The points with the 35 tightest labor markets are colored separately. The yellow months are 2017; the red 2016; and green and dark green 2006 and 2007, just before the housing bubble collapsed. More than half of the 35 tightest months for the construction labor market were in 2016 and 2017. Only four months out of the 35 were in years other than 2016-17 or 2006-7—each was in 2005 or 2015.

Figure 2: Unemployment and Job Openings Rates for Each Month, 2000-2017, 35 tightest Labor Markets Highlighted

Sources: Bureau of Labor Statistics JOLTS Survey; Bureau of Labor Statistics

While the Bureau of Labor Statistics has only collected job openings data since December 2000, the Current Population Survey has collected monthly industry-specific unemployment data since 1994. But even focusing solely on the unemployment rate, only one year (2000) had a lower unemployment rate than 2017’s rate.

The construction industry is booming, and restrictions on the ability of these firms to hire foreign workers ultimately limit production and raise prices.

We didn’t learn anything from this morning’s argument in Janus v. AFSCME, which asks whether state laws that compel the payment of “agency fees” by nonmembers of public-sector unions violate the First Amendment by forcing those workers to support policy positions they don’t like. None of the eight justices who heard the Friedrichs case on the same issue two years ago—which ended up 4-4 after Justice Antonin Scalia’s death—appeared to have changed their minds. The ninth, Justice Neil Gorsuch, didn’t ask a single question or otherwise show his hand. The whole exercise seemed like redundant pointlessness.

Justice Ruth Bader Ginsburg opened the questioning by asking about the validity of student activity fees and bar dues if Illinois state employee Mark Janus were to prevail, as well as how such a ruling would affect private-sector unions. Janus’s lawyer, Bill Messenger, responded that different state interests were at play there and that there’s no state action in the private sector and so no First Amendment harm. (Justice Scalia, in a 25-year-old case called Lehnert v. Ferris Faculty Association, made the same point, which is why he was considered the swing vote in Friedrichs—though he showed himself to unambiguously be on Rebecca Friedrichs’s side during oral argument in that case.)

Justice Elena Kagan expressed concern about the practical impact of a ruling that struck down the laws of 22 states that allow agency fees, which would also affect thousands of collectively bargained contracts. As expected, much of the questioning focused on stare decisis—the weight of a 40-year-old precedent that needs to be overturned for Janus to win—an issue that Cato’s amicus brief focused on.

Messenger explained that the law works fine in the other states, the contracts would all expire in the next few years at most, and that in any event, maintaining an unconstitutional contract can’t be a valid reliance interest. Solicitor General Noel Francisco, siding with Janus, added that the contracts were negotiated “in the shadow of” two recent opinions, Knox v. SEIU and Harris v. Quinn, that threw serious doubt on Abood’s continuing validity.

On the other side, Justice Anthony Kennedy showed palpable disgust at the idea that the government would force people to pay for advocacy with which they disagreed, particularly given the reality that unions uniformly advocated for larger workforces, higher taxes, and generally bigger government. Frankly, the only time I’ve seen him as exercised was when he orally summarized the joint dissent in NFIB v. Sebelius, the 2012 Obamacare case.

Justice Samuel Alito, the author of the Knox and Harris decisions, pointed out that the Constitution also doesn’t require that unions represent non-members—that it was state laws that made unions workers’ exclusive representative. He also took umbrage at the argument that public-sector workers don’t have First Amendment rights.

Justice Stephen Breyer floated a sort of compromise by offering that the agency fees should really only go to union expenses on negotiating wages and hours and on grievance procedures. In other words, that old precedent, Abood v. Detroit v. Board of Education, would be tightened rather than overturned.

It’s unclear whether Chief Justice John Roberts, whose minimalism often tilts toward narrow rulings, would make that deal. He poo-pooed the harm to unions from a ruling in Janus’s favor—they would just need to become more efficient and effective to attract members, he said—and repeatedly expressed concern that even bargaining over wages affects state budgets and thus has public-policy salience.

The smart money remains that Gorsuch will vote with Justices Roberts, Kennedy, Thomas (who also remained silent), and Alito in supporting Janus’s lawsuit. Of course, as one observer mentioned to me, Roberts was silent (update: nearly) in King v. Burwell, the 2015 Obamacare case, and we all know how that ended up. We’ll know in June.

This post is edited down from an op-ed published in the Washington Examiner.

On Saturday (Feb. 24), House Intelligence Committee Democrats were finally able to publish their rebuttal to the “Nunes Memo” written by the committee’s GOP majority staff and released earlier this month. So what have we learned from this Democratic rebuttal memo? As it turns out, not much we didn’t already know—though you wouldn’t get that impression from the media’s reaction to and characterization of the “Schiff Memo” following its release. 

NPR’s Philip Ewing and his editors preferred to treat the dueling memos episode as a game:

The more a game is played, the more adept teams become at its rules and strategies. Basketball defenders deliberately foul an opponent to force a free-throw. A manager brings up a left-handed reliever to pitch inside to a dangerous left-handed hitter.

The Republican memo gambit and last weekend’s Democratic riposte complete the first enactment of what could become a recurring sideshow inside Washington. The majority uses its control of the committee and its alliances inside the executive branch to release an unexpurgated file even if some of the relevant agencies object—as the FBI and Justice objected to the release of the Nunes memo.

The minority can’t twist the arms of the agencies controlled by its opponents and it can’t get parity with the opening shot: Nunes’ memo was released by lunchtime on a Friday following a week of extensive coverage. Schiff’s memo came out with no preliminary fanfare on a Saturday afternoon.

So will this be the template for each game? Or will Nunes and Schiff take a different approach next time? And with the rules more or less set, how will other players respond? Round Two is already different: Nunes suggested he was preparing another memo about what he calls problems with President Obama’s State Department. So a former State official wrote a column in the Washington Post that tried to short-circuit that attack.

