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The British luxury passenger liner RMS Lusitania was torpedoed a century ago. The sinking was deemed an atrocity of war and encouraged American intervention in World War I.

But the ship was carrying munitions through a war zone and left unprotected by the Royal Navy. The “Great War” was a thoroughly modern conflict, enshrouded in government lies. We see similar deceptions today.

World War I was a mindless imperial slugfest triggered by an act of state terrorism by Serbian authorities. Contending alliances acted as transmission belts of war. Nearly 20 million died in the resulting military avalanche.

America’s Woodrow Wilson initially declared neutrality, though he in fact leaned sharply toward the motley “Entente.” The German-led Central Powers were no prize. However, the British grouping included a terrorist state, an anti-Semitic despotism, a ruthless imperial power, and a militaristic colonial republic.

Britain was the best of a bad lot, but it ruled much of the globe without the consent of those “governed.” This clash of empires was no “war for democracy” as often characterized.

London ignored the traditional rules of war when imposing a starvation blockade on Germany and neutrals supplying the Germans. Explained Winston Churchill, First Lord of the Admiralty, Britain’s policy was to “starve the whole population—men, women, and children, old and young, wounded and sound—into submission.”

Since Berlin lacked the warships necessary to break Britain’s naval cordon sanitaire, Germany could retaliate only with surface raiders, which were vulnerable to London’s globe-spanning navy, and submarines. U-boats were more effective, but were unable to play by the normal rules of war and stop and search suspect vessels.

The British Admiralty armed some passenger liners and cargo ships, and ordered captains to fire on or ram any submarines that surfaced. Britain also misused neutral flags to shelter its ships. Thus, the U-boats were forced to torpedo allied and some neutral vessels, sending guilty and innocent alike to the ocean’s bottom..

However, Churchill encouraged the voyages. The week before the Lusitania’s sinking he explained that it was “most important to attract neutral shipping to our shores, in the hope especially of embroiling the United States with Germany.”

Wilson complained about the British blockade, but never threatened the bilateral relationship. Washington took a very different attitude toward the U-boat campaign.

The Imperial German government sponsored newspaper ads warning Americans against traveling on British liners, but that didn’t stop the foolhardy from booking passage. Off Ireland’s coast the Lusitania went down after a single torpedo hit; the coup d’ grace apparently was a second explosion of the ship’s cargo of munitions. The dead included 128 Americans.

There was a political firestorm in the U.S., but the flames subsided short of Churchill’s desired declaration of war. Still, the president demanded “strict accountability” for the German U-boat campaign.

His position was frankly absurd: Americans should be able to safely travel on armed vessels of a belligerent power carrying munitions through a war zone. The president eventually issued a de facto ultimatum which caused Berlin to suspend attacks on liners and limit attacks on neutral vessels.

As the war dragged on, however, Berlin tired of placating Washington. In January 1917 the Kaiser approved resumption of submarine warfare. But the effort could not redress Germany’s continental military disadvantages.

After the conflict ended the egotistical, vainglorious Wilson was outmaneuvered by cynical European leaders. The Versailles “peace” treaty turned out to be but a generational truce during which the participants prepared for another round of war.

Today America’s unofficial war lobby routinely clamors for Washington to bomb, invade, and occupy other lands. As I wrote on Forbes, “On the centennial of the Lusitania’s demise Americans should remember the importance of just saying no. Now as then Americans need a president and Congress that believe war to be a last resort for use only when necessary to protect this nation, its people, liberties, and future.”

Prime Minister Shinzo Abe’s trip to Washington demonstrated that Japan remains America’s number one Asian ally. Unfortunately, the relationship increases the likelihood of a confrontation between the United States and China.

Japan’s international role has been sharply limited since World War II. During Prime Minister Abe’s visit, the two governments released new “Guidelines for Japan-U.S. Defense Cooperation.” The document clearly sets America against China.

First, the rewrite targets China. Japan’s greatest security concern is the ongoing Senkaku/Diaoyu dispute and Tokyo had pushed hard for an explicit U.S. guarantee for the unpopulated rocks. Second, Japan’s promise to do more means little; the document stated that it created no “legal rights or obligations.” Tokyo will remain reluctant to act outside of core Japanese interests.

Third, though the new rules remove geographical limits from Japanese operations, most of Japan’s new international responsibilities appeared to be what Prime Minister Abe called “human security.” In his speech to Congress, the prime minister mostly cited humanitarian and peacekeeping operations as examples of his nation’s new duties.

Moreover, the guidelines indicate that the SDF’s military involvement will be “from the rear and not on offensive operations,” noted analysts at the Center for Strategic and International Studies. Defense Minister Gen Nakatani cited “ship inspection” as an example of helping America’s defense.

Fourth, to the extent force is involved, Japan mostly promises to help the United States defend Japan. For instance, Tokyo cited the fact that Japanese vessels now could assist U.S. ships if the latter were attacked while on a joint patrol.

This should be inherent to any alliance, but Narushige Michishita, at Tokyo’s National Graduate Institute for Policy Studies, noted that “technically” it remains impossible for Japanese forces to defend even a U.S. vessel in a Japanese flotilla “when an attack on that ship does not directly or will not directly threaten Japan’s security.” That means a situation which “threatens Japan’s survival and poses a clear danger to overturn fundamentally its people’s right to life, liberty, and pursuit of happiness, to ensure Japan’s survival, and to protect its people.”

In contrast, the revised guidelines begin with an affirmation that “The United States will continue to extend deterrence to Japan through the full range of capabilities, including U.S. nuclear forces. The United States also will continue to forward deploy combat-ready forces in the Asia-Pacific region and maintain the ability to reinforce those forces rapidly.” This means more and newer weapons.

Fifth, as I wrote in China-U.S. Focus, “America’s burden will grow. Tokyo’s military expenditures have been flat for years, but now Japan plans on devoting more resources to non-combat activities. That will leave less for defense against what the Japanese government sees as the greatest threat, the PRC—which continues to hike military outlays. Washington will be expected to fill the ever widening gap.”

Sixth, the new rules build on the Obama administration’s explicit promise to defend Tokyo’s contested territorial claims, most importantly the Senkakus/Diaoyus. U.S. forces will be drawn into the islands’ defense.

According to the document, “If the need arises, the Self-Defense Forces will conduct operations to retake an island.” The SDF would, of course, expect American support. Protecting Tokyo’s claims also encourages the Japanese government to be needlessly provocative.

Japanese and U.S. authorities also are discussing mounting joint air patrols to the edge of the East China Sea and into the South China Sea. In the latter, Tokyo is working with other countries, including Indonesia, the Philippines, and Vietnam. Thus, a U.S. plane could find itself challenging Chinese aircraft in support of a third nation’s disputed territorial claim.

President Obama argued that “we don’t think that a strong U.S.-Japan alliance should be seen as a provocation,” but it will be if directed against the PRC. Unfortunately, the new guidelines make it more likely that Washington will find itself confronting China over issues of limited interest to America.

Judging from the November electoral tsunami, whose epicenter was in coal country, people aren’t taking very kindly to the persistent exaggeration of mundane weather and climate stories that ultimately leads to, among other things, unemployment and increased cost of living. In response, we’ve decided to initiate “The Spin Cycles” based upon just how much the latest weather or climate story, policy pronouncement, or simply poo-bah blather spins the truth.

Like the popular and useful Fujita tornado ratings (“F1” through “F5”), or the oft-quoted Saffir-Simpson hurricane severity index (Category 1 through Category 5), and in the spirit of the Washington Post’s iconic “Pinocchios,”, we hereby initiate the “Spin Cycle,” using a scale of Delicates through Permanent Press. Our image will be the universal vortex symbol for tropical cyclones, intimately familiar to anyone who has ever been alive during hurricane season, being spun by a washing machine. Here’s how they stack up, with apologies to the late Ted Fujita and Bob Simpson, two of the true heroes of atmospheric science with regard to the number of lives their research ultimately saved.