So for NPR, allegations of FBI/DoJ potential misuse of the FISA process is like watching a Wizards-Celtics match-up on ESPN.

Other media outlets claimed the “Schiff Memo” entirely rebutted House Intelligence Committee chairman Devin Nunes’ (R-CA) case against the FBI:

Democratic members of the House Intelligence Committee on Saturday released a memo countering key claims made by their Republican colleagues, the latest chapter in Republican efforts to undermine special counsel Robert Mueller’s ongoing investigation into possible collusion between President Donald Trump’s 2016 campaign and Russian efforts.

The 10-page document reads: “FBI and DOJ officials did not ‘abuse’ the Foreign Intelligence Surveillance Act (FISA) process, omit material information or subvert this vital tool to spy on the Trump campaign.”

Former DoJ attorney and Georgetown Law professor Carrie Cordero went further in comments she made to WIRED:

“This memo repudiates a key allegation that was made in the Nunes memo: that the FBI and DOJ were untruthful to the FISC,” says Carrie Cordero, an adjunct professor at Georgetown Law School who has worked directly on FISA process issues. “That allegation went to the heart of the integrity of the FISA process, and as a former FISA practitioner, I’m glad to see it debunked.”

As the legal saying goes, those are facts not in evidence.

Both memos make claims and counterclaims that are designed to advance partisan narratives. For Democrats, the narrative is that the FBI & DoJ have behaved above reproach in this whole matter; for Republicans, the FBI & DoJ careerists have it in for a chief executive they despise and do not trust.

There’s no question in my mind that the “Nunes Memo” was not a series effort to determine what really happened in the Carter Page FISA affair, and the “Schiff Memo” does a good job of highlighting demonstrable inconsistencies or even outright errors in the GOP majority staff memo.

But the job that Nunes and Schiff are charged with is not to take the word of DoJ or IC officials at face value (as Schiff clearly does) or to start from the proposition that every DoJ or IC official involved in the Carter Page FISA application process is a sworn political enemy of Trump (as Nunes clearly does). To determine actual ground truth in this episode, the Committee and the public need several things we do not currently have in a publicly available form.

The FISA application and renewals targeting Trump campaign advisor Carter Page

No real evaluation of what did or did not happen in this episode can take place until all FISA applications targeting Carter Page are made public. A number of House members on both sides of the aisle have called for this, but it remains to be seen whether it will happen anytime soon.

All other internal DoJ and Intelligence Community correspondence dealing with the Page FISA application and renewals

I’m deep in the research phase on a book that will cover at least 120 years of U.S. government domestic surveillance and political repression activities, and one key lesson I’ve relearned is how critical it is to have access to the background material produced by officials in the lead up to a major decision. Such material can reveal the actual intent and mindset behind a particular policy initiative, in contrast to the publicly stated intent at the time the final decision is announced or taken.

In the Carter Page episode, any emails, text messages, or other correspondence between or among officials at the Justice Department, FBI, NSA, and Office of the Director of National Intelligence regarding the Page FISA application and renewals are absolutely relevant in order to determine whether or not the FISA application and renewals were indeed legitimate under law or simply a cover for a politically-motivated misuse of surveillance authorities and powers. And it’s not as if the DoJ and NSA have a pristine record of complying with the law vis a vis the FISA Court and its rulings, as the Demand Progress report on DoJ/IC FISA misdeeds documented last year.

A real examination of the workings of the FISA Court

On February 15, FISA Court presiding judge Rosemary Collyer responded to a Nunes request for FISA Court transcripts in the Page affair, the opening paragraph being the key one:

I write in response to your letter of February 7, 2018, in which you request that the Foreign Intelligence Surveillance Court confirm whether “transcripts of relevant FISC hearings associated with” matters described in the letter exist and, if so, provide copies to the Committee. As you know, any such transcripts would be classified. It may also be helpful for me to observe that, in a typical process of considering an application, we make no systematic record of questions we ask or responses the government gives. (emphasis added)

If no transcript of the proceedings was made during the original or subsequent DoJ appearances before the FISC in filing the FISA application or its renewals, exactly how are we to know how thorough the FISC judge who approved the application and renewals was in examining DoJ’s claims about Page? Why aren’t such transcripts mandatory in any proceeding involving a warrant application to spy on a U.S. citizen?

These and other questions about the function—or dysfunction—of the FISA Court need to be answered via a real investigation of the court’s operations and practices. It would be a great project for the House and Senate Judiciary Committees to undertake, or perhaps even GAO, especially since the House Intelligence Committee seems far more interested in waging partisan warfare through selective releases of incomplete information on the Page FISA episode.

 

 

 

The Supreme Court hears arguments today regarding the ability of state governments and their labor unions to extract union fees from unwilling employees. The case involves an Illinois state worker who decided not to join the AFSCME union that covers his job, but is being forced to pay a $45 per month “agency fee” to the union nonetheless.

Illinois is one of 23 states that allow unions to impose agency fees on nonmembers. The other 27 states allow people the “Right To Work” without unions picking their pockets. There has been a shift toward Right to Work in recent years, but the chart below shows that while union membership has plunged in the private sector, it has remained high in state and local governments.

Prior to the 1960s, unions represented less than 15 percent of the state-local government workforce. That changed during the 1960s and 1970s, as a flood of state laws triggered a dramatic rise in public-sector unionism. Many states passed laws that encouraged or required collective bargaining in the public sector, while also imposing compulsory union fees. The chart shows that we had reached today’s high rates of public-sector unionism by the early 1980s, which is when hard data on membership begins.

In 2017, 30.3 percent of state government workers and 40.1 percent of local government workers were union members, compared to just 6.5 percent of workers in the private sector. The combined state-local rate of union membership at 36.1 percent is more than five times higher than the private-sector rate. The most recent BLS data is here.

Why the public-private difference? Public agencies are static—once a union has organized a group of workers they tend to stay organized. By contrast, the private sector is dynamic, with businesses going bankrupt and new businesses arising all the time. Since all new businesses start out as nonunion, greater organizing efforts are needed to sustain private-sector unions.

Another factor is that many government services are legal monopolies, such as police and fire. The result is that consumers do not have the option of abandoning unionized public services if they become too expensive and inefficient, as they can do with unionized services in the private sector.

The Supreme Court case has to do with requiring public-sector employees to pay union fees. However, the more fundamental issue is so-called collective bargaining, or monopoly unionism. In both the public and private sectors, collective bargaining gives unions the exclusive right to speak for covered workers on workplace issues, many of whom may disagree with the union’s views. Dissenting individuals are prevented from dealing directly with their employer, and they cannot choose to be represented by another organization. So workers’ freedom of association is violated not just by mandatory union fees, but by collective bargaining in general.

Charles Baird explains:

Exclusive representation is a violation of voluntary exchange. It implies that an individual does not own his labor. Rather, a majority of his colleagues own it. It is a violation of a dissenting worker’s freedom of association. Freedom of association in private affairs requires that each individual is free to choose whether or not to associate with other individuals, or groups of individuals, who seek to associate with him. Freedom of association forbids any kind of forced association, even by majority vote. The sale of one’s labor services to a willing buyer is a quintessentially private act.

The Supreme Court may advance the cause of worker freedom in the current Illinois case, but broader labor union reforms are also needed, as Baird explains here.  

For further background on public-sector unions, see here.

For background on collective bargaining see here.

For Cato’s legal brief on the Illinois case, see here.

 

 

 

 

 

 

 

I spoke on a panel at CPAC with three conservatives—Scott Walter of Capitol Research Center, Ralph Hallow of the Washington Times, and Congressman Michael Burgess (R-TX)—moderated by Christopher Malagisi of Conservative Book Club (starts at 1:02:00). My main takeaway was that economics is not a major concern among the conference goers, though the congressman emphasized it. Both the audience and panel were overwhelmingly concerned with issues of assimilation, crime, and politics.

My View: Evidence Is Overwhelming in Favor of Immigration

In my opening statement, which you can watch here, I argued that conservatives should not act as liberals do on many issues. Liberals focus on mass shootings, not on the numerous cases of defensive gun use. Many liberals also ignore the incredible wealth that capitalism has created, preferring to highlight those people in capitalist societies who have been relatively less successful. In other words, liberals tend to focus on the exceptions to the rule.

Unfortunately, conservatives often act similarly on immigration. They focus on immigrant crime, even though the U.S. Census Bureau tells us that immigrants—including illegal immigrants—are more than half as likely to be incarcerated in the United States. They highlight the fiscal costs of immigrants, even though the National Academy of Sciences 2016 report found that the average recent immigrant will pay at least $92,000 more in taxes than they receive in benefits over their lifetime (in net present value terms).

On assimilation, English language comprehension at arrival is at its highest levels on record. Today’s immigrants integrate quickly into the labor market, acquiring jobs at higher rates than the U.S.-born population. Two-thirds of eligible immigrants have already become citizens. On policy, while there are a few differences between noncitizens and U.S.-born citizens, the General Social Survey finds no statistically significant differences between naturalized and U.S.-born citizens on almost any major policy area except immigration.

In conclusion, I argued that just as liberals want to grow the government and take away liberties to deal with exceptions in the free market or on guns, many conservatives want to spend billions of dollars on infrastructure to keep out people who would happily come to this country legally. They want to create an electronic national identification for every U.S. worker and every U.S. employer (called E-Verify), and they want government agents—as is already happening—to stop motorists and board trains and buses and demand that people prove their citizenship to them.

My message was simple: stop highlighting the exceptions as liberals do on guns or capitalism and pay attention to the big picture or it will inevitably lead to bigger government and less freedom.

Their View: Little Evidence Is Needed

In response, Ralph Hallow simply denied the fact that conservatives abuse civil liberties on immigration. Tell that to the ranchers on whose lands the wall is being built or the motorists and bus riders who Border Patrol targets for stops. Instead, he characterized my view as rejecting the idea that “we have a right to decide who comes into our nation.” I didn’t directly address that point, but it’s worth noting that in the U.S. tradition, governments have powers, while individuals have rights. In any case, I never challenged the government’s power to restrict entry of certain individuals to the United States.

Hallow also asserted (without evidence) that I could not give him “a shred of evidence” to indicate that immigrants are successfully assimilating. I will refer the reader above. He also implied that no one in the world appreciates “the ultimate worth of the individual” outside America and Western Europe, which I felt was odd given the common conservative view on Europe is that they are a bunch of socialists. Later, he emphasized that he felt immigration was problematic because “we used to worship our presidents” in public schools, but not anymore. If true, that seems like an improvement to me.

Scott Walter spoke about John Fonte’s work on “patriotic assimilation” without directly stating that immigrants aren’t patriotic, just that more attention needs to be paid to patriotism. I thought Walter’s tone and his discussion was completely reasonable, and I wish we could have discussed improving the naturalization process more. That said, Fonte’s work relies almost entirely on a single poll from 2008 and doesn’t compare the immigrant responses today to those in the past. In any case, Alex Nowrasteh has written about Fonte’s work here and here, showing that immigrants report the same level of trust in U.S. institutions and the same level of patriotism as U.S.-born citizens across a variety of measures.

The other major concern that came up repeatedly was purely partisan: that immigrants will vote for Democrats. I noted that in fact, Republicans only do well during periods when the share of immigrants is high. From 1935 to 1994—the entire period when the immigrant share of the population was below 10 percent—Republicans controlled the House of Representatives only twice. The rest of GOP history, it has dominated the House 70 percent of the time. 