And so, here we have it:

Delicates. An accidentally misleading statement by a person operating outside their area of expertise. Little harm, little foul. One spin cycle.

Slightly Soiled.  Over-the-top rhetoric. An example is the common meme that some obnoxious weather element is new, thanks to anthropogenic global warming, when it’s in fact as old as the earth. An example would the president’s science advisor John Holdren’s claim the “polar vortex,” a circumpolar westerly wind that separates polar cold from tropical warmth, is a man-made phenomenon. It waves and wiggles all over the place, sometimes over your head, thanks to the fact that the atmosphere behaves like a fluid, complete with waves, eddies, and stalls. It’s been around since the earth first acquired an atmosphere and rotation, somewhere around the beginning of the Book of Genesis. Two spin cycles.

Normal Wash. Using government authority to create public panic regarding climate change, particularly those omitting benefits, in an effort to advance policy. For example, the 2014 National Climate Assessment. Three spin cycles.

Heavy Duty. Government regulations or treaties claiming to save the planet from certain destruction, but which actually accomplish nothing. Can also apply to important UN climate confabs, such as Copenhagen 2009 (or, quite likely, the upcoming 2015 Paris Summit), that are predicted to result in a massive, sweeping, and world-saving new treaty, followed by self-congratulatory back-patting. Four spin cycles.

Permanent Press. Purposefully misleading commentary on science which will hinder actual scientific debate and credibility for generations to come, especially those with negative policy outcomes. Linking extreme weather events to climate change, the perpetually impending demise of the polar bears, the Federal government attempting to convince you to sell your beachfront property before it’s submerged. Five spin cycles.




In State of Michigan et al. v. Environmental Protection Agency, the EPA contends that the costs to reduce and then eliminate mercury from power plant effluent are justified because current emissions are lowering I.Q. scores. The result will be to eliminate all coal-fired generation of electricity, [double entendre ahead] currently around 40 percent of our total electric power.

You remember IQ (“Intelligence Quotient”) tests, right? Oh, well, maybe you don’t, because public schools can’t use them anymore. Whether or not they measure intelligence (whatever that is) or not, not all socioeconomic groups score the same, so they can’t be fair (whatever that means). But they do predict, within certain humongous error ranges, lifetime income—which isn’t fair, either.

Which, means, according to EPA, that power plant emissions of mercury are harming…whom?

So—we can’t make this stuff up, the EPA invented a population of 240,000 nonexistent women who fish day in and day out, in order to feed themselves. We won’t get into the fact that, given the cost of, say, a can of mackerel, these folks are paying themselves far, far below the minimum wage. No, instead, they eat—or should we say gorge—up to 300 pounds of hand-caught freshwater fish per day. And then they go home and do the sort of things that lead to children., whose IQ scores are lowered thanks to the mercury in those fish.

Nevermind that U.S. power plants emit less than 0.7 percent of the total mercury input to the atmosphere each year, or that the total U.S. contribution is a mere two percent, or that East Asia, (mainly China) contributes around 36 percent.  Given that mercury can stay in the atmosphere for weeks before it is deposited on the surface, their contribution to our mercury deposition is huge compared to what comes from our homegrown power plants.

The average IQ score is 100. The measurement error for practical purposes is +/- 5 points (one standard deviation). That means if you score 140, your true score is likely between 135 (“highly intelligent”) and 145 (“genius’), or about the average score of our readers.

Those hard facts weren’t enough to keep the EPA from confidently stating that the average IQ reduction in the hypothetical children of the hypothetical fish-obsessed women will be (drum roll!) 0.00209 IQ points. In other words, the average IQ of these sorry tots will read 99.997, with a real value of between 94.997 and 104.997.

Nowhere did the EPA say that avoiding such an IQ loss could impact future earnings, but they still proceeded to translate the value of 0.00209 IQ points to a value of up to $6,000,000 per year across 240,000 hypothetical kids.

One gets the impression that people who think they can find a needle of precisely 0.00209 IQ points in a haystack of 10.0000, or two-hundreths of one percent of the error range, might not score too high on such a test. Of course, since they are most likely government bureaucrats making around $115K per year, that shows how good IQ tests are, after all.

For “thinking” that we can measure 0.00209 IQ points, and, for that, we will shut down power plants that produce 40 percent of our juice, the inaugural recipient of the Spin Cycle award, the U.S. Environmental Protection Agency, gets five spin cycles, or Permanent Press.

The United States is effectively bankrupt. Economist Laurence Kotlikoff figures the United States faces unfunded liabilities in excess of $200 trillion. Only transforming or eliminating such programs would save the republic.

The Left likes to paint conservatives as radical destroyers of the welfare state. Instead, some on the Right have made peace with expansive government.

Particularly notable is the movement of “reform conservatism,” or the so-called “reformicons” who, noted Reason’s Shikha Dalmia, “have ended up with a mix of old and new liberal ideas that thoroughly scale back the right’s long-running commitment to free markets and limited government.”

The point is not that attempts to improve the functioning of bloated, inefficient programs are bad. But they are inadequate. Yes, government costs too much. Government also does too much.

The worst “reform conservatism” idea is to manipulate the state to support a particular “conservative” vision. For instance, Dalmia points out that some reformicons want to use the state to strengthen institutions which they favor. 

Dalmia noted that Utah’s Sen. Mike Lee has criticized conservatives who “have abandoned words like ‘together,’ ‘compassion,’ and ‘community’.” Although he warned against overreliance on the state, he still wants to use it for his own ends.

Reformicon intellectuals and politicians argue for an expended Earned Income Tax Credit for singles and increased deductions for dependents and tax credits for parents who stay at home. Some reformicons want more taxes on the wealthy, new employee-oriented public transportation, and a preference for borrowing over deficit reduction.

Senators Lee and Marco Rubio have introduced the “Economic Growth and Family Fairness Tax Reform Plan.” It offers some corporate and individual tax reductions but raises the rates on most everyone by lowering tax thresholds. The bill also increases the child credit even for the well-to-do.

Alas, this differs little from liberal social engineering. As Dalmia put it:  “Broad-based, neutral tax cuts to stimulate growth are out, markets are optional tools, the welfare state is cool, redistributive social engineering is the way forward, and class warfare is in.”

Reformicons don’t so much disagree as argue that they can do better than liberals. For instance, Yuval Levin of National Affairs contended that his movement relies on “experimentation and evaluation [and] will keep those programs that work and dump those that fail.”

Politics drives reform conservatism. Henry Olsen of the Ethics and Public Policy Center made a fulsome pitch for conservatives to embrace social benefits for “their” voters. After all, “Many of those working-class voters are located precisely in the two places a Republican presidential candidate needs to carry to win the White House.”

Of course, no one should want policies that don’t work. But that doesn’t address the most important question: is the end itself justified? Efficient income redistribution doesn’t make the process morally right, only less wasteful.

And such measures can create new problems. For instance, author Amity Shlaes and Matthew Denhart of the Calvin Coolidge Presidential Foundation warned the Rubio-Lee plan would generate resentment by pitting individuals against families. It also would sacrifice opportunities to spur economic growth by emphasizing group privileges over rate reductions for all.

Big issues are at stake. The current economic system isn’t working for all. Rubio asked the right question: “How can we get to the point where we’re creating more middle-income and higher-income jobs, and how do we help people acquire the skills they need?”

As I point out in the Freeman:  “However, social engineering, even conservative social engineering, is not the answer. The starting point for job creation remains what it always has been, making it easier to create businesses and jobs.” For most issues, the principal answer will come outside of politics. As Sen. Lee recognized, “Collective action doesn’t only—or even usually—mean government action.”

Some reformicon ideas might make some conservatives appear more presentable to the public. But reform conservatism fails to provide an answer to the most important problems facing America. Government is not just inefficient. It is too big and does too much.