Congressman Burgess made the only two concrete factual points that I noticed, neither of which I responded to directly. First, he claimed that the border security promised after 1986 never came. However, the number of Border Patrol agents has increased by 600 percent since 1986 and the Border Patrol budget rose in real terms thirteen-fold. The spending and money had little effect, which is maybe what he meant, but it is nonetheless the case that illegal immigration has fallen by 97 percent since then (mainly due to increases in legal immigration, not enforcement).

Second, the congressman claimed that the United States accepts more immigrants than the rest of the world combined. According to the United Nations estimates, the United States is home to less than one in five of the world immigrant population, and from 2014 to 2016, it accepted less than one-sixth of total net immigration. I attacked the question differently, pointing out that controlling for population, the United States has nowhere near the highest rate of immigration: among the top 50 wealthiest countries, the United States ranks in the bottom third. For some reason, the audience and two panelists really objected to controlling for population. I guess they consider Chinese three times wealthier than Germans because China’s total GDP is three times larger than Germany’s, even though China’s per capita GDP is five times smaller.

Congressman Burgess was the only one to mention economics, demanding that the growing economy be reserved for Americans only (without explaining why). But the response—though positive—was more muted than the excited cheering for negative comments about immigrant assimilation. People care less about economics than about cultural factors and personal fears. By contrast, the audience questions concerned crime (2) or language assimilation (2), relying mainly on personal experiences or misleading statistics. 

Some conservative writers are proposing to raid Social Security for the costs of a new parental leave program. Proponents are selling it as a sort-of free lunch. The plan would be “self financing” says the IWF’s Kristin Shapiro because “new parents would agree to defer their collection of Social Security benefits upon retirement for the period of time necessary to offset the cost of their parental benefits.”

But Social Security is not a savings program with a pool of assets to draw on. If the government starts mailing checks to millions of new parents, the only “financing” would be more federal borrowing. What Shapiro calls $7 billion a year in “parental benefits” would be $7 billion more in government spending. What Shapiro calls “self financing” would be more government debt.

In theory, the government would delay retirement handouts for participating individuals three decades down to the road. But, if enacted, lobby groups and politicians would get to work undoing those future savings. And if this sort of accounting trick is used for spending on parental leave, then the flood gates would be opened for Social Security spending on home purchases, job training, and other trendy causes.

What ever happened to personal saving? Humans can look ahead and plan, and they have been doing so since the beginning of time. Personal saving is the most powerful financing tool. But the more the government hands out benefits—for retirement, health care, unemployment, parental leave, and many other things—the more it undermines the innate and responsible saving incentive. The more the nanny state spends, the more it sabotages a culture of savings and the practical ability to save as taxes rise.

Young people thinking about having children should start setting aside some of their paychecks. Young people should be taught that kids are expensive, and they should plan accordingly. Alas, personal responsibility and saving are not the starting points for most policy discussions these days.

Put aside parental leave, and think about farm programs. The government spends $20 billion a year to cushion farmers from fluctuations in prices and crop yields. It apparently never occurs to policymakers that farmers should be using their own savings to level out their consumption over time. When corn prices are high, they should be saving the extra profits. When corn prices are low, they can withdraw. Wouldn’t that be easier than writing thousands of pages of farm legislation and extracting $20 billion a year from taxpayers?

At the bottom of Shapiro’s piece, it says the IWF believes that women are “better served by greater economic freedom” than “big government.” Thus, for parental leave, the focus should be on personal responsibility and savings rather than big government spending.

Part of the solution is to cut taxes on saving and make saving simpler, as Ryan Bourne and I discuss in our study on Universal Savings Accounts (USAs). The tax code includes numerous savings vehicles for retirement, but all savings are beneficial. USAs would facilitate personal savings to cover health care, education, parental leave, and many other costs. If Americans had larger pools of savings, they would be more self-sufficient and less dependent on government.

When thinking about policy reforms, the first goal should be to increase the self-sufficiency of Americans and reduce today’s overreliance on government. USAs would not solve every problem, but they would allow Americans to better prepare for their own financial challenges.

Vanessa Brown Calder critiques the paid leave proposals here and here.

In a Cato study last year, I argued that the U.S. policy of maintaining hundreds of permanent forward-deployed military bases around the world is not only unnecessary, but also actually counterproductive in some ways. Advocates of forward-deployment claim it pacifies the international system by deterring adversaries and reassuring allies, thus ameliorating conflict spirals and staving off interstate wars.

I argued instead that today’s lower rates of interstate conflict are a result of many factors – including defense dominance, economic interdependence, changing norms, etc. – other than forward basing and the security guarantees that underlie them. I further claimed that forward bases can actually undermine peace and stability by incentivizing “reckless driving” by allies and counterbalancing by adversaries. This is a view deeply at odds with the prevailing opinion in the Washington, DC foreign policy establishment.

Yet a new study from the RAND Corporation bears some of my analysis out. RAND researchers developed a statistical model to see how U.S. overseas bases correlated with interstate conflict. Though they find that “on average, U.S. troop presence was associated with…a lower likelihood of interstate war,” they concede their model can’t determine causation and can’t account for the impact that other factors (mentioned above) have had on the reduction of interstate conflict in the post-WWII period.

And while the study suggests there is good evidence for the restraining effect that U.S. bases have on allies (see here for a study suggesting otherwise), it also finds that stationing U.S. troops and bases overseas is “associated with a higher likelihood of low-intensity interstate conflict” and that “a large nearby U.S. troop presence was associated with potential U.S. adversaries initiating more low- and high-intensity conflicts.”

“Adversary states,” according to RAND, “are more likely to initiate a high-intensity MID [militarized interstate dispute] against a target state when the United States maintains a large troop presence in that target state. This suggests that adversaries may be threatened by U.S. forward presence abroad, leading to an increased risk of militarized behavior.”