It’s been a nice few weeks for civil liberties in Montana.  On the heels of the nation’s most comprehensive restrictions on police militarization, Montana Governor Steve Bullock (D) has signed a bill reforming civil asset forfeiture in the state.

HB463 requires a criminal conviction before seized property can be forfeited, requires that seized property be shown by “clear and convincing evidence” to be connected to the criminal activity, and bolsters the defenses for innocent owners by shifting the burden of proof to the government.

The effort was spearheaded by State Representative Kelly McCarthy (D), who credited the work of the Institute for Justice and other civil liberties organizations for bringing the abuses of civil asset forfeiture to light.

McCarthy told the Daily Caller News Foundation:

“After looking into Montana laws and working with the Institute for Justice, we found that our laws provided no greater property rights protections than those states who were identified with rampant abuse, (Texas, Kentucky, Pennsylvania, Virginia, etc.).

From that time I began meeting with stakeholders and working on the bill.”

Montana is now the second state in less than a month to heavily restrict state-level civil asset forfeiture, following New Mexico. It must be noted that the Montana reforms are less robust than those that passed in New Mexico last month. 

Unlike the New Mexico law, the Montana law does not restrict law enforcement agencies’ exploitation of federal forfeiture laws that maintain the lower burdens of proof and the civil proceedings that Montana now restricts at the state level. The bill also allows Montana law enforcement to keep the proceeds of their seizures, whereas the New Mexico law requires that such proceeds be deposited into the general fund, thus depriving police of any profit motive for initiating seizures.

That said, the Montana law represents substantial progress for a state that the Institute for Justice labeled “terrible” on civil asset forfeiture, and all those who worked for its passage should be commended for striking a blow in favor of due process and property rights.

That a traditionally red state like Montana with a Democratic governor and a traditionally blue state like New Mexico with a Republican governor have both passed substantial civil asset forfeiture reforms this year is a testament to the bipartisan consensus building around restricting this inherently abusive practice.


What happens when the population of K-12 students grows faster than the government is able to build school buildings? Las Vegas is finding out the hard way:

Las Vegas is back, baby. After getting slammed by the Great Recession, the city today is seeing rising home sales, solid job growth and a record number of visitors in 2014.

But the economic rebound has exacerbated the city’s severe school overcrowding and left school administrators, lawmakers and parents scrambling.

This elementary school was built to serve a maximum of 780 students. Today it serves 1,230 — and enrollment is growing.

Forbuss Elementary is hardly alone. The crowding is so bad here in the Clark County School District that 24 schools will soon run on year-round schedules.

Forbuss already is. One of five sections is always on break to make room. Scores of other schools are on staggered schedules. More than 21,000 Clark County students are taking some online classes, in large part because of space strains. Nearly 700 kids in the district take all of their classes online.

“It’s pretty rough some days. I’m in a small portable with 33 students,” says Sarah Sunnasy. She teaches fifth grade at Bertha Ronzone Elementary School, a high-poverty school that is nearly 90 percent over capacity. “We tend to run into each other a lot. Trying to meet individual needs when you have that many kids with such a wide range of ability levels is hard. We do the best we can with what we have,” she says.

At Forbuss Elementary there are 16 trailer classrooms — the school prefers the term “portables” — parked in the outdoor recess area, eating away at playground space.

There’s also a “portable” bathroom and portable lunchroom. “It’s warmer in the big school,” a little girl tells me. “These get cold in winter.”

“You have to make do,” says Principal Shawn Paquette. “You get creative.”

“Our school is so overcrowded, that, you know, everybody’s gotta pitch in,” says school support staffer Ruby Crabtree. “We don’t have enough people.”

The Nevada legislature recently approved funding to build new schools and renovate old ones, but as NPR notes, the “handful of new schools won’t be finished for at least two years.” In that time, the Las Vegas school district is expected to experience 1 percent enrollment growth, or about 3,000 to 4,000 students, so the district will need “at least two more elementary schools every year.”

Instead of herding children into crowded trailers “portables,” Nevada should consider giving students and their families the option of attending private schools. As education policy guru Matthew Ladner has pointed out repeatedly, school choice programs can serve as a pressure release valve in areas experiencing rapid growth–particularly where the elderly population is also growing, further straining public resources:

The 76,000,000 strong Baby Boom generation is already moving into retirement. Every day between now and the year 2030, 10,000 Americans reach retirement age. Every state will be much older than today, and the vast majority of states will have a larger portion of elderly than Florida has today – some much larger. 

As the Baby Boomers retire, many will also be sending their grandchildren off to school. The Census Bureau projects many states will face a simultaneous increase in school-aged and elderly populations. A fierce battle between advocates of public spending on health and public education looms. If economists have correctly described the relationship between age demography and economic growth, tax dollars may prove scarce, exacerbating the problem.

Let’s be clear about the improvement needed: in anticipation of the crisis ahead, we need a system of vastly improved learning outcomes at a lower overall cost per student. In other words we need to improve both the academic and cost effectiveness of our education delivery system.

Fortunately, we already know how to improve learning outcomes at a lower cost per student: school choice.

Last month, Nevada adopted a scholarship tax credit law, but sadly the available credits are so limited that the law will barely relieve any pressure at all. As I explained recently:

The total amount of tax credits available is limited to only $5 million in the first year, or about 0.14 percent of statewide district school expenditures. Following Arizona, Florida, and New Hampshire, Nevada lawmakers wisely included an “escalator clause” allowing the total amount of credits to grow by 10 percent each year. However, assuming an average scholarship of $5,000 (significantly lower than the law allows), there would only be sufficient funds for 1,000 students in the first year, which is the equivalent of about 0.2 percent of statewide district school enrollment. Even with the escalator clause, very few students will be able to receive scholarships without the legislature expanding the available credits.

This year, Nevada let the school choice camel get its nose whisker under the tent, but policymakers shouldn’t rely on the escalator clause alone for growth. Students crammed into overcrowded district schools need alternatives now. Kids who happen to be assigned to an overcrowded Las Vegas district school shouldn’t have to stay in that school.

The BBC reports that Nancie Atwell of Maine has just won the million dollar “Global Teacher Prize.” Congratulations Ms. Atwell! On the rare occasions such prizes are doled out, the reaction is universally celebratory. But is there really only one teacher in the world worth $1,000,000–and even then only once in a lifetime?

Here’s a radical thought: What if we organized education such that the top teachers could routinely make large sums of money “the old-fashioned way” (i.e., by earning it in a free and open marketplace)? In other fields, the people and institutions that best meet our needs attract more customers and thereby earn greater profits. Why have we structured our economy such that the best cell phone innovators can become rich, but not the best teachers? This seems not only deeply unfair but unwise as well.

Perhaps some people don’t believe it would be possible for educators to become wealthy in an open marketplace. Their negativity is contradicted by reality. In one of the few places where instruction is organized as a marketplace activity, Korea’s tutoring sector, one of the top tutors (Kim Ki-Hoon) has earned millions of dollars per year over the last decade. His secret: offering recorded lessons over the Internet at a reasonable price, and attracting over a hundred thousand students each year. His employment contract with his tutoring firm ensures that he receives a portion of the revenue he brings in–so even though his fees are reasonable, his earnings are large due to the vast number of students he reaches. And his success depends on his performance. In an interview with Amanda Ripley he observed: “The harder I work, the more I make…. I like that.” Is there any reason we shouldn’t like that, too?

As Ripley reports, this tutoring marketplace receives favorable reviews from students:

In a 2010 survey of 6,600 students at 116 high schools conducted by the Korean Educational Development Institute, Korean teenagers gave their hagwon [i.e., private tutoring] teachers higher scores across the board than their regular schoolteachers: Hagwon teachers were better prepared, more devoted to teaching and more respectful of students’ opinions, the teenagers said. Interestingly, the hagwon teachers rated best of all when it came to treating all students fairly, regardless of the students’ academic performance.

That is not to say that the Korean education system is without flaw. Indeed, the government-mandated college entrance testing system creates enormous pressure on students and skews families’ demands toward doing well on “the test,” rather than on fulfilling broader educational goals. This, of course, is not caused by the marketplace, but rather by the government mandate. The marketplace simply responds to families’ demands, whatever they happen to be. While many hagwons prepare students for the mandated college-entrance exam, there are also those teaching such things as swimming or calligraphy.

If we liberate educators, educational entrepreneurship will thrive. There are policies already in place in some states that could ensure universal access to such an educational marketplace.

In his groundbreaking work, Denationalisation of Money: the Argument Refined, F.A. Hayek proposed that open competition among private suppliers of irredeemable monies would favor the survival of those monies that earned a reputation for possessing a relatively stable purchasing power.

One of the main problems with Bitcoin has been its tremendous price instability: its volatility is about an order of magnitude greater than that of traditional financial assets, and this price instability is a serious deterrent to Bitcoin’s more widespread adoption as currency. So is there anything that can be done about this problem?

Let’s go back to basics. A key feature of the Bitcoin protocol is that the supply of bitcoins grows at a predetermined rate.1 The Bitcoin price then depends on the demand for bitcoins: the higher the demand, the higher the price; the more volatile the demand, the more volatile the price. The fixed supply schedule also introduces a strong speculative element. To quote Robert Sams (2014: 1):

If a cryptocurrency system aims to be a general medium-of-exchange, deterministic coin supply is a bug rather than a feature… . Deterministic money supply combined with uncertain future money demand conspire to make the market price of a bitcoin a sort of prediction market [based] on its own future adoption.

To put it another way, the current price is indicative of expected future demand. Sams continues:

The problem is that high levels of volatility deter people from using coin as a medium of exchange [and] it might be conjectured that deterministic money supply rules are self-defeating.

One way to reduce such volatility is to introduce a feedback rule that adjusts supply in response to changes in demand. Such a rule could help reduce speculative demand and potentially lead to a cryptocurrency with a stable price.

Let’s consider a cryptocurrency that I shall call “coins,” which we can think of as a Bitcoin-type cryptocurrency but with an elastic supply schedule. Following Sams, if we are to stabilize its price, we want a supply rule that ensures that if the price rises (falls) by X% over some period, then the supply increases (decreases) by X% to return the price back toward its initial or target value. Suppose we measure a period as the length of time needed to validate n transactions blocks. For example, a period might be a day; if takes approximately 10 minutes to validate each transactions block, as under the Bitcoin protocol, then the period would be the length of time needed to validate 144 transactions blocks. Sams posits the following supply rule:

(1a) Qt=Q(t-1)(Pt/P(t-1)),

(1b) ΔQt=Qt-Q(t-1).

Here Pt is the coin price, Qt is the coin supply at the end of period t, and ∆Qt is the change in the coin supply over period t. There is a question as to how Pt is defined, but following Ferdinando Ametrano (2014a), let’s assume that Pt is defined in USD and that the target is Pt=$1. This assumed target provides a convenient starting point, and we can generalize it later to look at other price targets, such as those involving price indices. Indeed, we can also generalize it to targets specified in terms of other indices such as NGDP.

Another issue is how the change in coin supply (∆Qt) is distributed. The point to note here is that there will be occasions when the coin supply needs to be reduced, and others when it needs to be raised, depending on whether the coin price has fallen or risen over the preceding period.

Ametrano proposes an elegant solution to this distribution problem, which he calls ‘Hayek Money.’ At the end of each period, the system should automatically reset the price back to the target value and simultaneously adjust the number of coins in each wallet by a factor of Pt/P(t-1). Instead of having k coins in a wallet that each increase or decrease in value by a factor of Pt/P(t-1), a wallet holder would thus have k×Pt/P(t-1), coins in their wallet, but the value of each coin would be the same at the end of each period.

This proposal would stabilize the coin price and achieve a stable unit of account. However, it would make no difference to the store of value performance of the currency: the value of the wallet would be just as volatile as it was before. To deal with this problem, both Ametrano (2014b) and Sams propose improvements based on an idea they call ‘Seigniorage Shares.’ These involve two types of claims on the system—coins and shares, with the latter used to support the price of the former via swaps of one for the other. Similar schemes have been proposed by Buterin (2014a),2 Morini (2014),3 and Iwamura et al. (2014), but I focus here on Seigniorage Shares as all these schemes are fairly similar.

The most straightforward version of Seigniorage Shares is that of Sams, and under my interpretation, this scheme would work as follows. If ∆Qt is positive and new coins have to be created in the t-th period, Sams would have a coin auction 4 in which ∆Qt coins would be created and swapped for shares, which would then be digitally destroyed by putting them into a burning blockchain wallet from which they could never be removed. Conversely, if ∆Qt is negative, existing coins would be swapped for newly created shares, and the coins taken in would be digitally destroyed.

At the margin, and so long as there is no major shock, the system should work beautifully. After some periods, new coins would be created; after other periods, existing coins would be destroyed. But either way, at the end of each period, the Ametrano-style coin quantity adjustments would push the price of coins back to the target value of $1.

Rational expectations would then come into play to stabilize the price of coins during each period. If the price of coins were to go below $1 during any such period, it would be profitable to take a bullish position in coins, go long, and profit when the quantity adjustments at the end of the period pushed the price back up to $1. Conversely, if the price of coins were to go above $1 during that period, then it would be profitable to take a bear position and sell or short coins to reap a profit at the end of that period, when the quantity adjustments would push the price back down to $1.

These self-fulfilling speculative forces, driven by rational expectations, would ensure that the price during each period would never deviate much from $1. They would also mean that the length of the period is not a critical parameter in the system. Doubling or halving the length of the period would make little difference to how the system would operate. One can also imagine that the period might be very short—even as short as the period needed to validate a single transactions block, which is less than a minute. In such a case, very frequent rebasings would ensure almost continuous stability of the coin price.

The take-home message here is that a well-designed cryptocurrency system can achieve its price-pegging target—provided that there is no major shock.


Ametrano, F.A. “Hayek Money: The Cryptocurrency Price Stability Solution.” August 19, 2014. (a)

Ametrano, F. M “Price Stability Using Cryptocurrency Seigniorage Shares.” August 23 2014. (b)

Buterin, V. “The Search for a Stable Cryptocurrency.” November 11, 2014. (a)

Buterin, V. “SchellingCoin: A Minimal-Trust Universal Data Feed.” March 28, 2014. (b)

Iwamura, M., Kitamura, Y., Matsumoto, T., and Saito, K. “Can We Stabilize the Price of a Cryptocurrency? Understanding the Design of Bitcoin and Its Potential to Compete with Central Bank Money.” October 25, 2014.

Morini, M. “Inv/Sav Wallets and the Role of Financial Intermediaries in a Digital Currency.” July 21, 2014.

Sams, R. “A Note on Cryptocurrency Stabilisation: Seigniorage Shares.” November 8, 2014.

[1] Strictly speaking, the supply of bitcoins is only deterministic when measured in block-time intervals. Measured in real time, there is a (typically) small randomness in how long it takes to validate each block. However, the impact of this randomness is negligible, especially over the longer term where the law of large numbers also comes into play.

[2] Buterin (2014b) examines three schemes that seek to stabilize the cryptocurrency price: BitAsset, the SchellingCoin (first proposed by Buterin (2014b)) and Seigniorage Shares. He concludes that each of these is vulnerable to fragility problems similar to those to be discussed in my next post.

[3] In the Morini system, participants would have a choice of Inv and Sav wallets, the former for investors in coins and the other for savers who want coin-price security. The Sav wallets would be protected by the Inv wallets, and participants could choose a mix of the two to meet their risk-aversion preferences.

[4] In fact, Sams’ auction is unnecessarily complicated and not even necessary. Since shares and coins would have well-defined market values under his system, it would suffice merely to have a rule to swap them as appropriate at going market prices without any need to specify an auction mechanism.