For example, the authors of the study argue that U.S. basing in the Baltic states may deter Russia from initiating major war against them, “but also may lead to the initiation of more disputes and provocations [short of all-out war] by Russia against the Baltic states.” Similarly, U.S. military presence in and near the South China Sea may play a role in deterring China from outright attacking neighboring states with competing maritime and territorial claims, but also “may lead to the intensification of Chinese militarized activities and provocations toward the partner states that host U.S. forces.” Another example is the Korean Peninsula. “U.S. troop presence has likely deterred North Korean aggression against South Korea,” the RAND study concludes, “but it has potentially done so at the cost of numerous militarized activities and provocations by North Korea during many decades.”

This should not be construed to mean that, in the absence of U.S. bases or security guarantees, Russia would conquer the Baltic states, or China would attack the Philippines, or North Korea would initiate war with South Korea. Each of these adversaries has good reasons - other than the threat of a U.S. response - not to take such action.

Here is the real kicker. Another argument in my own Cato study was that having all these bases and troops permanently stationed abroad has the effect of expanding the scope of perceived U.S. interests, thus increasing U.S. military interventionism abroad. The RAND study concurs:

Some analysts contend that U.S. involvement abroad actually leads to an expansion of U.S. security concerns and issues over which it is willing to use force. Frequent diplomatic interactions can lead to socialization, where the U.S. leaders adopt partners’ local security concerns. Moreover, once the United States makes a commitment to a partner, U.S. policymakers may also begin to see U.S. credibility at stake in any of the partner’s disputes. The United States may, in turn, be more likely to initiate or become involved in militarized conflicts to protect these interests. U.S. forward troop presence may contribute to the expansion of these concerns. U.S. military presence in partner states creates more opportunities for socialization, described above, and further ties U.S. reputation to its partners’ security. Moreover, forward presence may make the United States more sensitive to the capabilities and intentions of nearby states that could pose a physical threat to local U.S. personnel or infrastructure. The need to defend forward deployments and support regional partners may expand the domain of issues in which the United States is willing to use force, thereby increasing the risk that the United States initiates conflict abroad.

That’s an important finding. U.S. military activism has indeed spiked in the post-Cold War era, though we’re not better off for it. If forward-deployment pushes the United States to use military force with greater frequency and in more locations for what would otherwise be peripheral interests, that should be deeply concerning to Americans.

A new federal paid leave idea has been produced, promoted, and endorsed by individuals on the right. And now Republican legislators like Marco Rubio, Joni Ernst, and Mike Lee are getting behind it.

Advocates propose using Social Security as a benefit bank for paid leave – the idea is that parents could withdraw Social Security benefits today if they defer collecting benefits later. Of course, if advocates want to provide paid leave, a better idea is cutting Social Security benefits and payroll taxes so new parents don’t have to ask the government for their money back.

Still, it’s a clever idea and maybe the least-bad proposal for federal paid leave. But that does not mean the Social Security paid family leave (SS PFL) proposal is a good idea on its own merit. As described in The Hill yesterday, government-provided paid leave has harmful consequences and is not politically supported. 

Setting that aside, Social Security is a program with an assortment of problems, and allowing beneficiaries to borrow against future benefits does not improve the current model. Given how integral Social Security is to the current proposal, it’s worth a reminder just how deep those issues run.

First, Social Security will shortly be insolvent. Due to Social Security’s structure and demographic trends which include an increase in life expectancy, a decrease in fertility rates, and slowing wage growth, the value of Social Security’s obligations is estimated to exceed the value of its taxes in present value by $8.6 trillion over the next 75 years. (And no, providing paid parental leave and other parental benefits won’t change fertility trends meaningfully.)

In short, there are increasingly more retirees collecting benefits for every worker paying for them. To illustrate, in 1950 there were 12 people older than 65 for every 100 people of working age. By 2050, there are expected to be 35 people older than 65 for every 100 people of working age.

This makes Social Security unsupportable in its current form. The program is already running a cashflow deficit and in trouble financially. Indeed, the Social Security Administration (SSA) projects the present-value of Social Security’s unfunded financial obligation is equal to $32.1 trillion through the infinite time horizon. 

How will adding SS PFL change that? AEI’s Andrew Biggs says that in the long-run the SS PFL proposal is budget neutral. But in the short-run, the proposal increases Social Security’s financial obligations, thereby hastening Social Security’s decline toward insolvency. It would be one thing if Social Security was based on personal savings accounts and the proposal allowed people access to their savings more flexibly. But Social Security has no pool of savings, so the proposal means going deeper into debt to provide parental benefits. 

The most generous argument is that the SS PFL proposal does everyone a favor, because it forces lawmakers to grapple with Social Security’s problems sooner than they would otherwise. What will that reform look like? If historical precedent is any indication, it will involve increasing taxes and perhaps reducing benefits.

Social Security taxes have already grown substantially over Social Security’s lifetime: from a payroll tax of 2 percent at its inception in 1937 to a tax of 12.4 percent today. Indeed, during Social Security’s most recent reform in 1983, taxes were raised in a variety of ways. Recent proposals for reforming Social Security have also suggested expanding taxes to pay for the program.

Of course, benefits have also been reduced in past reforms. But with more obligations to more interest groups (parents, the sick, etc.) under a new version of the program, it will be increasingly difficult to reduce benefits because more groups will be impacted by cuts. 

It seems that an underlying premise of the SS PFL proposal is that nothing major can be done to reform Social Security in the short-term anyway, so let’s enjoy the ride down. Another underlying premise is that Democrats will eventually get their way on paid leave, so let’s preempt it and give them what they want.

Unfortunately for advocates, the current proposal is not what Democrats want, and it’s unlikely they’ll be satisfied. The SS PFL proposal conveniently leaves the door wide open to provision of more generous benefits in the future.

In the meantime, Republicans will have conceded substantial ground, hastened Social Security’s decline, and legitimized the provision of paid parental leave at the federal level.  If history is any indication, more taxes will be part of the solution.