[Cross-posted from]

Free speech has been in the news a lot recently. And lately it seems that we’ve had an unusually vigorous crop of utility monsters - the sort of professional complainers whose feelings are all too easily bruised, and who therefore demand that the rights of others be curtailed. 

In a climate like this, it’s important to distinguish the true heroes of free speech from the false ones. The latter are all too common. The key question to ask of public figures is simple: If you had all the power, how would you treat your opponents?

Meet Dutch politician Geert Wilders. He was a guest of honor at the recent Garland, Texas exhibition of cartoons of Mohammed, where two would-be terrorists armed with assault weapons were gunned down by a single heroic security guard armed only with a pistol. (Nice shooting, by the way.)

Wilders is now being hailed as a free-speech hero, at least in some circles. Unfortunately, he’s nothing of the kind. Besides criticizing Islam, Wilders has also repeatedly called for banning the Koran. The former is compatible with the principle of free speech. The latter is not.

A key move here is to distinguish the exercise of free speech from the principled defense of free speech. The two are not the same, as my colleague Adam Bates has ably pointed out.

Exercises of free speech can be completely one-sided. As an example, here’s me exercising my free speech: I happen to think Islam is a false religion. I have no belief whatsoever that Mohammed’s prophecies are true. They’re not even all that interesting. I mean, if you think the Bible is dull…well…have I got a book for you. I speak only for myself here, but I disagree with Islam. (And probably with your religion, too, because I’m a skeptic about all of them.) My saying so is an exercise of free speech. 

Defenses of free speech are different. Properly speaking, they must not be one-sided. A principled defense of free speech means giving your opponents in any particular issue the exact same rights that you would claim for yourself: If you would offend them with words, then they must be allowed to offend you with words, too. Say what you like about them, and they must be allowed to say what they like about you. 

No, we’re not all going to agree. And that’s actually the point: Given that agreement on so many issues is simply impossible in our modern, interconnected world, how shall we proceed? With violence and repression? Or with toleration, even for views that we find reprehensible? 

If you had all the power, how would you treat your opponents?

Mismanagement within the Department of Veterans Affairs (VA) is chronic. The agency mismanages its projects and its patients. Last year’s scandal at the Phoenix VA centered on allegations that veterans waited months for treatment while never being added to the official waiting lists. The VA Secretary resigned and the agency focused on changing course. New reports suggest that agency reforms still have a long way to go.

A congresswoman at a recent congressional hearing described the VA as having a “culture of retaliation and intimidation.” Employees who raise concerns about agency missteps are punished. The U.S. Office of Special Counsel (OSC), which manages federal employee whistleblower complaints, reported that it receives twice as complaints from VA employees than from Pentagon employees, even though the Pentagon has double the staff. Forty percent of OSC claims in 2015 have come from VA employees, compared to 20 percent in 2009, 2010, and 2011.

During the hearing, a VA surgeon testified about the retaliation he faced following his attempts to highlight a coworker’s timecard fraud. From July 2014 until March 2015, his supervisors revoked his operating privileges, criticized him in front of other employees, and relocated his office to a dirty closet before demoting him from Chief of Staff.

Another physician was suspended from his job shortly after alerting supervisors to mishandled lab specimens. A week’s worth of samples were lost. Several months later, he reported another instance of specimen mishandling and his office was searched. He became a target of immense criticism.

In addition to these sorts of cases, Carolyn Lerner, head of OSC, told Congress that in some cases a whistleblower’s own VA medical records are illegally accessed in order to discredit them.  

One VA whistleblower claims that his VA medical records were accessed “by a dozen different people from October 28, 2014 to March 10, 2015.” Apparently, other employees were trying to retaliate against him because he attempted to flag the VA’s mishandling of suicidal patients at the Phoenix facility. His only treatment during this time period was to purchase a new pair of glasses.

These stories paint a dark picture of the VA system. A VA neurologist said, “the story of VA is a story of two different organizations; there is the VA that takes care of veterans, and there is the VA that takes care of itself.”

Congress and the VA should try to clean up these messes. Veterans’ health care needs improvement, and employees should be free to highlight these issues without the fear of retribution.

Is the problem with Baltimore’s district schools a lack of funds?

The Daily Show’s Jon Stewart argued as much during a recent interview with ABC’s George Stephanopoulos:

“If we are spending a trillion dollars to rebuild Afghanistan’s schools, we can’t, you know, put a little taste Baltimore’s way. It’s crazy.”

However, under even cursory scrutiny, Stewart’s claim falls apart like a Lego Super Star Destroyer dropped from ten feet. As economist Alex Tabarrok explained:

Let’s forget the off-the-cuff comparison to Afghanistan, however, and focus on a more relevant comparison. Is it true, as Stewart suggests, that Baltimore schools are underfunded relative to other American schools? The National Center for Education Statistics reports the following data on Baltimore City Public Schools and Fairfax County Public Schools, the latter considered among the best school districts in the entire country:

Baltimore schools spend 27% more than Fairfax County schools per student and a majority of the money comes not from the city but from the state and federal government. Thus, when it comes to education spending, Baltimore has not been ignored but is a recipient of significant federal and state aid.

Clearly, as Tabarrok shows, Baltimore’s schools are not lacking for funds. According to the most recent NCES data, the national average district school per-pupil expenditure was about $12,000 in 2010-11, which is about $12,500 in 2015 dollars.

However, one could object to Tabarrok’s comparison: perhaps it’s simply more expensive to educate low-income students in Baltimore than the generally well-off students in Fairfax County. To see if money really makes a difference, we would need an apples-to-apples comparison.

One way to test the “more money equals better results” assumption is to see look at the funding changes across different states to see if there is any correlation between increased funding and improved results. In 2012, researchers from Harvard, Stanford, and the University of Munich released a report on international and state trends in student achievement that addressed this very question, finding that “Just about as many high-spending states showed relatively small gains as showed large ones…. And many states defied the theory [that spending drives performance] by showing gains even when they did not commit much in the way of additional resources.” They concluded:

It is true that on average, an additional $1,000 in per-pupil spending is associated with an annual gain in achievement of one-tenth of 1 percent of a standard deviation. But that trivial amount is of no statistical or substantive significance.


In other words, there’s no good reason to believe that Baltimore’s district schools would improve if the government followed Stewart’s advice and gave them a lot more money. In fact, the federal government already tried that. Due to stimulus funds, federal spending on Baltimore city schools increased from about $143 million in 2009 to a high of $265 million in 2011, before declining to about $150 million in 2014.

Source: Baltimore City Public Schools, Adopted Operating Budget, Fiscal Year 2014, page 12.

So how did Baltimore city school students perform on the state’s standardized test over that time period? About the same, and perhaps slightly worse:

Source: Maryland State Department of Education, 2014 Maryland Report Card.

Nearby Washington, D.C. already spends significantly more on its district schools. According to the most recent U.S. Census Bureau data, the D.C. district schools spent $1.2 billion in FY2012 [Table 1] on 44,618 students [Table 19], or about $26,660 per pupil. That’s down from the nearly $30,000 spent per pupil in FY2010, yet D.C.’s district schools still rank among the worst in the nation. By contrast, the D.C. Opportunity Scholarship Program spends less than one third as much per pupil yet, according to a random-assignment study by the U.S. Department of Education, it produces slightly better academic results and a significantly higher graduation rate (82 percent for students offered a voucher, compared to 70 percent in the control group). Other gold standard studies on school choice programs have found a positive impact on student achievement as well.

What Baltimore needs is not more money, but more choice.

Roger Milliken, head of the South Carolina textile firm Milliken & Co. for more than 50 years, was one of the most important benefactors of modern conservatism. He was active in the Goldwater campaign, and was a founder and funder of National Review and the Heritage Foundation. He dabbled in libertarianism, too. He was a board member of the Foundation for Economic Education and supported the legendary anarchist-libertarian speaker Robert LeFevre, sending his executives to LeFevre’s classes.

But he parted company with his free-market friends on one issue: free trade. Starting in the 1980s, when Americans started buying a lot of textile imports, he hated it. As the Wall Street Journal reports today,

Milliken & Co., one of the largest U.S. textile makers, has been on the front lines of nearly every recent battle to defeat free-trade legislation. It has financed activists, backed like-minded lawmakers and helped build a coalition of right and left-wing opponents of free trade….

“Roger Milliken was likely the largest single investor in the anti-trade movement for many years—as though no amount of money was too much,” said former Clinton administration U.S. Trade Representative Charlene Barshefsky, who battled with him and his allies….

Mr. Milliken, a Republican, invited anti-free-trade activists of all stripes to dinners on Capitol Hill. The coalition was secretive about their meetings, dubbing themselves the No-Name Coalition.

Several people who attended the dinners, which continued through the mid-2000s, recall how International Ladies’ Garment Workers Union lobbyist Evelyn Dubrow, a firebrand four years younger than the elderly Mr. Milliken, would greet the textile boss, who fought to keep unions out of his factories, with a kiss on the cheek.

“He had this uncanny convening power,” says Lori Wallach, an anti-free-trade activist who works for Public Citizen, a group that lobbies on consumer issues. “He could assemble people who would otherwise turn into salt if they were in the same room.”…

“He was just about the only genuinely big money that was active in funding trade-policy critics,” says Alan Tonelson, a former senior researcher at the educational arm of the U.S. Business and Industry Council, a group that opposed trade pacts.

But the world has changed, and so has Milliken & Co. Roger Milliken died in 2010, at age 95 still the chairman of the company his grandfather founded. His chosen successor, Joseph Salley, wants Milliken to be part of the global economy. He has ended the company’s support for protectionism and slashed its lobbying budget. And as the Journal reports, Milliken’s executives are urging Congress to support fast-track authority for President Obama.

American businesses are going global:

But as business becomes more international, American industries that once pushed for protection—apparel, automobiles, semiconductors and tires—now rarely do so. The U.S. Fashion Industry Association, an apparel trade group that wants to reduce tariffs, says that half the brands and retailers it surveyed last year used between six and 20 countries for production. Only two of the eight members of the main U.S. tire-industry trade group, the Rubber Manufacturers Association, even have their headquarters in the U.S….

“There’s a new generation of CEOs,” says Dartmouth College economic historian Douglas Irwin.“It’s part of their DNA that they operate in an international environment.”…

While Mr. Milliken saw China is a major threat to the industry—he said in 1999 he was “outraged, totally outraged” by Congress clearing the way for China’s entrance into the WTO—his successor sees the company’s future there. Milliken opened an industrial-carpet factory near Shanghai in 2007. It has a research-and-development center there and a laboratory stuffed with machinery where Chinese customers can check out the latest additive for strengthening or coloring synthetics.

Globalization is bringing billions of people into the world economy and into prosperity. Even in South Carolina.

The OECD has just released a report offering “its perspective” on Sweden’s academic decline. Its perspective is too narrow. In launching the new report, OECD education head Andres Schleicher declared that “It was in the early 2000s that the Swedish school system somehow seems to have lost its soul.” The OECD administers the international PISA test, which began in the year 2000.

Certainly Sweden’s academic performance has fallen since the early 2000s, but its decline was substantially faster in the preceding decade. PISA cannot shed light on this, but TIMSS—an alternative international test—can, having been introduced several years earlier. On the 8th grade mathematics portion of TIMSS, Sweden’s rate of decline between 1995 and 2003 was over five points per year. Between 2003 and 2011 it was less than two points per year. Still regrettable, but less grievously so.

Why is this timing important? Because Sweden introduced a nationwide public/private school choice program in 1992 and many critics blame that program for Sweden’s decline. This charge is hopelessly anachronistic. In 2003, at the end of the worst phase of the nation’s academic decline, public schools still enrolled 96% of students. Hence it must have been declining public school performance that brought down the national average. A 4% private sector could have had little effect.

What then can explain the country’s disappointing results?  Gabriel Sahlgren has some intriguing suggestions in a recent piece analyzing trends in Finland, Sweden, and Norway. For instance:

Something extreme clearly happened in Sweden in the mid-to-late 1990s, most probably due to the 1994 national curriculum that emphasised pupil-led methods, which decreased teacher-led instruction. [emphasis added]

If you happened to miss it last week, go catch Bill Keller’s extraordinary Marshall Project interview with David Simon, former Baltimore Sun reporter, creator of the crime drama “The Wire,” and longtime Drug War critic. A few highlights:

I guess there’s an awful lot to understand and I’m not sure I understand all of it. The part that seems systemic and connected is that the drug war — which Baltimore waged as aggressively as any American city — was transforming in terms of police/community relations, in terms of trust, particularly between the black community and the police department. Probable cause was destroyed by the drug war. …

Probable cause from a Baltimore police officer has always been a tenuous thing. It’s a tenuous thing anywhere, but in Baltimore, in these high crime, heavily policed areas, it was even worse. When I came on, there were jokes about, “You know what probable cause is on Edmondson Avenue? You roll by in your radio car and the guy looks at you for two seconds too long.” Probable cause was whatever you thought you could safely lie about when you got into district court.

Then at some point when cocaine hit and the city lost control of a lot of corners and the violence was ratcheted up, there was a real panic on the part of the government. And they basically decided that even that loose idea of what the Fourth Amendment was supposed to mean on a street level, even that was too much. Now all bets were off. Now you didn’t even need probable cause. The city council actually passed an ordinance that declared a certain amount of real estate to be drug-free zones. They literally declared maybe a quarter to a third of inner city Baltimore off-limits to its residents, and said that if you were loitering in those areas you were subject to arrest and search. Think about that for a moment: It was a permission for the police to become truly random and arbitrary and to clear streets any way they damn well wanted.

Former mayor (and later governor and presidential candidate) Martin O’Malley instituted a mass arrest policy made possible by the ready availability of humbles:

A humble is a cheap, inconsequential arrest that nonetheless gives the guy a night or two in jail before he sees a court commissioner. You can arrest people on “failure to obey,” it’s a humble. Loitering is a humble. These things were used by police officers going back to the ‘60s in Baltimore. It’s the ultimate recourse for a cop who doesn’t like somebody who’s looking at him the wrong way. And yet, back in the day, there was, I think, more of a code to it. If you were on a corner, you knew certain things would catch you a humble.  

“The drug war gives everybody permission to do anything.” One way Simon noticed things changing was that his own film crew members kept getting picked up:

…anybody who was slow to clear the sidewalk or who stayed seated on their front stoop for too long when an officer tried to roust them. Schoolteachers, Johns Hopkins employees, film crew people, kids, retirees, everybody went to the city jail. If you think I’m exaggerating look it up.

Under pressure from O’Malley to portray a crime reduction miracle, the BPD cooked its books to undercount serious crimes like rape and armed robbery while also going back to inflate crime numbers in previous years so as to simulate a bigger drop for which to take credit. Even as the arrest mill hummed, clearance rates for offenses like murder and aggravated assault were plummeting, the prolonged footwork needed to solve these crimes affording ambitious cops relatively few opportunities for overtime or advancement.

Meanwhile, the informal but understood street policing “code” was decaying. Under the old code, for example, “the rough ride [in the back of the van] was reserved for the guys who fought the police,” which Freddie Gray did not do, witnesses say.  The Baltimore Sun’s investigation of police misconduct payouts is frightening not so much because it shows patterns of abuse but because of its lack of patterns: “anyone and everyone” can wind up brutalized.

Policing in Baltimore may actually have bounced back from its low point, if Simon is correct, not only because newer police administrators are trying to refocus on serious crime rather than arrest numbers, but – crucially – because the public is now able to film the police: “The smartphone with its small, digital camera, is a revolution in civil liberties.” 