 

President Trump wants to cut legal immigration by more than 40 percent, complaining that the system focuses on family reunification rather than skills. In defending the plan, Attorney General Jeff Sessions generalized today’s immigrants as largely “illiterate”, with “no skills”, and argued that America “should be like Canada” on immigration, evaluating them on their skills. Yet, recent U.S. immigrants are better educated the U.S.-born, and differ little from recent Canadian immigrants.

Figure 1 provides the educational attainment distribution for U.S.-born working-age adults (25-64) compared to recent U.S. working-age immigrants (arrival from 2012 to 2016). As it shows, nearly half of all recent working-age immigrants had a college degree or higher, compared to just 32 percent of the U.S.-born working-age population. Recent immigrant workers to America are 50 percent more likely to have graduated college than U.S.-born workers. Moreover, among college graduates they are much more likely to have advanced degrees.

Figure 1: U.S.-Born Citizens and Recent Immigrants to the United States by Education, Ages 25-64*

Sources: American Community Survey, 2016 5-Year Sample *Including all adults over 25 reduces recent immigrant share of bachelor’s degrees to 47 percent and U.S.-born share to 30 percent

Figure 2 provides the educational attainment distribution for recent working-age immigrants to the United States compared to recent working-age immigrants to Canada (arrival from 2012 to 2016). As it shows, recent working-age Canadian and U.S. immigrants have very similar educational profiles, with an almost equal ratio of college graduates to non-graduates. U.S. recent immigrants with a college degree are a bit more likely to have an advanced degree.

Figure 2: Recent Immigrants to the United States and Canada by Education, Ages 25-64

Sources: American Community Survey, 2016 5-Year Sample; Statistics Canada

Canada’s overall immigrant population is slightly better educated than the United States’. Figure 3 provides the educational attainment distribution for all working-age immigrants to the United States compared to all working-age immigrants to Canada. Even looking at the entire population, however, the U.S. immigrant population ends up looking very similar to the U.S.-born population, with only minor differences in educational attainment.  

Figure 3: Recent Immigrants to the United States and Canada by Education, Ages 25-64

Sources: American Community Survey, 2016 5-Year Sample; Statistics Canada

These figures modestly understate the degree to which the U.S. legal system results in the immigration of educated workers because nearly a quarter of all U.S. immigrants are illegal, and illegal immigrants are less educated than other immigrants. Canada has relatively fewer illegal immigrants.

More important than the shares of the flow is the absolute quantity of the flow to each country. While Canada has a similar share of less educated immigrants, it allows far more of them to immigrate, relative to its population, because its immigration rate is so much higher than the U.S. rate. In other words, the United States is far less welcoming overall to less educated immigrants than our northern neighbor.

The claim that U.S. legal immigration policy is highly skewed toward “illiterates” who lack skills to succeed in America has no validity. In fact, even family-sponsored immigrants and diversity lottery winners are better educated than the U.S.-born. In any case, less educated immigrants bring skills and contribute in important ways to the United States, and they are successful on all standard measures. But ultimately, reforming immigration policies should start with the facts about the immigrants that we already have, not myths and conjecture.

Historian Harold James of Princeton University, known for his scholarly writings on the gold exchange standard and on the euro, has turned his attention to Bitcoin in a recent Project Syndicate commentary on “The Bitcoin Threat.” His commentary labors under a surprising number of misconceptions about Bitcoin and the history of privately issued currency. If even a reputable academic historian falls prey to these misconceptions, they are likely to be widespread. Scrutinizing them may then be of wider interest.

After noting some of the optimistic claims made on behalf of cryptocurrencies and the blockchain technology underlying them, James cautions us:

But others are rightly suspicious that this new technology might be manipulated or abused. Money is part of the social fabric. For most of the history of human civilization, it has provided a basis for trust between people and governments, and between individuals through exchange. It has almost always been an expression of sovereignty as well, and private currencies have been very rare.

To say that government-issued currencies have “provided a basis for trust,” and to imply private currencies have not, is a curious summary of centuries of monetary history. Anyone familiar with the long history of debasements by ancient and medieval government mints, or with the history of fiat money inflations by modern government central banks, knows that governments have often been untrustworthy issuers. Sovereigns have frequently abused rather than rewarded trust in their currencies. (To his credit, James does later observe that “bad states produce bad money.”) Indeed a key service that attracted medieval merchants to private bankers was their more trustworthy payment alternative to the variously debased government-issued coins, namely a ledger-based system where transferable account balances were denominated in units of unchanging silver content. Historians later called these stable private accounting units “ghost monies” because they were not embodied in any of the debased contemporary coins.

James’ statement that “private currencies have been very rare” is simply untrue. It is a surprising misconception for a financial historian to hold. Private silver and gold coins were historically rare, it is true, because governments have legally suppressed private mints to give their own mints monopoly privileges. But during the 18th and 19th centuries, redeemable paper currency became more popular than coins in modern economies, and the majority of paper currency in circulation in most countries consisted of privately issued banknotes. Kurt Schuler and Will McBride report that more than sixty countries have had periods of competitive private note-issue, so it was hardly a “very rare” experience.

Banknotes are a banking product, and banking is normally a private business, so it should not be surprising that the very first known banknotes were introduced by businesses and not by a government. Schuler and McBride write that “the first true circulating notes were issued” around the year 995 “by private bankers in the city of Chengdu” in China. Similarly, “In Europe, the first true circulating notes were issued in 1661 by Stockholms Banco, a private bank chartered by the crown.”