There is much more, in rich detail: which insults cops will informally shrug off, and which they won’t; why replacing white with African-American officers didn’t fix things; how the nightmare ends (“end the drug war”: it would help even if D.A.s just stopped paying cops overtime for penny-ante drug arrests.)  Read the whole thing.


When banks are in distress, it is important to assess how easily the bank’s capital cushion can absorb potential losses from troubled assets. To do this, I performed an analysis using Texas Ratios for Greece’s four largest banks, which control 88% of total assets in the banking system.

We use a little known, but very useful formula to determine the health of the Big Four. It is called the Texas Ratio. It was used during the U.S. Savings and Loan Crisis, which was centered in Texas. The Texas Ratio is the book value of all non-performing assets divided by equity capital plus loan loss reserves. Only tangible equity capital is included in the denominator. Intangible capital — like goodwill — is excluded.

Despite the already worry-some numbers, the actual situation is far worse than even I had initially deduced. A deeper analysis of the numbers reveals that Greece’s largest banks include deferred tax assets as part of total equity in their financial statements. Deferred tax assets are created when banks are allowed to declare their losses at a later time, thereby reducing tax liabilities. This is problematic because these deferred tax assets are really just “phantom assets” in the sense that these credits cannot be used (read: worthless) if the Greek banks continue to operate at a pretax loss.

Similar to its neighbors — Portugal, Spain and Italy —Greece provides significant state support to its banks by offering credit for loss deductions for taxable future profits. For the four largest banks, this type of support made up 38-61% of total equity (see accompanying chart).

Adjusting the Texas Ratio to account for the phantom assets yields much higher ratios. These indicate significantly higher risk of bank failures, barring a capital injection (see the accompanying chart).

The federal government runs more than 2,300 subsidy programs. One of the problems created by the armada of hand-outs is that many programs work at cross-purposes.

Government information programs urge women to breastfeed. This website says, “the cells, hormones, and antibodies in breastmilk protect babies from illness. This protection is unique and changes to meet your baby’s needs.” Breastfeeding, the government says, may protect babies against asthma, leukemia, obesity, ear infections, eczema, diarrhea, vomiting, lower respiratory infections, necrotizing enterocolitis, sudden infant death syndrome, and diabetes. 

The alternative to breastfeeding is baby formula. Some moms need to use formula, but you would think given the superiority of breastmilk that the government would not want to encourage formula. But that is exactly what the government does with the Women, Infants, and Children (WIC) program. According to the Wall Street Journal, the “largest single expense” in the $6 billion program is subsidies for formula. If you subsidize something, you get more of it. And, presumably, more formula means less breastmilk.

The government and probably every pediatrician tell moms to breastfeed if they can, yet the government provides huge subsidies for the alternative. “Huge” seems to be the correct word. The WSJ says that WIC provides benefits to the moms of half of all babies in the nation, and the program “accounts for well over half of all infant formula sold in the U.S.” That is remarkable.

Obviously then, ending WIC subsidies for formula would be a good way to trim the bloated federal budget. Another way to trim the budget would be to cut off people on WIC who earn more than the federal income limits, which is the focus of the WSJ article.

So WIC would be a good target for reforms by Republicans, who often rail against bloated spending and promise to eliminate deficits. Alas, rather than a take-charge reform agenda on WIC from the GOP, the WSJ captures just a quiet whimper:

“The focus will remain on preserving the intent of these programs, which is to ensure low-income children—and, in this case, mothers and infants in need—receive supplemental assistance to help protect against inadequate nutrition,” said Senate Agriculture Committee Chairman Pat Roberts (R., Kan.), who has a lead role in renewing the WIC law.

In March, we detailed reforms announced by Attorney General Eric Holder to federal asset forfeitures under the Bank Secrecy Act’s “structuring” law.  Those changes mirror an earlier policy shift by the Internal Revenue Service.  Unfortunately for some, those changes were not made retroactive, meaning people whose property was seized before the announcements in a way that would violate the new policies did not automatically have their property returned.

Lyndon McLellan, the owner of a North Carolina convenience store, has not been charged with a crime.  He has, however, had his entire business account totaling $107,702.66, seized by the federal government.  As Mr. McLellan attempts to recover his money, he is now being represented by the Institute for Justice, which issued this release:

“This case demonstrates that the federal government’s recent reforms are riddled with loopholes and exceptions and fundamentally fail to protect Americans’ basic rights,” said Institute for Justice Attorney Robert Everett Johnson, who represents Lyndon. “No American should have his property taken by the government without first being convicted of a crime.”

In February 2015, during a hearing before the U.S. House of Representatives Ways & Means Oversight Subcommittee, North Carolina Congressman George Holding told IRS Commissioner John Koskinen that he had reviewed Lyndon’s case—without specifically naming it—and that there was no allegation of the kind of illegal activity required by the IRS’s new policy. The IRS Commissioner responded, “If that case exists, then it’s not following the policy.”

The government’s response to the notoriety Mr. McLellan’s case has received was nothing short of threatening.  After the hearing, Assistant U.S. Attorney Steven West wrote to Mr. McLellan’s attorney:

Whoever made [the case file] public may serve their own interest but will not help this particular case. Your client needs to resolve this or litigate it. But publicity about it doesn’t help. It just ratchets up feelings in the agency. My offer is to return 50% of the money. 

What “feelings in the agency” could possibly be “ratchet[ed] up” by highlighting a case in which the owner is accused of no wrongdoing while both the Department of Justice and the Internal Revenue Service have announced reforms to prevent these seizures from occurring?

Perhaps the government is sensitive to the avalanche of negative press that civil asset forfeiture has received over the past several years (thanks to the tireless efforts of organizations like the Institute for Justice and the ACLU).  Perhaps the government feels that the game is nearly up, after dozens of publicized cases of civil asset forfeiture abuse.

Cases like this show that the executive branch, now under a new Attorney General who has her own controversial civil forfeiture history, cannot be trusted to stay its own hand.  State and federal legislators must take the initiative, as some already have, if this abusive practice is going to end.

When Prime Minister Shinzo Abe visited Washington he brought plans for a more expansive international role for his country. But the military burden of defending Japan will continue to fall disproportionately on America.

As occupying power, the U.S. imposed the “peace constitution” on Tokyo, with Article Nine banning possession of a military. As the Cold War developed, however, Washington recognized that a rearmed Japan could play an important security role.

However, Japan’s governments hid between the amendment to cap military outlays and limit the Self-Defense Forces’ role, ensuring American protection. That approach also suited Tokyo’s neighbors, which had suffered under Imperial Japan’s brutal occupation.

In recent years Japanese sentiment has shifted toward a more vigorous role out of fear of North Korea and China. This changing environment generated new bilateral defense “guidelines.”

Yet the focus is Japanese, not American security. In essence, the new standards affirm what should have been obvious all along—Japan will help America defend Japan. In contrast, there is nothing about Tokyo supporting U.S. defense other than as part of “cooperation for regional and global peace and security.”

This approach was evident in the Prime Minister Abe’s speech to Congress, when he emphasized that Tokyo’s responsibility is to “fortify the U.S.-Japan alliance.” He said Japan would “take yet more responsibility for the peace and stability in the world,” but as examples mostly cited humanitarian and peace-keeping operations.

Worse, Japan’s military outlays were essentially flat over the last decade while Washington, and more ominously for Japan, the People’s Republic of China, dramatically increased military expenditures. The U.S. is expected to fill the widening gap.

Obviously Tokyo sees its job is non-combat, relatively costless and riskless social work which will enhance Tokyo’s international reputation. Even Tokyo’s potential new “security” duties appear designed to avoid combat—cyber warfare, reconnaissance, mine-sweeping, logistics.

As I point out in Forbes, “Washington’s job is to do anything bloody or messy. That is, deter and fight wars with other militaries, a task which the prime minister ignored. Indeed, the U.S. is expected to do even more to defend Japan, deploying new military equipment, for instance.”

While America has an obvious interest in Japan’s continued independence, no one imagines a Chinese attempt to conquer Tokyo. Rather, the most likely trigger for conflict today is the Senkaku Islands, a half dozen valueless pieces of rock. Abe so far has preferred confrontation to compromise—a stance reinforced by Washington’s guarantee.

Abe’s historical revisionism further inflames regional tensions. Abe addressed the historical controversy in his speech to Congress but more remains to be done.

U.S. officials appear to have forgotten the purpose of alliances. Abe was eloquent in stating why Japan enjoyed being allied with America. It isn’t evident what the U.S. receives in return.

After World War II the U.S. sensibly shielded allied states from totalitarian assault as they recovered. That policy succeeded decades ago. Now Washington should cede responsibility for defending its populous and prosperous allies.

America should remain a watchful and wary friend, prepared to act from afar against potentially hostile hegemonic threats. In the meantime Washington should let other states manage day-to-day disputes and controversies.

The U.S. should not tell Tokyo what to do. Rather, Washington should explain what it will not do. No promise of war on Japan’s behalf, no forward military deployment, no guarantee for Japanese commerce at sea, no Pentagon backing for contested territorial claims.

This would force the Japanese people to debate their security needs, set priorities, and pay the cost. Moreover, Tokyo would have added incentive to improve its relationships with neighboring states.

After 70 years the U.S. should stop playing globocop, especially in regions where powerful, democratic friends such as Japan can do so much more to defend themselves and their neighborhoods. This would be the best way to enhance security and stability not only of the Asia-Pacific but also of America, which is Washington’s highest responsibility.

Last week, the Department of Justice (DOJ) announced a $20 million police body camera pilot funding scheme to assist law enforcement agencies in developing body camera programs. In the wake of the killings of Michael Brown, Walter Scott, and Freddie Gray there has been renewed debate on police accountability. Unsurprisingly, body cameras feature heavily in this debate. Yet, despite the benefits of police body cameras, we ought to be wary of federal top-down body camera funding programs, which have been supported across the political spectrum.

The $20 million program is part of a three-year $75 million police body camera initiative, which was announced by the Obama administration shortly after the news that Darren Wilson, the officer who shot and killed Michael Brown in Ferguson, Missouri, would not be indicted. It is undoubtedly the case that if Wilson had been wearing a body camera that there would be fewer questions about the events leading up to and including his killing of Brown. And, while there are questions about the extent to which police body cameras prompt some “civilizing effect” on police, the footage certainly provides welcome additional evidence in investigations relating to police misconduct, thereby improving transparency and accountability.

Democratic presidential nominee Hillary Clinton agrees that body cameras improve transparency and accountability. In a speech on criminal justice last week she said that she wants to extend President Obama’s body camera funding program: “We should make sure every police department in the country has body cameras to record interactions between officers on patrol and suspects.” Clinton did not provide any details about her proposed body camera program, but it certainly sounds like it would be more expensive that Obama’s.

On the other side of the political spectrum a more detailed police body camera proposal emerged. In March, Republican presidential candidate Sen. Rand Paul (R-KY) co-sponsored a body camera bill with Sen. Brian Schatz (D-HI) that would establish a federal pilot funding program for police body cameras. I wrote last month about some of the worrying aspects of the bill, such as the requirement that the entities requesting body camera funding publish privacy policies “in accordance with the open records laws, if any, of the State.” This means that Paul and Schatz’s bill could provide financial assistance to departments that are not subject to policies conducive to improved law enforcement transparency and accountability.

Given that law enforcement agencies can propose bad body camera policies and that body cameras can impose a fiscal burden on states it is not hard to see why federal funding for police body cameras might be appealing. But it is important to keep in mind that while the DOJ does require that “a strong BWC policy framework” be in place before body cameras are purchased through the recently announced program, what constitutes a “strong BWC policy framework” is not made clear. The DOJ document which outlines eligibility for the grants does state that law enforcement agencies will have to develop or build on a policy which includes the “Implementation of appropriate privacy policies that at a minimum addresses BWC program issues involving legal liabilities of release of information, civil rights, domestic violence, juveniles, and victims’ groups.” However, the document includes few specific details about what policies will have to include in order to be deemed to have addressed these issues.  

There are numerous policy concerns associated with police body cameras that must be adequately addressed if they are to improve transparency and accountability. A good body camera policy will outline (among other things) when a police body camera must be on, what footage can be requested, how much of that footage can be released to the public, how long the footage is stored, what the punishment will be when officers fail to turn their cameras on, what information will be redacted from footage when it is released, and whether police will be able to view footage before speaking to investigators.

It might be the case that the Bureau of Justice Assistance, which will administer the grants, will require the best police body camera policies so far proposed. But the fact that implementation of “appropriate privacy policies” is a condition for funding means that some law enforcement agencies may adopt privacy policies in order to receive funding rather than because they provide the best privacy protections.

If the DOJ is going to take part in the ongoing debate on police body camera policy it shouldn’t provide a financial incentive for the adoption of its policies. When discussing the best policies for a relatively new technology such as body cameras we ought to consider suggestions from a variety of sources, but none of these suggestions should be accompanied by financial assistance, which could adversely influence the consideration of policy. 

The federal government operates the air traffic control (ATC) system as an old-fashioned bureaucracy, even though ATC is a high-tech business. It’s as if the government took over Apple Computer and tried to design breakthrough products. The government would surely screw it up, which is the situation today with ATC run by the Federal Aviation Administration (FAA).

The Washington Post reports:

A day after the Federal Aviation Administration celebrated the latest success in its $40 billion modernization of the air-traffic control system, the agency was hit Friday by the most scathing criticism to date for the pace of its efforts.

The FAA has frustrated Congress and been subject to frequent critical reports as it struggles to roll out the massive and complex system called NextGen, but the thorough condemnation in a study released Friday by the National Academies was unprecedented.

Mincing no words, the panel of 10 academic experts brought together by the academy’s National Research Council (NRC) said the FAA was not delivering the system that had been promised and should “reset expectations” about what it is delivering to the public and the airlines that use the system.

The “success” the WaPo initially refers to is a component of NextGen that was four years behind schedule and millions of dollars over-budget. That is success for government work I suppose.

The NRC’s findings come on the heels of other critical reports and years of FAA failings. The failings have become so routine—and the potential benefits of improved ATC so large— that even moderate politicians, corporate heads, and bureaucratic insiders now support major reforms:

“We will never get there on the current path,” Rep. Bill Shuster (R-Pa.), chairman of the House Transportation Committee, said two months ago at a roundtable discussion on Capitol Hill. “We’ve spent $6 billion on NextGen, but the airlines have seen few benefits.”

American Airlines chief executive Doug Parker added, “FAA’s modernization efforts have been plagued with delays.”

And David Grizzle, former head of the FAA’s air-traffic control division, said taking that division out of FAA hands “is the only means to create a stable” future for the development of NextGen.

The reform we need is ATC privatization. Following the leads of Canada and Britain, we should move the entire ATC system to a private and self-supporting nonprofit corporation. The corporation would cover its costs by generating revenues from customers—the airlines—which would make it more responsible for delivering results.

Here is an interesting finding from the NRC report:  “Airlines are not motivated to spend money on equipment and training for NextGen.” Apparently, the airlines do not trust the government to do its part, and so progress gets stalled because companies cannot be sure their investments will pay off. So an advantage of privatization would be to create a more trustworthy ATC partner for the users of the system.

ATC privatization should be an opportunity for Democrats and Republicans to forge a bipartisan legislative success. In Canada, the successful ATC privatization was enacted by a Liberal government and supported by the subsequent Conservative government. So let’s use the Canadian system as a model, and move ahead with ATC reform and modernization.