In the United States before the Civil War, the vast majority of paper currency was issued by private state-chartered banks. The only governmental or quasi-governmental notes were those issued by the short-lived first and second Banks of the United States (whose shares were 80% in private hands) and by state-government-owned commercial banks in a few frontier states. After the Civil War, private banks with federal charters (the “National Banks”) continued to issue notes into the 1930s. In the United Kingdom, all banknote issuers including the Bank of England were private before the First World War. Even if we were to consider the BOE “non-private” after it gained special privileges in the Bank Charter Act of 1844, other private banking companies issued 43 percent of the notes in circulation in 1851, to pick a mid-century year. Canada’s banknotes were entirely private before the provinces (later The Dominion) began issuing small notes in 1866, and there private banknotes continued in circulation until the 1940s.

When it comes to the operations of Bitcoin, James exhibits additional misconceptions. He comments that “Bitcoin looks like a twenty-first-century version of gold, and its creators have even embraced that analogy.” I discussed here recently what the Bitcoin system has in common with a gold standard, and how it differs in important ways. James’ statement that Bitcoin’s “creators have even embraced that analogy” seems to refer to the term “mining” being used metaphorically to refer to the operation of Bitcoin validation nodes. But in writing that Bitcoin “is produced — or ‘mined’ — through effort,” James appears to have been misled by the term. Bitcoin “mining” validates payments. Unlike gold mining, growth in the number of computers “mining” bitcoin does not increase the rate at which the total stock of bitcoin grows. It only adds more competition to be the mining node that receives the reward in new coins for processing the next transaction block (by being first to solve a mathematical guessing problem, the difficulty of which is endogenously adjusted to keep the expected solution time at ten minutes). New coins are awarded at a rate that is predetermined by the source code. Thus, a new miner who adds a computer to the system “produces” expected new bitcoins for himself, but not for the system as a whole.

The most dramatic of James’ ill-founded claims come in the commentary’s penultimate paragraph — which is hard to read as anything but rather wild fear-mongering:

And yet we have already reached the point where a Bitcoin crash could have serious global implications. Financial institutions’ current exposure to the cryptocurrency is unclear, and probably would not be fully revealed until after a financial disaster. It is eerily reminiscent of 2007 and 2008, when no one really knew where the exposure to subprime-mortgage debt ultimately lay. Until the crash, it was anyone’s guess which institutions might be insolvent.

James cites no evidence of financial institutions’ exposure to cryptocurrencies. Unlike mortgages in 2007, known commercial and investment bank balance sheets indicate no significant holdings of cryptocurrency assets by the institutions. Asked about cryptocurrencies, European Central Bank chief Mario Draghi commented on 5 February 2018 that bank exposure was not evident: “Let me first say that we are not observing a systemically relevant holding of digital currencies by supervised institutions — by banks, in other words.” As he went on to add, banks do not hold them precisely because cryptocurrencies are indeed very risky investments. A Forbes blogger in December, imagining bank losses from cryptos, was to his credit willing to acknowledge: “Of course, this is a doomsday scenario and there’s no evidence that big banks have garnered large positions in Bitcoin or other currencies — yet.”

The only apparent (albeit minuscule) exposure of banks, one mentioned in recent news reports, is via credit-card customers who charge such large cryptocurrency purchases to their cards that a plunge in crypto prices might make them personally bankrupt and force them to default on card payments. No problems from credit-card losses of this kind have yet been reported, however, and the card-issuing banks are fully able to price or quantitatively limit such a risk. Coindesk reports that JPMorgan Chase, Bank of America, Citi, and Capital One are now in fact disallowing cryptocurrency purchases by their credit-card customers. Of course the banks already cap the size of their customers’ credit lines to limit default risk, and charge additional fees when they allow customers to take (limited) cash advances.

A bank that allows its customers to use a debit card or other form of deposit transfer to buy cryptocurrencies, it should be noted, is not extending credit to those customers and is not exposing the bank to any risk of credit losses from crypto price volatility.

In 2007, by contrast, regulators looking at audited balance sheets knew which banks were holding how many billions of dollars in mortgages and mortgage-backed securities (MBS). (Granted, the regulators were unaware ex ante of how risky the mortgages and MBS were.) Total MBS outstanding in 2007 and 2008 were over $9 trillion, by the way. The total volume of cryptocurrencies outstanding today is under $400 billion, less than 1/20th of $9 trillion, and cryptocurrency purchases on outstanding bank card balances must be a very tiny fraction of that. Again, there’s no evidence of banks or investment banks holding crypto positions. So today’s situation is hardly “eerily reminiscent” of 2007-08.

James’ phrase “financial institutions” covers more than banks, of course. And there are a small number of speculative financial institutions buying cryptocurrencies for their customers, namely specialized hedge funds and proprietary trading firms. Pantera Capital offers a leading cryptocurrency investment fund. The CEO of Pantera notes that the crypto market is remarkable for the nearly complete absence of institutional investors: “It’s a half-a-trillion-dollar asset class that nobody owns. … And bitcoin is still so underowned by institutional investors that it trades at its own beat.” At the mid-December BTC price peak, the firm reportedly had about $2 billion under management. Half of that value has been lost, but without any apparent spillover effects. Hedge fund shareholders are high-net-worth individuals who can afford speculative losses to parts of their portfolios. Contrary to James’ fear that “a Bitcoin crash could have serious global implications,” the halving of Bitcoin’s value over the last two months shows no worrisome spillovers to the financial system more generally. It provides no rationale for restricting the public’s right to buy or hold or use cryptocurrencies.

[Cross-posted from Alt-M.org]

Imagine that it’s your first day at a new job. As you endure the tedious onboarding process, an interesting tidbit catches your attention; among the perks of your new position, you will be issued a company car and cell phone. “Sweet!” you exclaim, now more confident than ever of having made the right career move. But your enthusiasm drops precipitously as you learn that GPS devices have been installed on both the car and phone, allowing the company to continuously track your location. And your shock turns to horror when you are informed that the (mandatory) use of these items requires that you consent to the police having unfettered access to the resulting information, thus waiving your Fourth Amendment rights. While commenting on what a huge mistake accepting the position was on your way out the door, HR drops perhaps the biggest bombshell of all: “Sorry you feel that way, but it’s the city’s rule, not ours, and every other company in the field has the exact same rules… so good luck finding another job!”

Incredibly, such a dystopian scenario could become commonplace if the City of Chicago has its way.

LMP Services is a company owned by Laura Pekarik, who has operated the “Cupcakes for Courage” food truck since 2011. About a year after starting her business, Chicago passed ordinances requiring food trucks to install GPS trackers and to refrain from operating within 200 feet of established restaurants. LMP then sued to prevent enforcement of these laws—and is capably represented by our friends at the Institute for Justice.

While this case ostensibly involves food trucks in Chicago, if the Fourth Amendment fails to protect against laws like these, then there is very little to prevent cities and states across the country from extending similar regulations to virtually any other disfavored economic activity. In erroneously ruling that these requirements don’t involve an unreasonable search and don’t intrude on any liberty interests, the Illinois Appellate Court employed two lines of reasoning.

First, the court found that there was no Fourth Amendment “search” because there was no physical intrusion by the government. But this ignores the well-established rule that compelling a private party to carry out the equivalent of a search rather than conducting the search itself does not allow the government to avoid constitutional scrutiny. That’s precisely the situation here, as Chicago tried to shirk constitutional limitations by forcing food-truck owners to install the tracking devices and then having the information sent to a private company rather than to the government itself.

Second, the court found that there was no search because being allowed to operate a food truck is subject to a revocable license. Because the government isn’t required to issue such licenses, it’s supposedly free to condition issuance on the vendor’s consent to the placement of the GPS device. But under this rationale, what’s to prevent a state from conditioning (for example) a commercial driver’s license on drivers’ consenting to random police searches? While anyone with even a passing familiarity with the Fourth Amendment would find this absurd, there is no principled basis for preventing such measures under the court’s reasoning.

One might logically ask why on earth Chicago would have enacted these restrictions in the first place. The most plausible answer comes when examining the other ordinance at issue—the “200-foot rule” that prevents food trucks from operating close to other businesses that prepare and sell food to the public. As even the city’s representatives have admitted, this is a purely protectionist measure designed to shield brick-and-mortar restaurants from competition. The Appellate Court didn’t merely turn a blind eye toward such favoritism; it specifically endorsed it by finding that favoring one class of merchants over another was justified by the city’s need to “strike a balance” between higher-tax-paying restaurants and lower-tax-paying food trucks. Needless to say, conditioning a party’s rights on the amount of taxes it pays is a dangerous precedent indeed.

Finally, these protectionist measures have achieved predictable results, with the already-low total of 120-130 licensed food trucks in 2012 dropping to only 70 as of last year. That’s not exactly a win for hungry consumers who want reasonably priced snacks!

Because these measures are detrimental to Chicago’s consumers and entrepreneurs—and indeed all residents’ constitutional rights—Cato has joined the Illinois Food Truck Owners Association and National Food Truck Association on an amicus brief supporting LMP Services’ appeal of the Appellate Court’s erroneous judgment. The Illinois Supreme Court should hear this case and rule that overtly advantaging market competitors and forcing merchants to forego Fourth Amendment protections cannot be countenanced as just another cost of doing business. Instead, this is a disgraceful abuse of power that’s repugnant to a free and open society.

Perhaps most importantly, when you think of all the great culinary delicacies that Chicago is known for – regardless whether deep-dish pizza is pizza, it’s delicious – it would be a crying shame to deprive the city of food trucks.

The Trump administration’s 2019 budget would eliminate funding for the Manufacturing Extension Partnership (MEP) run by the Department of Commerce. The Wall Street Journal reported on the proposal the other day, although the article read more like an oped by program supporters.

The MEP shells out $140 million a year of taxpayer money to more than 50 offices around the country that aid local businesses. Tad DeHaven and I discuss some of problems with the MEP here.

One problem is that such corporate welfare necessarily favors some businesses over others. Companies receiving MEP aid are given an unfair edge over competitors. The MEP’s annual report does not actually say which particular companies have been aided. Instead, it is full of dynamic-sounding language such as “technology acceleration,” “learning organization,” “high-performance system,” “technology-centric operations,” “cultivate enduring collaborations,” and “actionable items for implementation.”

The MEP suffers from the usual waste and abuse of federal subsidy programs. In one classic case, the MEP charged taxpayers $1.1 million for a big party (I mean “conference”) at a resort in Orlando, with free food, booze, live music, and a trip to Disney World.

In another taxpayer rip off, the South Carolina director of an MEP-funded group (p. 29) submitted fraudulent documentation for $336,000 of expenses, including “contracts and payments to shell corporations that were controlled by friends, family members, and him/herself for work that was not completed.” She was sentenced to 27 months in jail, and then was charged with trying to cover up a further $1 million in dubious MEP charges.

My assistant, Dave Kemp says, “What do you expect, it’s the government?” True, but the fact that such handout programs are routinely abused is a good reason to terminate them.

If we eliminated the MEP’s handouts, we could also eliminate the MEP bureaucracy. The agency has about 100 employees making an average $160,000 a year in wages and benefits, according to the federal budget.

To its credit, the Trump administration has proposed various cuts to corporate welfare, and it has reduced tax and regulatory burdens on businesses. Unfortunately, the administration’s protectionist trade actions are a form of corporate welfare that undermine the benefits of its pro-growth policies.

The MEP’s 2016 annual report leads off with a paean to Alexander Hamilton’s 1791 Report on Manufacturers, which was a call for economic central planning. Fortunately, the Jeffersonian free-enterprise view mainly held sway in subsequent decades, and American industry rose to greatness not because of Hamilton/MEP-style subsidies, but because of the sacrifices and struggles of generations of bold entrepreneurs.

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